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Why Add Equipment Breakdown Coverage to My Farmers Insurance?

Farm Insurance | 2019.04.17

Operating a modern agricultural business means investing in the necessary equipment. No matter how large or small your farm may be – you rely on multiple pieces of equipment and technologies to ensure your farm is efficient, effective and profitable. However, many farm insurance policies limit or exclude equipment breakdown. By adding farm equipment breakdown coverage to your insurance policy, you minimize downtime and save yourself the hassle of hiring third parties to repair mechanical, electrical and pressure systems.

What is equipment breakdown? In the world of farmers insurance, it’s defined as physical loss or damage originating within boilers, pressure vessels, electrical distribution, mechanical systems, computers and electronics. Now, let’s take a more detailed look at the types of equipment breakdown that can occur and how adding breakdown coverage to your farmers insurance can protect you against unforeseen damage and business interruption costs.

Boilers & Pressure Vessels

Boilers are widely used to generate and distribute heat and hot water. Other types of pressure vessels include sterilizers and air tanks. Increasingly, dairies and hog farms are generating power from waste, burning methane to produce energy for their operations. Boilers and pressure vessels are major parts of co-generation systems.

Common Causes of Breakdown

  • Pump failure
  • Low water cut off mechanism failure
  • Control failure
  • Scale build-up
  • Inadequate controls of safety devices

Example: Feed Yard Water Pump Breakdown

In one instance, two 50 horsepower water pumps for cattle feeding operation shorted due to a high voltage surge. With equipment breakdown coverage, insurance covered $28,300 in direct damages and repair costs. Parts were obtained and shipped to the farm before any costs were incurred due to business interruption.

Electrical Distribution

A variety of electrical equipment is critical to daily farm and ranch operations. Electrical generators provide power for remote areas or serve as back-up to primary energy sources. Electrical panels, circuit breakers and cables control the flow of power to the farm. On farms and ranches, many of the conditions that cause breakdown are more extreme than in other business environments. Temperature changes, rain, dirt and dust – all part of the farm environment – contribute to equipment breakdown risk.

Common Causes of Breakdown

  • Power surges and fluctuations
  • Loose connections
  • Moisture or high humidity
  • Dirt and dust
  • Overloading
  • Insulation deterioration
  • Inadequate maintenance

Example: Dairy Farm Electrical Equipment

On one Canadian dairy farm while new utility-owned electrical equipment was being installed, a short circuit occurred. The short sent a surge through the insured’s incoming power line burning out several pieces of electrical equipment. The surge severely damaged a weight scale used to weigh dairy trucks. Their farmers insurance and equipment breakdown coverage provided the necessary protection, saving them from going out of pocket for $31,800 in direct damages.

Mechanical Equipment

The motors, gears and many mechanical parts in pumps, milking carousels and other farm and ranch equipment are subject to a variety of breakdown risks. Operating for long hours and often stretched to maximum capacity, this equipment is constantly at risk of breakdown. Most mechanical equipment also contains electrical parts and on today’s farms it is highly automated. Controlled by sensitive high-tech equipment that increases the risk of breakdown.

Common Causes of Breakdown

  • Lack of lubrication
  • Oil contaminant
  • Misalignment
  • Metal fatigue
  • Vibration
  • Electrical disturbances

Example: Mechanical Issues at a Grain Mill

In the case of this grain mill, a 200-horsepower drive motor for a leg elevator burned out by an apparent voltage surge. Some of the soft start motor controls were also damaged by the surge. The farm’s insurance provider rented a crane for repair access and paid $23,476 in direct damage and $5,000 for extra expenses.

Computers & Electronics

Technology is part of farm life today. Modern operations often use precision farming techniques that utilize sophisticated technology or other complex electrical systems. Even traditional farms now rely on office computers, phones and communications systems that contain sensitive electronic technology. High-tech equipment is fragile, highly prone to breakdown and typically once damaged, must be replaced. In many cases, loss of farm income due to breakdown compounds the cost.

Common Causes of Breakdown

  • Power surges
  • Power interruptions
  • Electrical line surges
  • Insulation deterioration
  • Overload

Example: Greenhouse pH Sensor: Small Item, Big Loss

For one greenhouse, the failure of an electronic pH sensor resulted in irrigation water becoming too acidic. As a result of the corresponding increase in the acidity of the soil being irrigated there was reduction in the yield of the crops. The cost of the damage to the sensor was only $250, but with their equipment breakdown coverage, the farm was also covered by their insurance for $43,423 – the cost of the interruption to their business.

It’s clear that as farming becomes more automated and connected electronically, farmers are becoming increasingly reliant on sophisticated equipment to keep things running optimally. No farming business can afford losses due to equipment breakdown. At MMI we offer farmers financial protection in the form of equipment breakdown coverage so you can run your business – knowing we’ve got your back.

Interested in adding equipment breakdown coverage to your farmers insurance policy?
Contact us!