Knowing how to use insurance properly can be confusing. Photo Credit: https://www.flickr.com/photos/striatic/2144933705
Let’s be honest. Some business managers have pondered the question, “Why bother with insurance?” at some point in their career. Possibly it was when they were starting a business, shopping for a new insurance quote, looking for ways to reduce overhead costs, or making a premium payment. Knowing how to use insurance properly can be confusing.
Insurance is a form of risk management that shifts some of the risk of the business to the insurance carrier. Insurance was designed to cover pure risks--the uncertainty or chance of a loss from a situation or event that could occur. With the high risk exposure in agribusiness, insurance policy options should be carefully considered for proper coverage. However, before exploring insurance options, it is important to review your understanding of risk on your specific operation. If you’re not sure where to start, here are some helpful tools adapted from an Exploring a Small Farm Dream course to guide an internal assessment:
- Prepare a SWOT Analysis
- A SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) is a process that can help get insights into the past and think of viable solutions to existing/potential issues for your business. Learn more about how to conduct a SWOT analysis with your planning team.
- Complete a Risk Management Checklist
- After you identify the business vision, goals, and objectives, do a risk management inventory. The USDA checklist covers production, marketing, financial, legal, and general components.
- Review Production and Financial Projections
Finding an Agent or Broker
The next step is to speak with a licensed insurance agent or broker. Do your research to find an agency or brokerage that meets your business needs and service expectations. Most agencies or brokerages offer some form of business or agribusiness insurance. Understand that a single company may not always have all the policies you need. Depending on your business type, it may be common to have multiple insurers.
Requesting Insurance Quotes
As you begin to request insurance quotes, be prepared to provide the following information at minimum. This will save time in the long-run and provide more accuracy in your quoted premium. Don’t forget to be honest. Leaving things out can lead to unwanted exposure.
- Name, address, and employer identification number (EIN)
- Year business was established
- Detailed description of business, including property and operations
- Detailed description of buildings and structures, including construction type, year built, and square footage
- Employees' names and drivers’ license numbers, if applicable with business vehicles
- Vehicle Identification Numbers (VIN) for business vehicles and equipment, including tractors, ATVs, trailers, etc.
- Gross Annual Income and Annual Gross Sales
- The value of all items, including specific figures for large items you wish to be scheduled
- The dollar amount of liability protection you are considering
- A description of any past losses you have experienced in the business
Understanding Insurance Quotes
Once you have a few quotes, ask plenty of questions for clear understanding. Insurance jargon can often be very confusing. Have an agent sit down with you and discuss what each coverage means. For example, double check property values and deductibles, ask about endorsements and exclusions, and find out if there are ways to get discounts. It may be beneficial to ask for specific scenarios you are concerned about based on your risk assessment. In short, continue to ask questions until you are confident enough to make a good decision
Reviewing Policy Renewals
Once you have insurance coverage, don’t forget to review your policy renewals or ask your agent for an annual assessment. This service can prove valuable long-term. Things to look out for are over or under insured property, vehicle and driver changes, changes to business type and scale, and many more. Be proactive rather than reactive when it comes to your business insurance. In the case of a loss, it’s best to be prepared.
Exploring Additional Insurance Information
If you are interested in learning more about insurance options related to your business, click on the resources below from the Penn State Extension website:
Conducting a SWOT Analysis
USDA Risk Management Checklist
Principles of Insurance
Agricultural Business Insurance