Is your tractor insurance realistic?
Insuring your existing fleet or your latest bit of kit should be easy. You would think that you just choose between comprehensive cover or third party fire and theft and put a realistic value on the machine.
Historically this would have been the case, when farms were operating more tractors and a 300-horsepower one could be bought for around £60,000 (which, incidentally, is what my family paid for a John Deere 8520 back in 2004). Today, tractors are packed full of gadgets and gizmos through which many features are automated. Consequently, they are now typically three times the price and so farms are running fewer of them, even though, despite the GPS and automated features, they don’t achieve three times the output.
Now, machines that would have done 500 hours per year 10 to 15 years ago routinely do 100 hours per year and so each tractor is a vital part of the farmer’s workforce, which would be sorely missed if out of action for any prolonged length of time. Also, using third party fire and theft is no longer really an option. It’s largely obsolete due to the minimal savings on premiums and finance agreements on tractors dictating that they be insured comprehensively. Thus, making comprehensive cover the only real option.
So, what about putting a realistic value on the machine? It is important to get this bit right. The premium is based upon the insured value but, in the event of a claim, the insurer will only pay out the market value or the insured value, whichever is the lesser. Overvalue your machine and you will pay higher that necessary premiums and still only get paid the market value if you claim. Undervalue it and you will pay slightly lower premiums but not get a sufficient pay-out to replace it with a machine of the same specification, should the worst happen. Take some time discussing this with your dealer, as the correct value is what they will sell you an identical machine with the same specification. Remember that this should not be the price paid when a trade-in has taken place.
This discussion with your dealer should not just be a one-off either. Tractors depreciate in value over the years. A three-year old tractor does not have the same market value as a brand new one and it is surprising how often, when we at Acres Insurance quote for a new business, we find that older tractors are still insured at their original purchase price. Once again, this wastes premiums and only the market value of a machine the same spec and age will be paid out.
It’s also worth mentioning that any decent tractor insurance policy underwritten on a comprehensive basis should automatically provide comprehensive cover for all implements, trailers or attachments that go behind (or even in front) of the tractor, both on an attached and a detached basis. This means that a trailer damaged in a shed fire whilst not attached to a tractor will automatically be insured. It’s worth checking the small print for any individual implement item limits though. These can differ widely between different insurers and we have seen them range from as little as £25,000 all the way up to £175,000, and so some of your higher value implements may not come within that limit. Your insurance broker should be discussing these limits with you.
It’s also important to be aware of whether your GPS system is covered under your tractor insurance. Such equipment is expensive and fairly easy to steal, making thefts rife. Certainly, on our farm the John Deere GreenStar dome (fondly nicknamed Donny the Dome) is given VIP levels of protection. GPS systems integrated within the cab and controls are covered in the value of the tractor and therefore come under the tractor insurance. Any guidance systems that are moved between tractors or sit in a farm workshop or office, such as Donny the Dome, are not covered and so are best insured on an ‘all risks’ basis on your farm policy.
Your tractors and implements are some of the most valuable and vital assets on your farm. Having an annual conversation an insurance broker at Acres Insurance and your dealer is time well spent, as it ensures you are fully covered without paying unnecessary additional premiums.
— Nigel Wellings, Director