Posted On 19 Mar 2019
When is it Excluded? When is it Covered?
The Random House College Dictionary defines the word Insurance:
- The act, system, or business of insuring
property, life, etc. against loss or harm in consideration of a payment proportionate to the risk involved.
- Coverage by contract in which one party agrees to indemnify or reimburse another for any loss that occurs under the terms of the contract.
- The amount for which anything is insured by
contractitself, set forth in a written or printed agreement or policy.
People purchase or invest in different types of insurance policies to
- We purchase a homeowner’s policy to physically cover our home and our personal property in and around the house.
- We purchase auto insurance to physically protect the car and provide liability protection to others when and if we are at fault.
- We purchase life insurance to provide money to replace our income producing ability
and / orto cover a large debt or loan.
- We purchase other property policies such as a
farmowner’spolicy to cover the large investments in the physical assets that make up our farm: the buildings, mobile equipment, supplies, and inventories.
- We purchase insurance policies as a requirement to secure a loan.
- We purchase insurance due to a law. We purchase auto insurance because the state requires a registered vehicle to have liability protection to others.
It is common in most property insurance policies to describe what we cover for perils and the causes of loss as basic, broad or special coverage. Under basic and broad coverage, the policy would say we cover for:
- Basic: Fire, Damage from vehicles, Lightning, Smoke, Windstorm,
Sink holecollapse, Hail, Volcanic Action, Explosion, Vandalism, Riot, Civil commotion, Theft, Aircraft damage
- Broad: All basic perils plus, Falling Objects, Weight of ice sleet and snow, Accidental discharge of liquids or steam from plumbing, Sudden & accidental damage from electrical current, Freezing of plumbing, Collapse, Sudden & Accidental tearing apart of buildings
- Special Forms will include all risk of physical damage to covered eligible property unless specifically excluded by policy language or certain exceptions.
Yes, not everything in life is covered by insurance. All insurance policies are going to have exclusions and exceptions (make sure you read your policy for a full listing of what is not covered).
Here are a few common exclusions and exceptions but by no means a complete list.
- Civil Authority – if a government agency comes along and says, “Hey, you have to move that barn. We are going to build a new road!” This is not an insurance claim.
- Earth movement – earthquakes and landslides are not covered. Also,
shiftingof earth around your basement wall is not covered.
- Intentional acts or wear and tear. You cannot neglect to care for your property and expect long-term damage and deterioration to be covered by insurance.
- Ordinance of Law – we do not cover or pay for the loss or increased cost which results from the enforcement of code, ordinance or law.
- Water damage – this includes water from
flood, surface water, waves, water back-up from drains, sewers, sump, and water from below groundsurface.
Another common exclusion applied to homes and farm buildings on a farmowner’s policy reads:
-Wear and Tear-We do not pay for loss which results from wear and tear, marring, deterioration, inherent vice, latent defect, MECHANICAL BREAKDOWN, rust, wet or dry rot, corrosion, mold, contamination or smog.
We are referencing the part of the policy that covers our homes, residences, other dwellings, as well as, farm barns and buildings. So, we are talking about the mechanical breakdown of equipment that is fixed to or part of these structures (we are not talking about our mobile farm machinery and equipment). We are talking about refrigeration and air conditioning equipment. We are talking about computers, electronics, communication systems. We are talking about motors boilers, pressure vessel systems
What could happen to these types of fixed equipment that their exclusion would not
cover? Examples include:
- Mechanical breakdown or rupturing by centrifugal force
- Losses caused by arcing or electrical current (other standard
farmowner’spolicy would cover lightning) Explosionof boilers, pipes, turbines, engines. Lossto both hot water or steam boilers, heaters, pipes, turbines, or engines caused by any condition or occurrence with insuch equipment.
Not all is lost. There is a coverage endorsement that you can add to your farm policy and in most cases for a nominal premium that gives coverage and buys back the exclusion. It is simply called “Equipment Breakdown Coverage”
There are five parts to this endorsement.
- Electrical – We cover power transformers, electrical motors, switchboards, distribution panels, circuit breakers, cables
andducts. We cover common causes of loss that include: supply line surges, excessive moisture, insulation deterioration, poor workmanship, operator error andpoor contacts.
- Air conditioners and refrigeration – We cover air conditioning, refrigeration, motors, compressors, fans, switchboards, coils, pipes
andvessels. We cover common causes of loss from the failure of control systems, vibration, refrigerant slugging, scale build-up, rapid weather change, wear of internal parts and external blows.
- Boilers and Pressure Vessels – We cover heating and process boilers, pressure vessels, cookers, sterilizers, and vulcanizers. We cover the common causes of loss from control failure, scale build-up, freezing, vibration, low water condition, operator error, and coldwater slugging.
- Computerized production, communications, and computing equipment – We cover common causes of loss from electrical line surges, insulation deterioration, overload conditions, excessive moisture, poor contacts and connections, operator errors and abuse.
- Pumps, fans, blowers, engines, turbines, compressors and gear settings – Common causes of loss from oil contamination, misalignment, overload, surging, vibration,
overspeed, bearing wear, and operator error.
So what kind of things on the farm would be covered? Here is a list of some of the things (not a complete list).
- Electrical panels in our home, buildings, and electrical panels running our grain handling facilities
- Milk tank refrigeration
- Air conditioning equipment (fixed, not window units) both in homes as well as offices, cooling systems for cabbage, potatoes, onions,
- Refrigerated perishable supplies including semen, medicines, and vaccines
- Hot water tanks
- Propane storage tanks
- Office equipment, computer systems, phone systems
- Computerize milking systems
- Precision farming equipment attached to a structure (not attached to a tractor or combine)
- Motors as part of
- Motors as part of
- Air compressor pumps
- Other pump units
This coverage endorsement also provides some extra coverage with specific
|Expediting expenses||$ 25,0000.00|
|Hazardous substance release||$ 25,000.00|
|Data restoration||$ 25,000.00|
When a farm operation may need more protection than what these sub limits offer, we can make an application asking for an increase in coverage for a corresponding increase in premium.
As always, do not hesitate to call the office with questions and concerns regarding your specific policy needs at (585) 589-6236