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.
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
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.