New law passed to improve farm insurance

In Springfield, Illinois (WICS) — Legislation supported by State Senator Paul Faraci to amend the minimum coverage requirements for farm mutual insurance companies was signed into law on Friday. The new law, known as Senate Bill 765, mandates that these companies maintain adequate catastrophic reinsurance instead of unlimited catastrophic reinsurance. This adjustment is expected to limit the exposure of companies to losses, capping it at 20% of their policyholders’ surplus.

Senator Faraci emphasized the positive impact of this legislation on farmers, stating, “Adequate reinsurance allows insurers to offer affordable premiums for farmers, making insurance coverage more accessible. This will help our farmers fully invest in their operations without being burdened by excessively high insurance costs.”

Senate Bill 765 aims to enhance the financial sustainability of farm mutual insurance companies by introducing a specific limit on catastrophic reinsurance exposure. The use of Aggregate Catastrophe Reinsurance (ACR) is highlighted as a means to provide coverage up to a predetermined limit, facilitating more effective cost management for insurers.

This legislative change is a proactive step toward creating a more balanced and accessible farm insurance framework, ultimately benefiting farmers and agricultural businesses by mitigating financial risks associated with unforeseen events.

Key components of farm insurance may include:

1. Property Coverage: This aspect of farm insurance protects against damage to or loss of physical property, such as farm buildings, machinery, equipment, and stored crops. Coverage may apply to perils like fire, storms, theft, and other specified risks.

2. Crop Insurance: This type of insurance is specific to crops and provides protection against losses due to events such as adverse weather conditions, disease, or other perils. It helps farmers manage the financial risks associated with the unpredictable nature of agriculture.

3. Livestock Insurance: This coverage protects against the loss of livestock due to specified perils such as disease, accidents, or theft. It is important for farmers who raise animals for meat, dairy, or other agricultural purposes.

4. Liability Coverage: Farm liability insurance protects against claims of bodily injury or property damage that may occur on the farm. This can include injuries to visitors, such as customers at a farm stand, or damage caused by the farmer’s operations.

5. Business Interruption Coverage: This type of coverage helps farmers recover lost income if their operations are interrupted or if they are unable to produce and sell their products due to a covered event.

6. Equipment Breakdown Coverage: This coverage helps cover the costs of repairing or replacing farm equipment that breaks down due to mechanical or electrical failure.

Farm insurance policies can be tailored to the specific needs of the agricultural operation, taking into account factors such as the type of crops grown, the size of the farm, the number and type of livestock, and the overall scope of the farming activities. It plays a crucial role in helping farmers manage risks and protect their livelihoods.

Who is in need of farm insurance?

Farm insurance is essential for various individuals and entities involved in agricultural operations. Here are some of the key parties who typically need farm insurance:

1. Farmers and Ranchers: Individual farmers and ranchers, whether they operate small family farms or large commercial enterprises, can benefit from farm insurance. It helps protect their investment in crops, livestock, equipment, and infrastructure.

2. Agribusinesses: Companies involved in various aspects of the agricultural supply chain, such as agribusinesses, co-operatives, and food processors, may need farm insurance to protect their assets and operations. This includes coverage for processing facilities, equipment, and inventory.

3. Crop Producers: Farmers who cultivate crops, whether for food, fiber, or other purposes, can use crop insurance to mitigate the financial risks associated with crop failure due to adverse weather conditions, pests, or disease.

4. Livestock Producers: Those involved in raising livestock, including cattle, poultry, swine, and other animals, may need livestock insurance to protect against risks such as disease outbreaks, accidents, or theft.

5. Dairy Farmers: Dairy operations can benefit from specific insurance coverage that addresses the unique risks associated with milk production, including coverage for dairy equipment, buildings, and liability.

6. Equine Owners: Individuals or businesses involved in horse farming, breeding, or training may require insurance to protect valuable horses, facilities, and related activities.

7. Farm Lenders: Financial institutions that provide loans to farmers may require borrowers to maintain farm insurance coverage to protect the collateral, such as the farm property and equipment, securing the loan.

8. Farmers’ Markets and Agritourism Operations: If farmers sell products directly to consumers through farmers’ markets or engage in agritourism activities, they may need liability coverage to protect against potential lawsuits arising from injuries or property damage on the farm premises.

9. Wineries and Vineyards: Businesses involved in grape growing and wine production may need specialized insurance coverage to protect their vineyards, winemaking equipment, and inventory.

It’s important for individuals and entities involved in agriculture to assess their specific risks and insurance needs. The type and extent of coverage required can vary based on the size of the operation, the crops or livestock involved, the geographical location, and other factors. Farm insurance plays a crucial role in helping these stakeholders manage the uncertainties and risks inherent in agricultural activities.