Farm Insurance

[foragefarmer]

I do appreciate you looking out for my well being. But I might point out the irony of offering financial advice to someone who is in a position to self insure, and store grain for multiple years.

Do you believe that after all overhead and administration costs, the insurance company can invest your premiums and make a better return than you yourself could do by investing it in your own business?

We had an MFWD tractor burn during seeding a few years ago. Found the nearest comparable tractor for sale and bought it outright, was back in the field within half a day. After seeding I bought a used cab and cosmetic parts, replaced a lot of hydraulic hoses and wiring. Have put out multiple small combine fires( and even started one as a last resort to unplug a combine, it worked), and one baler fire.
We have 3 residences, none have ever had mortgages, so if one burns down, we won't be homeless, or destitute.
And yes, most of our equipment and buildings are not worth having insurance on. The only modern major equipment are the combines at 11 and 17 years old. The 4wd seeding tractor is 45 yrs old. I'm currently repairing the tractor that we put the most hours on every year. I paid $1000 for it in "inoperable" state ~10 years ago. Does all the spraying ( 130 foot), does most of the swing auger and grain vac work, all the baling, fertilizer spreading, some harrowing etc. And I have two more identical tractors as back up. I think we will recover from the financial hit if it falls off a cliff tomorrow uninsured.

You never did respond to the thread about storing grain, yet you brought it up again. And neither did tweety when I asked what investment he/she found that did better than double in value in that time? As I said, I messed up, and I regret not selling even more when the price was 2.5 times what it was worth when it went in the bins(the price which was available for only a few days). but in the end, the stored grain all sold for at least double what it was worth when it went in the bins. So I'll ask again, what did you invest in that had a better return than that? If you had an ROI of better than that, you most definitely beat the insurance companies returns on your premiums, and should consider self insuring for yourself.

Insurance is a must on our farm and wouldn't risk not having it regardless of what our farm balance sheet looks like, besides it's tax deductible.

As for spelling out the inventory of equipment and buildings, and ROI generated by the farm and other investment strategies never going to happen on a social media platform.

As for carrying over grain for multiple years it's not a new concept, farmers have been doing forever, but unlike you AB5 the majority of us know that the rest of the world doesn't need to see it in print.

[blackpowder]

Aren't we all lucky to be making the most of the system we're living in with what we were given?
We are all also private corps with no shareholders to impress or Harvard grads to listen to.
Subsequently the right and wrong is judged only by us and measured by no one. What is clear is that while at times we suffer from hubris, none are stupid.

[AlbertaFarmer5]

Aren't we all lucky to be making the most of the system we're living in with what we were given?
We are all also private corps with no shareholders to impress or Harvard grads to listen to.
Subsequently the right and wrong is judged only by us and measured by no one. What is clear is that while at times we suffer from hubris, none are stupid.

Exactly. Do whatever works for your unique financial situation, allows you to sleep at night, and keeps the banker happy.

I can certainly understand how most operators probably came at this issue from the other end, and therefore have a different perspective.

If you started out with valuable equipment/infrastructure, with financing, that mentality will continue even if the necessity has long since passed. I started from the opposite end, even if we eventually meet at the same point in our careers, the experience sticks with us.

There may also be a gambling mentality as well. After paying insurance on an asset for so long without a payout, if you quit today, there is zero chance of ever getting any return on your investment. It would be a shame to walk away from that investment, even if it is no longer a financial necessity. Not much different than plugging money into a VLT over and over trying to recoup the investment. If you don't keep playing, you can't possibly win. But the longer you play, statistically, you will eventually win something.

[AlbertaFarmer5]

Does anyone want to debate this comment I made earlier?

Do you believe that after all overhead and administration costs, the insurance company can invest your premiums and make a better return than you yourself could do by investing it in your own business?

[blackpowder]

False premise perhaps?
They collect from many but pay out a few.
While you're at it, do you self insure your public liability as well? Common coverage now $5M+

[AlbertaFarmer5]

The reinvestment question you asked isn't the same answer you gave Tweety regarding time value of money you've lost storing grain for years upon years and then not selling last spring when there were record prices.

I would argue that it is the same investment. Using the savings ( in this example the savings of not paying insurance premiums) to invest in grain inventory. Grain inventory being one of the most liquid assets a farmer could own, it can easily be liquidated in the event of an uninsured catastrophe. No transaction fees, no middlemen, no commissions, no confrontations with adjustors, no increased premiums due to making a claim, no deductible, no being limited to repairing the issue with insurance approved vendors to their standards and on their timeline.

[AlbertaFarmer5]

False premise perhaps?
They collect from many but pay out a few.

Yes, socialism within a capitalist industry.

[blackpowder]

No because they are legally bound to all they underwrite.

[AlbertaFarmer5]

Insurance companies invest primarily in bonds. The average annual return of bonds in the last decade is 1.6%.
Out of that remove all of the administration costs, and profit, and that is what the average insurance customer should expect to see as an ROI on their investment.
What has been the annual ROI on capital invested in your own farm over the last 10 years?

[blackpowder]

I'm sorry you're losing me.
Are you suggesting I can self insure investing my premium money elsewhere?

[AlbertaFarmer5]

I'm sorry you're losing me.
Are you suggesting I can self insure investing my premium money elsewhere?

Yes. That is exactly what I am suggesting.
Better yet, invested in what you know best, your own business.

[AlbertaFarmer5]

A big part of the difference in opinion on these matters comes down to a topic we have been discussing a lot recently. Personal responsibility.
Insurance of any kind literally removes the impetus to take preventative measures, and be responsible for yourself. Just look at our health systems.
How many buildings would be built (and rebuilt over and over again) in flood zones and hurricane zones if they didn't have insurance?
I shovel off roofs if they get too much snow. Park vehicles under a roof when conditions are ripe for hail storms. Do our best to prevent fire hazards. Don't see the need to repair every minor cosmetic damage. Grain bins don't get a chance to blow over when they're full of grain.
How often do you hear of someone wishing for, or celebrating an insurance payout? That is certainly not the intention of the product. How many vehicles and RVs have been written off from hail damage and are still being driven years later. All insurance customers get to pay for those claims.
With some notable exceptions, the insurance industry is not great at rewarding self-responsibility, or punishing the opposite.

[sumdumguy]

Many expensive/almost new RV’s written off due to rodent damage. Guess no one wants cats around anymore.

[AlbertaFarmer5]

Many expensive/almost new RV’s written off due to rodent damage. Guess no one wants cats around anymore.

I hadn't heard that one before. But if that is true, then it's another very good example of the personal responsibility side of the issue. I wouldn't have even guessed that a preventable loss such as rodent damage would be insurable. So now, responsible RV owners premiums go to paying for this?

[Partners]

Neighbor had 2 fifth wheel camper trailers replaced because of mice damage..