Insurance

What have any of you done about insurance? I'd like to insure our trees, as a U-pick they are important. I want to make sure if they are destroyed by fire or tornado that we can replace them. I've called around and everyone is saying I need crop insurance. However, research into crop insurance is not giving me much faith. I don't think they are equipped to deal with polyculture. I don't think they'll insure us at all. So how to insure it all then???

I would take issue with the need of insurance at all. Insurance as a financial instrument is designed is to provide for unexpected catastrophic loss. It takes the cost of the loss and amortizes it across a large time frame. In effect you pay for the loss whether you incur one or not. That is the nature of the vehicle.

I would argue that if you live in an area that you might reasonably expect a loss of your orchard, then you should not carry insurance at all. You should be putting a portion of your profit in an account each year equal to the insurance premium you would pay an agent or underwriter. (if you expect a total of X $ lost in 20 years, then X/20 needs to be in a seperate account and tracked as a liability on your ledger. Accounts Payable are liablities even though they are current cash on hand. They are earmarked or encumbered already, thus a liability.) This business practice is known as being self insured. It is much cheaper, more reliable, and practical. First, the underwriter is making money. That is an upcharge that is calculated into your premium. Second, your adjuster does not HAVE to pay you a thing, if you don't have an iron clad policy...which you don't because they write it... and to their favor. Third, you get to keep the interest on the money that you pay yourself to insure yourself on that account.

If you are not comfortable with that practice, then talk to your agent about Business Interruption Insurance instead. As you have seen, Crop insurance will only cover the produce lost. MAYBE a portion of the trees. But it will not cover the intervening years that your trees need to reach full production again. In short crop insurance is only going to give you current loss on the tree and a part of the value of the replacement cost of the tree. That does you no good in the subsequent years. Oh, and your premium will certainly go up, even though you now have nothing to insure for a few more years.

Disclaimer: I am not involved in the insurance industry. I have never researched Orchard specific insurance. And most importantly, I do not believe the brainwashing that I need financial vehicles or the idea that second or third parties have my best interest at heart in the business arena. Your mileage may vary. Caveat Emptor, etc...


Forgot to point out the most important point, as obvious as it may be. If self insured and no loss occurs in that time frame, guess where that money goes? YES! in your pocket. Not in the insurance companies coffers. You can roll it, and save the premium; or spend it. (beware capital gains implications.) Beats the hell out of being a serf to a financial institution for the life of your business.

Jack Edmondson wrote:I would take issue with the need of insurance at all. Insurance as a financial instrument is designed is to provide for unexpected catastrophic loss. It takes the cost of the loss and amortizes it across a large time frame. In effect you pay for the loss whether you incur one or not. That is the nature of the vehicle.

I would argue that if you live in an area that you might reasonably expect a loss of your orchard, then you should not carry insurance at all. You should be putting a portion of your profit in an account each year equal to the insurance premium you would pay an agent or underwriter. (if you expect a total of X $ lost in 20 years, then X/20 needs to be in a seperate account and tracked as a liability on your ledger. Accounts Payable are liablities even though they are current cash on hand. They are earmarked or encumbered already, thus a liability.) This business practice is known as being self insured. It is much cheaper, more reliable, and practical. First, the underwriter is making money. That is an upcharge that is calculated into your premium. Second, your adjuster does not HAVE to pay you a thing, if you don't have an iron clad policy...which you don't because they write it... and to their favor. Third, you get to keep the interest on the money that you pay yourself to insure yourself on that account.

If you are not comfortable with that practice, then talk to your agent about Business Interruption Insurance instead. As you have seen, Crop insurance will only cover the produce lost. MAYBE a portion of the trees. But it will not cover the intervening years that your trees need to reach full production again. In short crop insurance is only going to give you current loss on the tree and a part of the value of the replacement cost of the tree. That does you no good in the subsequent years. Oh, and your premium will certainly go up, even though you now have nothing to insure for a few more years.

