INSURANCE 



Lawrence D. Rhoades 

 Extension Specialist in Farm Management 



Rarely does the morning edition of the newspaper or the early morn- 

 ing radio news report come out without a report of a fire loss. Fre- 

 quently, the report reads something like this: 



"Fire Chief estimates the damage at $30,000 PARTIALLY COV- 

 ERED BY INSURANCE" (capitals are ours) . 



If you haven't changed the amount of insurance coverage on your 

 property, your barn, poultry house or fruit storage, in the past 5 years, 

 the likelihood is that your insurance coverage is less than it should be. 

 Why? First , building costs have continued to increase; second , additions 

 may have been made; third, buildings may have been remodeled or extensively 

 repaired without increasing the insurance coverage. 



It's too late to read your policies after the fire occurs. 



Here are some questions to ask your insurance agent. 



How much insurance do I have and what risks are insured? 



Do any of my policies have a co-insurance clause? 



A co-insurance clause usually results in a lower premium, but it 

 works this way. 



Assume you have equipment valued at $10,000. Your policy, if it 

 has the common 80% co-insurance provision, should be for $8000. But in- 

 surance costs money, so you insure for only $6000. If the property is 

 completely destroyed, your company will pay you $6000. But, what if you 

 have a partial loss, say half the the property is destroyed? Do you 

 get $5000 compensation, half the value, since the loss is less than the 

 coverage? The answer is NO. Your compensation would be figured: 



Actual Insurance amount divided by the amount of insurance 

 that should be carried times the amount of the loss or 

 6000 



8000 



X 5000 = $37 50 = the amount paid on your loss, 



Why? You didn't keep your part of the bargain and carried only 3/M- 

 of the coverage you said you would when you accepted the policy terms by 

 paying the premium. 



Ask your agent how a loss would be settled on your farm buildings. 



If you bought property and an insurance policy was assigned to you, 

 the insurance company must assent (agree) to the assignment. 



If the property is mortgaged, a "loss payable clause" should be 

 part of the policy to protect the lender, and indirectly, you . 



