What Is an Act of God in a Farm & Ranch Insurance Policy?
Farms and ranches stand more to lose from “acts of God” than any other business. Unforeseen weather disasters cause immediate damage to the products farms and ranches make. While other businesses can protect their inventory from these events, that’s not as easy with acres of crops or herds of livestock.
While every underwriter has different coverage standards, there are common understandings of what events qualify as acts of God. How do they relate to the fields of farm and ranch insurance?
What Is an Act of God?
Legally, an act of God is defined as an unpredictable natural event for which no human being could be held responsible. “Unpredictable” is the keyword in this definition. It separates acts of God from disasters that can be anticipated and managed.
Acts of God can take many forms in the context of farms and ranches. Periods of heavy rainfall or high winds can devastate crop fields. Tornadoes can upend barns, equipment, and other farm structures. Over the last few years, we’ve seen how extended droughts have crippled entire agricultural industries in the Western United States.
Farm and ranch insurance companies that account for acts of God do so in several ways. Many of them include or exclude specific acts of God in their policies. Premiums and deductibles to cover unexpected disasters may be different from other coverages (usually higher).
Because of their nature, assessing the risk of acts of God on farms and ranches can be quite complex. They don’t just suffer property losses — they also experience income and inventory losses.
Are Earthquakes and Floods Acts of God?
Many insurers exclude earthquakes and floods from the list of “acts of God.” True, you can’t blame any specific person for earthquakes or floods. However, they are, in the slightest of ways, “predictable.”
It comes down to geography. Certain parts of the world experience earthquakes more frequently than others. Other areas are mapped as floodplains that are much more susceptible to heavy rains.
Some farm and ranch insurance companies do include earthquakes and floods as acts of God. For the most part, however, those who run agribusinesses and want additional earthquake and flood insurance policies must purchase them on top of standard liability coverage.
How Are Acts of God Covered?
A typical farm insurance policy covers equipment, buildings, structures, feed, livestock, irrigation systems, and vehicles for their insured repair or replacement value. This usually includes acts of God like tornadoes, lightning strikes, winds, thunderstorms, tornadoes, pest infestation, wildfires, and drought.
Insurance policies typically distinguish crops from other farm and ranch assets. Most agribusinesses take out “multiple peril crop insurance” (MPCI) for events resulting in low harvest yields. The federal government regulates the purchase of MPCI policies, and farmers must buy them before growing season deadlines.
Hail storms are typically covered in separate “crop-hail” policies. That’s because hail could decimate a particular area of a rancher’s farmland but leave others intact.
What Does Your Insurance Cover?
Insurance companies have different policies and limits on losses caused by acts of God. Farmers must examine their insurance documents carefully to see what’s covered and speak to their agents to make adjustments.
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