Disclaimer: I am not involved in the insurance industry. I have never researched Orchard specific insurance. And most importantly, I do not believe the brainwashing that I need financial vehicles or the idea that second or third parties have my best interest at heart in the business arena. Your mileage may vary. Caveat Emptor, etc...


Forgot to point out the most important point, as obvious as it may be. If self insured and no loss occurs in that time frame, guess where that money goes? YES! in your pocket. Not in the insurance companies coffers. You can roll it, and save the premium; or spend it. (beware capital gains implications.) Beats the hell out of being a serf to a financial institution for the life of your business.

Ah but I'm not making any profit right now. I'm in the building process. And while I agree, and we do plan for rainy days, I don't know what I would do should all 80 acres go up in flames at once. I would want to pass that risk on to someone else. As people who aren't going into debt we can only string out resources so far.

From all I have read here that you have written, I do see that you are doing it right; and y'all are very fiscally responsible. No debt is the only way to go. Yes, there is some risk. And there is no real income. If you pass that risk on to the underwriter, keep in mind that the policy must be custom suited to what you need. I don't think an off the shelf arrangement is going to benefit you. That moves you into the realm of high cost. But you will know what is and is not covered. Ask about the business interruption policy. They should be custom tailored to the individual business by nature; and the policy writers will have a better idea of what needs done.

I hear what you are saying about the dollars only going so far. I won't beat a dead horse. But I consider that sort of risk mitigation part of the start up capital equation. Much like choosing to not go into debt, insurance premiums are like cost of capital, interest payments. It is a losing proposition. A necessary one, if you chose to shift the risk; but an expensive choice in the long run, just as is the choice to borrow money.

I have been reading your post and pulling for you guys. You have a big hill to climb. I am hoping for your success.

Thanks! I'm absolutely terrified of fire but only because I seem to be a magnet. If it can catch fire, it will around me. Water heater, refrigerator, electrical, we've had em all. Things you'd not think of lighting on fire....... So I can just see all of my work burning to the ground. lol

elle sagenev wrote:What have any of you done about insurance? I'd like to insure our trees, as a U-pick they are important. I want to make sure if they are destroyed by fire or tornado that we can replace them. I've called around and everyone is saying I need crop insurance. However, research into crop insurance is not giving me much faith. I don't think they are equipped to deal with polyculture. I don't think they'll insure us at all. So how to insure it all then???

I checked into this a while back, and overall it seemed like you had to insure by the crop (apples, peaches, pears, etc.) with crop insurance and you can only get it after your average annual yield per acre has been established. Additionally, with a polyculture your annual yield per acre will look terrible for each crop so you might not qualify. Of course, since you are doing a you-pick, liability insurance for someone injuring themselves is FAR more important than insuring against loss of a couple trees.

Jack Edmondson wrote:You should be putting a portion of your profit in an account each year equal to the insurance premium you would pay an agent or underwriter...This business practice is known as being self insured. It is much cheaper, more reliable, and practical.

Jack, what you are saying makes absolute sense from a business perspective, but when talking about crop insurance you need to remember that it is a la-la land where the insurance premiums are subsidized by the U.S. government.

My general farm insurance will let me add anything to the schedule, just have to itemize it and pay accordingly. A walnut tree worth $40,000 (eventually) can be added, if you want to pay.

There are "outs" for the insurance company you need to investigate, especially if there is a disaster exemption that gets them out if it is drought conditions for example.

Thanks all. And yes to liability though we aren't open to the public and aren't planning to be until 2018. So that can be put off.

The only insurance that I anticipate buying, is public liability. All other risks are spread out over the property.

Even when I was selling life insurance, I didn't buy any. It was a way to make money and for most people, a sucker's deal. I never sold anything but straight term. The company wanted me to sell whole life and other investments that were not in the best interest of my clients. I've never been involved with a group of people for whom I had so little respect, as the scheisters that I met while in that business.