Most magazine articles describe how things should be done. Experts talk about best practices and strategies. We read about the winners and their successes. Yet the most important lessons I have learned came not as a result of emulating what others have done right but rather recognizing and avoiding mistakes I have previously made.
Winston Churchill said: “All men make mistakes, but only wise men learn from their mistakes.”
This month I wanted to try to provide readers with pertinent information about insurance.
But what information do readers need about insurance? After all, insurance is a fact of life. Every farmer has at least one vehicle, which by law must be insured. Farmers often carry some type of home insurance, building and asset coverage, life insurance, disability insurance, and business insurance. A significant number insure crops and livestock.
Farmers in most provinces must also provide some type of coverage for employees, and a growing number of farmers purchase price insurance to protect against commodity price drops or margin losses.
Is there anything that I could tell farmers about insurance that they already do not know, given they already deal with insurance in so many facets of their life and business?
I contacted insurance agents and the insurance industry seeking information to pass on. And as I questioned these experts, it seems the industry is more interested in selling policies than providing risk protection. Yet Wikipedia states the primary purpose of insurance is “to hedge against the risk of a contingent or uncertain loss.”
The reason I wanted to provide readers with information about insurance was in the past year I have had three experiences where insurance did not provide the risk protection I expected.
I am first to admit in each case it was my mistake. And then it occurred to me that perhaps the best information I could provide is to share the insurance mistakes I made rather than quote insurance experts repeating the same information you have likely heard repeatedly. After all, as Samuel Levenson quipped, “You must learn from the mistakes of others. You can’t possibly live long enough to make them all yourself.”
So here’s hoping that the possibility of helping someone else avoid these mistakes is worth the risk of exposing my own ignorance.
What is covered by your policy?
I have a disability policy that provides coverage due to accident or injury. In the past year I have had carpel tunnel surgery on both hands. Due to the physical nature of farm work, the surgery severely limited what I could do for a couple of months this past year. I expected a significant payment from my disability policy given the premiums I am charged and the time for which I simply could not do the physical work required on the farm.
So it came as a surprise when I found my disability claim was disallowed because the insurance company considers carpel tunnel syndrome to be a sickness rather than an injury. Even though there are many references to repetitive movements as a potential cause of carpel tunnel syndrome, the cause is still considered to be unknown. According to Wikipedia: “The Occupational Safety and Health Administration (OSHA) has adopted rules and regulations regarding cumulative trauma disorders. Occupational risk factors of repetitive tasks, force, posture, and vibration have been cited. The relationship between work and CTS is controversial; in many locations, workers diagnosed with carpal tunnel syndrome are entitled to time off and compensation.” But such classification is of no relevance since carpel tunnel syndrome was excluded in my policy.
The mistake I made was I did not know what my policy actually covered. Instead of the payment I expected, I had no coverage for carpel tunnel syndrome and in fact it cost me money to have the doctor fill out the forms which were rejected by the company.
I made assumptions based on my expectations of what should be covered, instead of what actually was covered.
Check before you buy. What are your risks? Does the policy cover them?
In March my wife and I flew to Europe with a major Canadian airline. The trip out of Edmonton required a change of plane in Calgary and another flight change in Germany. Like most travellers, we purchased travel insurance that included coverage in the case of cancelled and delayed flights.
Unfortunately, about 12 hours before we were to travel, the first leg of our trip was cancelled due to weather (according to the text message). Amazingly, a flight an hour earlier and another flight an hour later by the same airline from Edmonton to Calgary were not cancelled, but both were full and we could not change flights. A competing airline’s flights also continued on-time operation.
We asked about flying with the competitor, but our tickets could not be transferred and it would have added about $1,000 out of our pocket to purchase last-minute seats on the competitor’s flights. The ticket agent thought the $1,000 would likely be covered by our travel insurance.
Given we did not want to cough up $1,000 the morning of our trip, we had time, and weather was not yet an issue, we chose to cancel the first flight leg and drive the four hours to Calgary to catch the flight to Germany. The ticket agent told us we could apply for a refund of the first leg when we got home.
The trip went without a further hitch until we got home and I applied for a refund. It took hours of phone calls and emails and over six weeks before we got a refund. Worse, the dollar amount we got back from the cancelled tickets did not even cover the gas to drive to Calgary. So I called the travel insurance provider and asked if I had coverage for driving to Calgary when our flight was cancelled. Unfortunately, the travel policy did not cover alternate private automobile travel.
Furthermore, had we called the insurance agency as soon as our flight was cancelled, the insurance company would have booked us on the competitor’s flight from Edmonton to Calgary at no additional cost to us. She made it clear that the first call when you experience any type of disruption, medical, or other covered loss on a travel policy should be to the travel insurance agency and let them make the arrangements or provide authorization for you to take action yourself.
I tried to solve the problem myself instead of contacting my travel insurance provider as soon as I experienced the travel disruption.
It’s important to know the procedures to be followed when a loss is experienced.
The most significant loss happened to a family member last summer. A lightning strike knocked out their septic tank pump resulting in gray water flooding a finished basement. The good news was they had flood coverage. The bad news was their coverage was only half of the expected loss.
Compounding this problem was a lack of knowledge of individuals or companies qualified for the immediate remedial work needed to clean the basement and repair the damage. So they left it up to the insurance adjuster to contract the work out.
Unfortunately, this meant zero cost control on the contracted work. The insurance company knew immediately they would be paying the full amount of coverage. So they hired a major city firm that charged travel time and mileage. The bill for the first day on the job, when the contracted firm never even completed getting the ruined rugs out or any of the furnishings, ate up close to one-sixth of the coverage dollars available. That was the only day that company was on the job. We ended up acting as general contractors ourselves and hired workers as needed.
Family members ended up doing a good portion of the work. In spite of these savings, it still cost about 50 per cent more than the insurance coverage as well as many days of our unpaid own labour.
The first thing I did following this loss was review my own basement flood coverage to ensure it would cover the costs of remediation in case of flooding.
The agent also reminded me that while most home owner policies cover water damage from broken pipes or fixtures, this is likely not to be the cause of a loss due to overland flooding. Most policies no longer cover losses due to overland flooding and you require an additional rider for loss from overland flooding.
If you are in a flood-prone area, make sure your policy covers overland flooding.
The mistake I made in my own home was not updating the policy to reflect home improvements we had made, meaning I had insufficient coverage for potential losses. Thankfully, I did not have a loss on my home due to flooding and was able to correct the mistake before I had a flood or loss.
Repair costs can get out of hand, especially if not monitored from the start.
Make sure coverage is sufficient for potential losses.
These were three very different losses, on three different types of polices, with a costly lesson from each. And there are many other real examples online of insurance mistakes people regularly make.
The list gets even longer when you consider mistakes made in purchasing business insurance. It’s worth looking at the www. fitsmallbusiness.com website, a U.S. small business online resource that lists 25 common mistakes small businesses make in purchasing insurance, many of which apply to a Canadian farm business.
In fact, it can be even more important for farms to carry the right policies to provide risk protection. Remember, most farms are dangerous workplaces in close proximity to the general public. We use dangerous chemicals, operate large, slow-moving equipment on public roads, and generally have less supervision of our employees, lands, and operations than other businesses. At the same time, most farmers are asset rich. It is a lawyer’s dream if an accident happens and unless we protect our business with proper insurance, a mistake could easily bankrupt a farm business.
In today’s world, insurance is a necessity. But unless you actually know you have the right kind amount of insurance, and you know the steps to follow if you experience a loss, you are likely wasting money and not getting the protection you think you have.
Talk to your agent and competitors ASAP!