Are you adequately insured?

Insurance cover is very important to protect your business if an accident or tragedy occurs on the farm. It is important to understand what your insurance covers when you pay your annual premium. Gerard McCutcheon tells us more.

Areas of insurance cover for pig farms

There are three main areas that should be covered when you insure your pig farm:

• Stock value,
• Building replacement value,
• Loss of profits or consequential

Also you should have cover for public liability and employer’s liability, personal accident and also wages/salary cover. Each area should be discussed with your insurance company annually as you renew your policy to ensure that your cover is suitable for your business.

Insuring stock values

When insuring the stock on a pig farm their value must be estimated. This will vary depending on the pig sale value and the feed cost on your farm, remembering to adjust for the fact that pig prices have risen in the last 12 months.

 The value of piglets, weaners and finishers will vary with the pig sale price, feed performance and feed costs (€/tonne). Assuming a sale weight of 118kg LW and a 76.5 % kill-out allows a valuation for these pigs as shown in the table below. This values the pigs at a sale value minus the feed cost

with some allowance for the other variable costs to bring the pig to sale weight.

Table 1. Value of a Piglet, Weaner and Finisher based on two sale prices:

Assumes a finisher FCE of 2.7 and a weaner FCE of 1.8. Transfer to finisher at 38kg LW. Creep/starter diet @ €1180/t, Link @ €800/t, Weaner €514/t, Finisher €450/t.

The average sale price for pigs in 2021 was c.160 c/kg DW. The average price in 2023 may be 220 c/kg DW. If we take the 220 c per kg sale price we get a €2,100 stock value per sow plus progeny (with sows valued at €500 each).  This figure is €1,350 per sow plus progeny if the finisher sale price is 160 cent per kg DW.

For insurance cover of stock you need to decide what other risks are you to insure against. Cover should also be sought to cover the value of pigs being transported from the farm (pigs in transit) if you transport your own pigs for sale. This should be discussed with your insurance company as you renew your policy.

Insuring farm buildings

When you insure a farm building you are really insuring the replacement cost of the farm building should it be damaged or destroyed. For example, if you have a pig finisher house with 1000 places and it was built ten years ago, it’s book value is probably only €100,000 today. The current cost of new finisher accommodation is at least €350 (excluding VAT) per finisher place – so the replacement cost of the building is 1000 by €350 – so the building should be insured for a value of €350,000. This valuation should be done for all your buildings on the pig farm (including feed mill if one is present).

If you only insure the building for its current value you will get less than 30% of the cost of replacing it (i.e. €100,000/€350,000 multiplied by 100). This will not replace the building if the building was destroyed. The figure is probably in the region of €5,300  per  sow  plus  progeny  (based  upon €900/dry sow place, €3,500 per farrowing place, €250 for first and second stage weaner place and €350 per finisher place).

Check the risk cover that you require insurance for, e.g. fire, storm damage, lightning, explosion, suffocation etc. You should also discuss cover for removal of dead stock or building debris in the event of a fire or other tragedy on the farm.

Loss of profits or consequential loss

The cost of profit loss or consequential loss is usually defined as the gross profit that is lost as a consequence of some tragic event that may be insured. Read your policy or ask your insurance company for an explanation of how the cover is defined and what that means. As pig prices and feed prices fluctuate the gross profit will vary from year to year.

The next decision is what length of cover you may require. If you have a fire on your farm and need to depopulate the herd, the time that you are out of production could well be a year, but if you run into planning issues or other problems this could even be longer. It is important to know when the consequential loss is triggered. It is usually the date of the incident. The period of cover needs to be considered – a year may suffice but if there is a fire it could take a lot longer than a year to be fully operational again.

Conclusion

Good farm insurance can take a lot of pressure off if an unfortunate event occurs on your farm. Unfortunately a lot of people say that “it will never happen to them” and perhaps do not give this the time and attention that it deserves. It’s also important to remember that with higher feed costs and building costs you should review the values of stock and buildings that you have cover for.

It could happen to you, and you need good farm insurance cover if your business is to survive.