According to recent research, “the global crop insurance market attained a value of about USD 36 billion in 2020. The market is further expected to grow in the forecast period of 2023-2028 at a CAGR of 6.2% to reach nearly USD 51 billion by 2026.”
Australia as we know is an arid land. Despite that, Australian agriculture has benefitted both nationally and internationally. Climate, availability of water, soil type, and market proximity determine the country’s agricultural activity. The agricultural sector contributes to 55% of the country’s land use and 24% of water extractions. The country is a leading producer of wool and wine and is also a source of grains, meat, sugar, dairy products, and fruits globally.
This blog discusses the different types of farm insurance and the advantages of having an insurance policy.
Having an agricultural policy implies that the farmers require to pay a meagre amount to the insurance providing company, mostly in the form of a small percentage, guaranteeing coverage against loss caused due to death, flood, drought, etc. This farm insurance also covers the farmer’s expenses for a certain time, within which the insured farmer needs to reimburse the amount.
Types of Agricultural Insurance
- Animal Insurance: This type of insurance is essential for farmers who rear animals like fish, birds, and livestock. To protect farm animals from the outbreak of disease, accidents, and natural disasters like hail, drought, and floods, these insurances are important.
- Crop Insurance: Crop insurance are designed for agricultural producers, ranchers, and other farmers who require insurance for protection against the loss of crops due to natural disasters like drought, hail, floods, or revenue loss caused due to a decline in the prices of agricultural products. Crop yield insurance and crop revenue insurance are the two major categories of crop insurance.
- Fire and Hail: This type of insurance covers the loss of yield due to natural disasters or any other insured hazard.
- Multi-peril Crop Insurance: These insurances cover farmers from yield loss or any other revenue loss and are a complex type of insurance.
- Single-peril Weather Insurance: These insurances cover farmers due to lack of rain, excessive rain, or cyclone, based on an agreed period. The different types of crops considered for this type of insurance include broadacre, industrial crops, viticulture, and orchard crops.
- Farm Property and Equipment Insurance: This type of insurance is provided to farmers and agricultural businesses dealing in packaging and processing agricultural produce. These insurances protect equipment and properties used in agriculture and Australian farming.
These broad categories of insurance policies are sub-categorised into-
- Fish-farm Agricultural Insurance: As the name suggests, this insurance policy protects fishes against death and farmer’s pond of fish from damage caused by fire, lightning, windstorm, flood, disease, and accidents. This policy also endures the value of dead fish and reconstructing the pond.
- Poultry Insurance: This policy protects poultry farms against death caused due to fire, lightning, windstorm, flood, disease, and accident. This policy will pay the assessed amount for birds based on the standard coverage.
- Livestock Insurance: To insure cattle, sheep, goats, rabbits, and goats, you would need livestock insurance. It protects livestock against death caused due to fire, lightning, windstorm, flood, accident, and other outbreaks of disease or pest. In case of the death of livestock, the standard plan covers the farmers. Or, farmers can opt for additional premiums by purchasing coverage extensions and compensations provided to a certain limit as per the policy they choose.
- Farm Property and Produce Insurance: For protection against any loss or damage due to fire, burglary, lightning, flood, windstorm, explosions, plane crashes, impacts, or earthquakes, farmers require farm property and produce insurance. This policy provides compensation if your farm property or agricultural produce gets damaged due to any of these hazards.
- Multi-peril Crop Insurance: This type of crop insurance protects a farm against any physical loss or damage to crops caused by fire, lightning, windstorm, flood, pest, or disease outbreak. It covers the crop production cost that is lost or damaged from the plantation period to the maturity of the crop.
Benefits of Having a Farm Policy
- Regardless of the size of the farm, modern technologies and equipment are a must which help enhance the farm’s productivity. Agriculture companies offer farmers the credit and financing required to acquire these essentials.
- Cash flow regulations and a farmer finance buffer can benefit farmers rehabilitate damaged enterprises.
- Business risks get diminished due to agricultural insurance. Every piece of equipment and infrastructure used in farm operations are susceptible to damage caused due to human error. Therefore, having an insurance policy can manage these setbacks.
- Insurance policies work as a security blanket giving farmers mental satisfaction. Being mentally secure help farmers enhance their productivity and creativity in their businesses.
- Having an insurance policy encourages savings since the premiums from the insurance policies cannot be withdrawn before their expiration date.
- Since insurance policies act as collateral, they help farmers get loans easily.
- Insurance policies benefit the economic growth of a country. The collected capital from the insured is used to invest in the country’s economic growth.
- Job security is one of the major benefits of having a farm policy. Since employers are protected from going out of business, the jobs of the employees working on the farm remain secure.
To minimise farm risk, an agribusiness owner needs to choose the right farm insurance policy.
To determine which insurance policy will work best for you, you need research on the insurance policies that have worked perfectly for the most successful farmers in Australia. To get an insight into the Australian farming industry, browse through the KG2 Australia website, the country’s largest independent farmer database that enables the farmers and industry to leverage Australia’s most comprehensive agribusiness database.