Dec 21, 2017
Insurance specialist Ryan Taylor joins this episode to cover some of the common mistakes and gaps in insurance selection and how to avoid them.
ABOUT OUR GUEST:
Ryan Taylor is an Ag Risk Advisor for Water Street Solutions in the multi-line insurance service line. Ryan graduated from the University of Illinois where he earned a bachelor’s degree in Business Management. He has 10 years of experience in the banking industry, focusing on customer service, loan and deposit growth, and employee growth and retention. Ryan had been with Busey Bank in Peoria, Illinois where he most recently served as vice president/retail market manager. He has management experience, as well as experience serving as a licensed financial consultant.
As an Ag Risk Advisor for the multi-line insurance service line, Ryan helps his farmer clients get customized insurance-based risk management plans in place for their farming operations. Ryan has a strong passion for working face-to-face with his farmer clients and for providing his clients with a high level of service. He is licensed in property and casualty insurance.
Q: What are some of the most common mistakes or gaps you find in coverage when reviewing policies for the various operations you look at?
A: In my experience when I start looking at existing policies for clients or prospects, about 8 of 10 times they are either under-insured or over-insured and paying too much money in premium.
The first thing I see with some regularity is having low liability limits on large equipment such as semis—many people we see have $100K in liability on each of their semis; we recommend $1M, because if there were some sort of accident and one of your vehicles runs a stop sign and hits a family minivan or a school bus, you’re most likely looking at over $100K in damages.
The second most frequent issue I see, especially recently, is regarding grain-in-storage coverage. The market is basically paying people to hold on to their grain, so a lot of folks are adding bins. The problem is that once those bins are full, they don’t have adequate coverage to cover the actual grain sitting in those bins. Coverage on grain in storage is very inexpensive. If you are under-insured and were to have a bin fire, you’re really just letting cash burn up.
Third, we see too many operations with no workers compensation policy. If an employee gets hurt or there’s an accident on the farm, a lack of a work comp policy means lost wages and hospital bills come out of the farmer’s pocket.
Q: Let’s stop and talk about work comp a bit. Different states
have different laws regarding workers compensation. Some states
require it, some don’t. Tell me, why should I have a work comp
policy regardless of whether my state regulates it or not? I mean,
it’s just me and a handful of people on the operation, and half of
them are family.
A: First off, we’re not attorneys; we can’t give legal advice. But imagine you have an employee climbing a bin, and he slips and falls off the bin. That employee is now paralyzed, and you do not have a work comp policy. Any medical bills and lost wages as well as possibly benefits to the family members for the life of that employee would generally be covered by a work comp policy. Without that policy, those funds are going to come right out of the farmer’s checkbook. A large claim or a death on the farm could legitimately spell the end of a small operation. It’s an easy decision to be covered because the insurance is not overly expensive, and the premium scales with the amount of payroll you have.
Q: So it sounds like a process needs to be in place to make sure
my coverage is right. What are some key pieces to have in place to
make sure that review is happening in an effective way?
A: The most important thing is communication. We make sure we are communicating with our clients on a regular basis. Farmers tend to buy, sell and trade equipment and trucks regularly. Constant communication every couple of months helps us make sure a farmer hasn’t bought a new piece of equipment or vehicle, or constructed a new outbuilding that hasn’t been added to the coverage—or they aren’t still paying for coverage on a piece of equipment they unloaded several months ago.
Q: As a farmer or business owner, then, it’s a matter of keeping
it in mind: “Oh, hey, we traded combines. I need to let the
insurance agent know that I’ve got some new serial numbers they
need to be aware of to update the policies.” It’s being proactive
when something does change . It’s also about having a proactive
agent who contacts me once in a while and asks, “Hey, has anything
changed there in the last few months?”
A: Exactly. Another area I focus on is annual reviews. A couple weeks before an annual policy renews, I make a point to go out and visit my client’s farm, sit down with the farmer and go through the entire farm policy, the entire auto policy, etc. We want to make sure everything is covered and we’re not missing anything or overpaying for stuff they got rid of and forgot to mention. An annual review is very beneficial to the farmer to help understand the coverages they have and to make sure they’re not missing anything.
Q: Finally, if I have a policy, what are some important things I
need to be aware of? The things that people forget to ask or
A: There are a handful of items that people tend to not know or forget. I’d say number one is their deductible amounts. For insurance policies, farmers can pick different deductibles for different sections of their policy. You can tailor the deductibles to suit you so that maybe larger items have larger deductibles and that way the premium isn’t quite so high.
Secondly, people tend not to be aware of the difference between replacement cost and actual cash value. This comes up typically during annual reviews. Replacement cost coverage is going to be a bit more expensive, but it will cover the cost of completely rebuilding a machine shed, for example, that’s been around for 20 years while actual cash value will only give you what a 20-year-old building is worth; it won’t be enough to replace it.
Finally, we find that for older semis and other vehicles, you can either have full coverage or liability only. So we tell clients if they have a 30-year-old semi, they might consider covering it with liability only. If the semi is totaled in a wreck, having the liability-only coverage has cost you less in insurance premiums, and let’s be honest, if you lose a 30-year-old truck, you’re not going to replace it with another one of comparable age—you’re going to be ready for an upgrade.
Those are the three main things I like to bring up with clients so that we are on the same page: deductibles, replacement cost vs. actual cash value, and full coverage versus liability-only on larger vehicles.
If listeners have questions about this topic, feel free to contact Ryan Taylor at (309)680-1211 or firstname.lastname@example.org
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Thanks for listening! See you next week!