Australian agriculture is beneficial both nationally and internationally, despite being an arid land which is unsuitable for farming. The country’s agricultural activity is determined by climate, availability of water, soil type, and market proximity. Australia’s agricultural sector contributes to 55% of the country’s land use and 24% of water extractions. Not only is the country a leading producer of wool and wine, but it is also a source of grains, meat, sugar, dairy products, and fruits across the globe.
In this blog, we have talked about agricultural insurance – the different types, and benefits.
What is Agricultural Insurance?
Under the agricultural policy, farmers have to pay a meagre amount to the insurance-providing company, usually in the form of a small percentage that guarantees coverage against loss caused due to death, flood, drought, etc. This insurance also covers the farmer’s expenses for a certain period of time, within which the insured farmer has to reimburse the amount.
What are the Benefits of Agricultural Insurance?
Like every other sector, insurance is an essential tool in the agricultural sector too.
- Every farm, regardless of its size, requires modern technologies, tools, and equipment to enhance its productivity. Insurance companies provide farmers with the credit and financing they require to acquire these investments.
- To rehabilitate damaged enterprises, cash flow regulations and a financial buffer can benefit farmers.
- Agricultural insurance helps diminish business risks. The infrastructure and equipment in farm operations are prone to damage that can be triggered due to human error. Having an insurance policy can manage all these uncalled setbacks.
- Insurance policies are a security blanket that gives farmers mental satisfaction. Being secure helps farmers enhance their productivity and creativity in their businesses.
- Since insurance premiums cannot be withdrawn before their expiration date, it encourages savings.
- Insurance policies can act as collateral that helps farmers get loans easily.
- Insurance policies are not just beneficial to individual farmers, but benefit the economic growth of the country. The collected capital from the insured can be used to invest in the country’s economic growth.
- One of the biggest advantages of agricultural insurance is job security. Employers can be protected from going out of business, protecting the jobs of the employees working on their farms.
What are the Types of Agricultural Insurance?
Agricultural insurance is categorised into-
- Animal Insurance: Animal insurance is essential to farmers who rear animals like fish, birds, and livestock and need to protect them from the outbreak of disease, accidents, and natural disasters such as hail, drought, and floods.
- Crop Insurance: Agricultural producers, ranchers, and other farmers require crop insurance for protection against the loss of crops due to natural disasters like drought, hail, floods, or revenue loss caused as a result of a decline in the prices of agricultural products. There are two prominent categories of crop insurance – crop yield insurance and crop-revenue insurance.
Different types of crop insurance in Australia–
The Australian insurance industry has evolved over the years, protecting farmers from the risks involved with growing crops. Insurance is provided to the farmers depending on the type of crops and the risks involved-
- Fire and Hail: As the name implies, this type of insurance covers the loss of yield as a result of a natural disaster or any other insured hazard.
- Multi-peril Crop Insurance: This type of crop insurance covers farmers for yield loss or any other revenue loss. It is a complex type of insurance.
- Single-peril Weather Insurance: This type of insurance covers farmers in case there’s a lack of rain, excessive rain, or a cyclone, based on an agreed period. The different types of crops that are considered for this type of insurance include broadacre (cereals, grains, legumes, and oil seeds), industrial crops (cotton and sugarcane), viticulture, and orchard crops (fruits, nuts, and olives).
3. Farm Property and Equipment Insurance: Farmers and agricultural businesses dealing in packaging and processing agricultural produce require this type of insurance. It protects equipment and properties used in agriculture and farming.
These broad classifications are sub-categorised into-
- Fish-farm Agricultural Insurance: This policy protects fish against death and the farmer’s pond of fish against damage caused by fire, lightning, windstorm, flood, disease, and accident. This policy also bears the value of dead fish and for reconstructing the pond.
- Poultry Insurance: This type of insurance policy insures poultry farms against death caused by fire, lightning, windstorm, flood, disease, and accident. The insurance policy will pay the assessed amount for the birds as per the standard coverage.
- Livestock Insurance: Livestock insurance is to insure cattle, sheep, goats, rabbits, and pigs. This policy protects livestock against death caused by fire, lightning, windstorm, flood, accident, or any outbreak of disease or pest. The standard plan covers the value of the animals in the event of death. Farmers can also opt for an additional premium by purchasing coverage extensions and compensation, which is provided up to a certain limit as per the policy they purchase. For livestock insurance, a Veterinary Health Certificate from a qualified veterinarian is a must.
- Farm Property and Produce Insurance: To protect your farm property or agricultural produce from any loss or damage caused due to fire, burglary, lightning, flood, windstorm, explosions, plane crashes, impacts, or earthquakes, farm property and produce insurance is a must. This policy will provide you compensation in case your farm property or agricultural produce is damaged due to any of the mentioned hazards.
- Multi-peril Crop Insurance: This policy insures a farm against any physical loss or damage to crops caused by fire, lightning, windstorm, flood, pest, or disease outbreak. This insurance will cover the cost of crop production that has been lost or damaged from the plantation period to the maturity of the crop.
Choosing the right farm insurance policy to minimise farm risk is crucial for any agribusiness owner.
To understand insurance policies better and to choose the right one, refer to the farmer database curated by experts at KG2. Know what other successful farmers have implemented and make the right decision for your business.