W^H? The Holmes Murphy Blog

  • It’s Time to Get Moo-ving on Livestock Life Insurance

    Chances are you’ve thought about life insurance and how it would apply to your life, help your family, etc. That’s pretty common. It truly is a necessary planning tool. If you’re in the agriculture business, there’s another kind of life insurance that may be just as crucial. Ever heard of livestock life insurance? If not, what I can tell you is that it’s a necessity for protein producers. Now, before we get too far, I want to be sure to state this type of insurance shouldn’t be confused with pet life insurance for your dog or cat. Livestock life insurance, formally named “mortality insurance,” covers the death or humane destruction of livestock as a result of a covered cause of loss.

    I know…it’s not the greatest of topics to have to talk or read about. Unfortunately, it’s a crucial discussion in the ag world, as mortality coverage should be an essential insurance coverage in every protein producers’ risk management plan.

    Here’s what you need to know. Mortality insurance isn’t a “one size fits all” insurance. It can vary from carrier to carrier, and coverages and enhancements vary by protein. There are standard threats that should be insured against, but even those may vary depending on your geographical location. For example: Just a few standard perils that should always be insured against include fire, lightning, tornado, windstorm, hail, and smothering.

    Most of the dangers discussed so far are caused by Mother Nature. So what do you do when human error causes a loss? You insure against it! For example: Owners who have their hogs finished by a third party or have their cattle backgrounded by a third party can purchase insurance for loss caused by the negligence of others. This is applicable when the third party has care, custody, or control of the livestock and the negligence of that 3rd party causes the death of the livestock. Again, this is one of the many enhancements that can be purchased to protect the producers’ livestock.

    Now, you may be asking…great, I need this insurance, but what does it actually pay for? First, in the event of death or humane destruction, the producer receives the value of the animal at the time of death. Different values can and should be assigned to animals at different stages of growth as well as valued for their purpose.

    How about this…“My livestock is dead, and it takes months to grow that animal back to market size. How do I get paid for my loss of income?” Loss of income and extra expense can also be backed by insurance. The correct amount that should be insured against is a formula that should be reviewed by the company’s controller and CFO and discussed with your broker to determine the exact amount and length of time the loss of income is needed. Many questions factor into the loss of income determination, such as where will we build, how long will it take, how long will permitting take, and so on and so forth.

    Again, while not a great topic to read (or…let’s be honest, blog on), mortality insurance is the most important insurance coverage for protein producers and needs to be talked about. What I’d advise you about is the coverages and amount of insurance should be reviewed and discussed with your broker to make sure that your greatest assets are protected and done so appropriately. If you have any questions about this, feel free to reach out!

    Published on: 03.08.18

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