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High Mowing Organic Seeds
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Insurance, Take 2 - Important, Really!  - Paul Betz, Sales Associate & owner of High Ledge Farm

Paul BetzLets face it, when I mention insurance, people are only marginally interested. The classic image of people running away from their insurance agent has been around for a while now. I would even go as far as saying that before April 9th, 2009 it was pretty low on my radar. A few weeks ago I gave a talk about insurance issues at the NOFA VT winter conference, and two people showed up. Given the choices of other workshops to attend, I was not very surprised, but I feel like this is really important. Please do not run away.

I had mixed feelings about insurance in general, but had also been a reluctant participant. Our vehicles were covered, and our house was as well. When our initial homeowner’s insurance dropped us because we wanted to heat with wood, we took the plunge and got a small farm policy that covered our operation, including out buildings, some equipment, and our off farm market presence. That was about six years ago, and although our business has grown, I had not really looked at our policy since its inception. The annual renewal is in September, and the coverage page arrives in mid August. I just never had the time to really sit down with it, because who has time to do anything in August?

Then we had our fire.

The next day I was able to find some time to look it over, and I found out that the greenhouses I had built after the initiation of the policy were not included, because I never added them. Suddenly, the paltry amount that my barn
was insured for really hit home. The check from the insurance company would not even Paul's Burnt Greenhouse - Make sure you get insurance!!cover the materials. The amount that the covered greenhouses were insured for was way under their costs. There was a lot of under coverage. Our washing barn, which survived, was even more grossly underinsured. If that had burned, our loss on that building alone would have been enormous.

I am not an insurance agent, and do not claim to be an expert, but I do have a little advice based on my experience. I should start by admitting that a lot of this is hind sight. Through some amount of dumb luck, our policy had some areas of coverage that never would have occurred to me, and I am glad it did. They will all be important when it comes to putting us back to where we were before the fire. I can go into all of that a little later.

First, some basics. Buying an insurance policy is essentially trading risk for money. Sounds obvious, but it is important to think of it that way. Asses how much risk you are willing to accept against the cost of the policy. There are ways to balance that coverage vs. expense, such as having a higher deductible.

When it comes to policy decisions, ask yourself; in the event of a loss, would you rebuild your business and what would it look like if you did? The answer to this question should help shape your policy decisions. While I am at the age where continuing to farm was not a question for me, I have talked with friends who are not sure that they would start over. The amount of work involved was more than they were interested in taking on, and a significant loss to their infrastructure would be a deal killer for them. Given that choice, it may not make sense to carry the
higher cost of a more comprehensive policy.  If you have a barn that would cost $250,000.00 to rebuild, but you could get by in barn that would cost $100,000.00, the extra expense of insuring to full value may or may not make sense. If your intention would be to continue your operation with as little interruption as possible, then you will need a different level of coverage. Consider all the tools and supplies that you use in the course of the season. How many did you pick up along the way of developing your farm? Now imagine having to buy them all at once. It was a rather chilling thought when I had to face it last April. I was able to put together most of the equipment that I needed, but it wasn’t an inexpensive project. However you structure your policy, all that I am tying to stress is that now is the time to make these choices.

If you do get a farm policy, be sure that you have a coverage section for your equipment. I would recommend an unscheduled coverage over a scheduled. The advantage of unscheduled is that if you get new equipment, it is automatically covered, without having to call in and add it to your policy. I would suggest making a list of your equipment, approximate its’ value, and then add 25% to determine your coverage. This will give you a buffer for any new purchases, as well as the things you have forgotten about.

While loosing the greenhouses was one issue, the loss of sales of starts and tomatoes was a second one. Those are two big pieces of our business and the loss of income was significant. We fortunately have insurance to cover that loss. The amount of that coverage should be equal to your last years’ net income.

One thing that would have been really helpful for us to have is some documentation of our belongings. Even though it has been close to 11 months since the fire, we are still discovering new things that we lost. I have been encouraging everyone to get a video camera and walk around your property and tape everything. Open drawers, closets, sheds, machine shops, all those dark corners of your barns. Then put the tape in a safe deposit box in town or at a neighbors’ house. If you ever have a loss, it will be a huge asset when you file your claim.

Sound scary? What happened at our farm certainly was. It is truly a miracle that no one died. That said, I do not live my life in a state of high alert. Nor am I in constant fear that something bad will happen. But I never believed what happened to us could actually happen. Do I wish we were more prepared? Yes. Am I more aware of potential risks? Yes. I probably always will be, and that’s the way it is. I have faith that this will all work out, although this thinking has taken me a while to fully embrace, and the trip has its unpleasant moments. We have increased the coverage on our surviving buildings and the new greenhouses. I am hopeful I will never use this expanded coverage, but I have decided it is money well spent if I ever need it.

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