This is the fifth installment of a series of short articles on the typical coverage found in most farm policies. This article will explain Coverage E & under insuring property, Scheduled and Unscheduled Farm Personal Property.
Farm personal property coverage is capable of covering a variety of farm property. Depending on the items to be covered, where they are located and the associated values, one method may be more advantageous than the other.
For this article I will focus on farm machinery, miscellaneous equipment, hay and livestock coverage as they are pertinent to a typical equine operation.
One overall reason to Schedule your property is to avoid coinsurance. I will emphasize this here but keep it in mind when reading the coverage descriptions. Unscheduled property uses coinsurance to penalize for underinsuring. Unscheduled limits need to be insured for at least 80% of the actual cash value of the property. Scheduled coverage may require more itemization than Unscheduled, but it can be worth the effort. Also, both Scheduled and Unscheduled property are paid on an Actual Cash Value basis, not replacement cost. Also, each category is subject to the perils selected in the policy, Basic, Broad or Special. This is a key item in determining coverage. Stay tuned for a future article on these perils, or Cause of Loss, as we call them.
Let's first handle the category that usually has the higher limit of coverage, farm machinery. The Schedule coverage option is much more flexible in terms of what type of machinery can be insured. The scheduled coverage also allows for newly acquired and replacement machinery based on certain time frames and amounts.
The second category is Miscellaneous equipment. It is a catch all category which handles all the small tools and tack necessary to run your organization. This can add up for sure and it is only for the equipment owned by the insured, not others. Using the Scheduled coverage avoids coinsurance and will provide a 25% extension for property off premise. However, it is subject to a $3,000 ($2000 in some policies) per item limit. The unscheduled coverage is primarily an on premise coverage only and again, subject to coinsurance.
Hay can be a significant investment depending on the size of your barn and the number of horses you care for. Hay will not be covered for loss unless it is covered in this part of the farm policy. The advantages to scheduling hay is no coinsurance, and if hay happens to be outside, a $10,000 per stack limit applies. Unscheduled coverage has coinsurance and covers only 10% of the policy limit for hay that is in the open. Since most hay I have seen is stored in doors, the big difference in the two methods is the use of coinsurance.
Lastly let's discuss, livestock. This coverage, as mentioned earlier, is only triggered if a covered peril leads to death or destruction of the animal. This coverage is not a substitute for mortality and medical coverage.
Scheduled livestock coverage allows for listing specific animals and values. It also allows for coverage on racehorses, show horses, and show ponies. Unscheduled coverage will not allow these types of horses to be covered and is subject to coinsurance. Neither of these coverages offer great payment options. Both will cap the limit per animal between $1,000 and $2,000. There is more to this story but suffice it to say the payment amounts are designed for lower value animals.
This is just a brief overview of Scheduled and Unscheduled Farm Personal Property. Each policy can be different so be sure to consult your policy or agent for your situation. If your unclear on how your covered please give us a call we would love to help.
