“They always come in threes” is the saying. When accidents or other bad things happen, expect three. Or “If another bad thing happens after three have already happened, it’s not the 4th, it’s the first in the next set of three!”
True or not, we may never know, but sometimes, it just feels that way. And on the farm, it especially feels that way! You mostly work on your own, doing things that mostly require two or more people, so you use the tractor front end loader to double as the extra set of hands. And sometimes it works, sometimes it doesn’t. What will it be this time, a barked knuckle, or a broken wrist? A pulled back muscle or a cracked rib? We’ve all been there.
Check out the story I attached, about a bad day on the farm – it’s good for a great laugh, I can assure you! I bet most people will remember a day exactly like it!
The trouble is that if you were working for someone else and this happened, firstly, you could demand that some extra labour be supplied or workplace health and safety would be onto you, and secondly, if something did go wrong, with all the help around as it still sometimes can, there would be insurance cover available for you to take time out to recover from the injury.
But you’re a farmer, and farmers can’t get most insurances. That was, until now.
Insurance companies are seeing the light, and now, Income Protection, as well as Trauma and TPD (Total and Permanent Disability) are available to farmers to ensure that even if they are injured while working on the farm, financial protection is available through an Income Protection Policy.
This is a different scenario for the insurance companies, as previously, the only income protection that was available was based a ratio of 75% on a guaranteed amount of salary. Well, we know that on many farms, that just doesn’t happen! By the time the bills are paid, many properties run on an overdraft and there is no profit left to pay salaries! However, the various farm advisors and financial planners going to bat for you insisted and a solution has been found.
The income protection has been set working on the basis of 30% of the farm turnover, not profit, up to a maximum of $3,500 per month. That’s a turnover annually of $140,000 pa. It was a very bad year if your farm didn’t turnover this much, but even if it only turned over $100,000 for the year, that’s still an amount of $2,500 per month you could receive in the event of an injury that prevented you from working for any extended period of time.
On my office computer, I have some software set up to calculate this type of situation, so I created a typical farmer and set out an insurance plan for him. He’s 45 years of age and doesn’t smoke and doesn’t have too many other bad habits. He has a wife and a couple of children and an overdraft or mortgage of $150,000, the typical Aussie farmer on his own thousand-acre farm. He’s got some sheep and cattle and crops around 500 acres a year. He has a serious commitment to his wife and young family, and with the droughts and occasional fires, fluctuating process for grain and fat lambs, they manage but it’s not that easy. There’s not a lot of cash left over at the end of the year. An accident that prevents him working could see them in serious trouble.
I set out to insure him with $500,000 Term Life, $250,000 TPD, $250,000 Trauma and $3,500 per month Income protection. The life insurance is there to pay off the mortgage in the event of his death by accident or illness, and to leave his family with cash to adjust to their changed circumstances, invest for cashflow and living expenses and perhaps to set up the farm differently so they can manage without him. The TPD pays off the mortgage in the event of an accident that leaves him disabled if something like that occurred, and goes toward recovery and rehabilitation costs. The trauma covers him for another quarter of a million dollars in the event of such things as a heart attack, loss of limbs, burns, kidney or other organ failure, cancer and so on. Income protection is there to look after him in the event of farm accident type short term injuries such as broken bones or other accidents that can occur around the farm, which we are all aware of. He and his family are fairly well insulated financially from tragedy with this basic cover example.
The total cost to provide this insurance was only $3,800 per year! His family buys peace of mind for less than $4,000. A couple of years ago, no amount of money could buy this protection but now it IS available and it IS affordable!
Of course, insurance is not the only consideration. In his situation, we could possibly look at other investment strategies that would also pay more than the $4,000 per year for the insurance and effectively provide FREE insurance AND a profit from the off-farm investments!
As I said, lots has changed in recent times, and as farmers, working in possibly the most consistently dangerous place on earth, aside from being a postman in Iraq or Afghanistan, the opportunity is now there to protect yourself from the financial consequences of tragedies that have ruined many farms and sent farms to bankruptcy in the past.
If you are vulnerable to this type of situation and want to do something about it, let’s talk. Whilst your farm and financial situation will be different to the average farmer example I created, it’s no less important that it be handled well and your cover be put in place, as soon as possible. Some of the busiest and most dangerous times lie just ahead of us in the harvest season. If you are not covered, who is looking after you and your family?
Ray Jamieson Dip F.S. (F.P.)