Despite being an arid country where large areas are unsuitable for farming, coupled with numerous other challenges, Australian agriculture is important both domestically and internationally. The agricultural activity of the country is determined by climate, availability of water, type of soil, and proximity to markets. Being a leading producer of wool and wine, the country is also a source of grains, meat, sugar, dairy products, and fruits across the globe.
Reports state that Australian agriculture contributes to 55% of the country’s land use and 24% of water extractions.
What is Agricultural Insurance?
Like any other insurance, agricultural insurance is a policy in which the farmer pays a small sum to the insurance company, mostly a small percentage, to guarantee against loss caused due to death, flood, drought, etc. The policy covers the farmer’s expenses for a certain period of time, usually a year within which the insured farmer is supposed to indemnify in case of such a loss.
Advantages of Agricultural Insurance
Agricultural insurance is an effective tool to reduce farmer losses. Some of the benefits include-
- Farmers can get credit and financing for investment in new technologies, tools, and equipment to increase and sustain their productive capacity.
- Helps farmers with cash flow regulations and provides a financial buffer to rehabilitate damaged enterprises.
- Agriculture insurance diminishes business risk. The equipment and properties used in farm operations are prone to damage due to human error. Having agricultural insurance helps in managing these setbacks.
- Having an insurance policy gives farmers mental satisfaction, thereby enhancing their productivity and creativity with their farming business.
- The regular premium payment cannot be withdrawn before the policy expiration, thereby encouraging savings.
- Owning agricultural insurance provides credit facilities that help farmers get a loan by using the insurance poly as collateral, the cash value of which will not exceed the cash value of the policy charged by the insurer.
- Agricultural insurance boosts the economic growth of a country by collecting capital from the insured and utilising it for investments in services and infrastructure necessary for the country’s economic growth.
- Agricultural insurance also provides job security to employees as it can save employers from going out of business, thereby providing employees with job security.
Types of Agricultural Insurance
Since there are different types of farming businesses, there are different agricultural policies to protect them. There are three categories of agricultural insurance-
Animal Agricultural Insurance:
This kind of insurance is purchased by farmers who rear animals to protect against the loss of their animals like fish, birds, and livestock due to the outbreak of disease, accidents, and natural disasters such as hail, drought, and floods.
Crop Agricultural Insurance:
This type of agricultural insurance is purchased by agricultural producers, ranchers, and others to protect against the loss of crops due to natural disasters like drought, hail, or floods, or revenue loss caused as a result of a decline in the prices of agricultural products. Crop-yield insurance and crop-revenue insurance are the two categories of crop insurance.
Types of Crop Insurance in Australia
The insurance industry has evolved over the years to protect Australian farmers from risks involved with growing crops. Depending on the type of crop, insurance is provided for the different risks involved-
- Fire and Hail: This is the most common type of insurance that covers loss of yield as a result of a natural disaster or insured peril.
Multi-peril Crop Insurance:
This type of insurance is quite complex and covers farmers for yield loss or any farm revenue loss.
Single Peril Weather Insurance:
Farmers can get insurance coverage for lack of rain, frost, excessive rain, or cyclone, based on an agreed period.
The crops that are considered for insurance include-
- Broadacre like cereals, grains, legumes, oilseeds
- Industrial Crops like cotton and sugarcane
- Orchard Crops like fruits, nuts, and olives
Farm Property and Equipment Agricultural Insurance:
This type of insurance is opted by farmers and agricultural businesses dealing in packaging and processing agricultural produce. This kind of insurance protects equipment and properties used in agriculture and farming.
These broad classifications of agricultural insurance are sub-categorised into-
Fish Farm Agricultural Insurance:
This type of insurance will insure your fish against death and your pond of fish against damage caused by fire, lightning, windstorm, flood, disease, and accident. As per the terms of insurance, the policy will bear the value of your dead fish and for reconstructing your pond.
Poultry Agricultural Insurance:
As the name suggests, this insurance will insure your poultry farm against death caused by fire, lightning, windstorm, flood, disease, and accident. As per the standard coverage, this insurance policy will pay the assessed amount of the birds.
Livestock Agricultural Insurance:
To insure your livestock including cattle, sheep, goats, rabbits, and pigs, you would require livestock insurance. This policy will protect your livestock against death caused by fire, lightning, windstorm, flood, accident, or an outbreak of disease or pest. The standard plan will cover the value of your animal in the event of death. You can also opt for an additional premium by purchasing coverage extensions and compensation is provided up to a certain limit as per the policy you purchase. For livestock insurance, you would require a Veterinary Health Certificate from a qualified veterinarian providing the age, identification marks, photographs, health, and market value of the animal.
Farm Property and Produce Agricultural Insurance:
If you wish to insure your farm against any loss or damage to your farm property or agricultural produce caused due to fire, burglary, lightning, flood, windstorm, explosions, plane crashes, impacts, or earthquakes. The standard coverage of this policy will provide you compensation in case your farm property or agricultural produce is damaged due to any of the perils listed.
Multi-peril Crop Agricultural Insurance:
Farmers can opt for this type of policy to insure the farm against any physical loss or damage to crops caused by fire, lightning, windstorm, flood, pest, and disease outbreak. The insurance will cover the cost of crop production that has been lost or damaged from the plantation period to the maturity of the crop.
To minimise farm risk, you need to choose the insurance policy that is best suited to your agribusiness.
For a better understanding of insurance policies and choosing the right one for your agribusiness, you can refer to the farmer database to know what successful farmers have implemented. KG2 is the unrivalled agribusiness data partner with a farmer database covering over 95% of Australian farms. With our database, you will be able to connect with producers from the right industry sector and regions.