In February 2011, about 150 cattle were killed in a barn fire in northern New York state. A burned-down building may be covered by property insurance -- but loss of livestock can mean a loss of livelihood.
For this reason, many ranchers and farmers buy livestock insurance to meet their unique business insurance needs.
What is livestock insurance?
Livestock insurance allows those who rely on animals to earn a living to recoup their losses in the face of a variety of disasters, from fires to market fluctuations.
- Mortality policies: Mortality policies cover you if your animals die. Livestock may be insured for their actual value or another set value.
Often, these policies are broken down by which threats are covered. American Live Stock, for example, offers a "Specified Perils" policy for cattle that covers death as the result of fire or lightning, for example.
Meanwhile, American Livestock's "Full Mortality" policy covers those threats as well as death from natural causes or euthanasia (if recommended by a veterinarian). The policyholder can add coverage for optional threats like accidental shooting, drowning, wild animal attacks and building collapses. Coverage can be purchased for 15 days to 12 months.
- Market-value policies: Like most agricultural products, livestock is susceptible to unpredictable swings in market value and feeding costs. "Livestock Risk Protection," available through the U.S. Department of Agriculture (USDA), allows a policyholder to establish a minimum livestock value. If the market price declines below that value, the policy would pay the difference.
Meanwhile, "Livestock Gross Margin" coverage, also offered through the USDA, offers protection against rising feed costs. If feed costs for cattle rise to the point that they lead to a loss of a farmer's gross margin, the policy provides a payout. USDA offers similar insurance for dairy farmers, covering them if milk prices drop.
Policies are available for a variety of livestock, including cattle, horses, pigs, llamas and sheep. And some specialty insurers offer other optional types of coverage, tailored to farmers' needs. Wilkins' Livestock Insurance, for example, offers a horse insurance policy that includes major medical coverage (reimbursement for vet bills) and stallion infertility coverage (in case a male horse becomes permanently unable to impregnate a mare).
As with any insurance product, livestock insurance can have a variety of exceptions. The USDA's Livestock Gross Margin policy, for example, covers cattle that are fed only in certain states. American Live Stock's cattle policy insures only cattle that are 3 months to 7 years old (insuring cattle outside that window requires a higher premium), and its Full Mortality policy also excludes coverage for theft, which must be purchased separately. Moreover, its policies do not cover farmers who are mandated to slaughter their animals by government order (because of disease, for example).
Federal subsidies and livestock insurance
As most agribusiness owners know, comprehensive federal farm subsidy programs are generally available only for certain crops (corn, cotton, rice, soybeans and wheat). There are, however, several smaller federal subsidy programs that can provide coverage for livestock operations.
The USDA administers the Livestock Assistance Program and Livestock Compensation Program to provide financial help to livestock producers who lose grazing areas or suffer feed losses as the result of federally declared natural disasters. There are also a number of more targeted programs, such as the Small Hog Operation (which compensated farmers for low hog prices in 1999) and the American Indian Livestock Feed Program (which provides funds to feed livestock on tribal-governed lands).
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