How much cover should you get, and what do you need to look out for? Dave Bullard breaks it down for you
Having heavy equipment stolen or damaged can be devastating for business owners. However, many farmers, contractors and fleet owners continue to find themselves in a dire situation by not having appropriate or adequate machinery insurance cover.
It is useful to note that while heavy machinery can be insured separately, they are commonly insured as part of a package custom-made for your business.
A farm insurance pack, for example, can include any or all of the following: Farm property; hay, grain and livestock; heavy machinery; fire (for both inanimate and living assets); domestic property and contents; personal accident and sickness; farm and personal vehicles; working dogs; business interruption; business liability; and road transit.
Use a trusted broker
The Insurance Council of Australia (ICA) recommends talking to a local insurance broker who is familiar with your needs and the industry you’re working in.
"They will be well equipped to help the customer with a risk assessment and their insurance needs," the ICA says. "The broker can develop an appropriate mix of insurance products for machinery, equipment, buildings and other assets and can also consider household and motor vehicle cover."
Think about the cover you need
Machinery can be covered for a wide range of risks including natural hazards and other forms of loss, including theft. You must also consider coverage for breakdowns and accidents such as hitting power lines or breaking fences.
The scope of coverage is probably the most important aspect of your insurance policy. Consider these important questions: Does your policy cover incidents like fire, explosion, theft, fraud and vandalism? Does it cover future damage caused by continuous operation or while on the road? Can you amend the policy and add other items to it later as required?
Make sure you get coverage that matches the real value of your equipment. If you own a fleet of equipment, your broker or insurer should provide advice on buying group insurance to help you save some coin.
Read and understand the fine print
According to business.gov.au, insurance contracts are like normal contracts in that they have terms and conditions that must be met before you are covered.
These terms, which should be included in your Product Disclosure Statement (PDS), can include:
- Conditions of cover, such as making sure you service your vehicles, and how long you’re covered before you renegotiate your insurance contract.
- How much gets paid out to compensate you, such as an agreed amount, market value or a percentage of market value.
- How much you pay for the insurance and when, such as an annual payout limit, lifetime limits, limits per claim and also what you’re covered for.
Business.gov.au advised reading an insurer’s PDS carefully before entering into an insurance contract, paying particular attention to what your policy does and does not cover and in what circumstances.
"It’s best to review the definition of common words for unforeseen events, so you know exactly what you’re covered for," the website said.
"In some cases, certain events become an optional extra for an extra fee.”
Check your machines
If buying farm equipment second-hand, check documentation to ensure that you insure the correct make and model. Also check the repair and ownership history of the equipment.
Don’t forget to secure the paperwork for the equipment such as maintenance records etc.
Consider public liability insurance and cover for damage to third-party property.
Secure your equipment
Heavy equipment is prone to theft, so ensure you take the appropriate steps to protect your assets.
Maintain and use your equipment as you should. When using equipment, make sure relevant licensing laws, building rules and other regulations are followed. A claim that arises from the illegal use of machinery may not be covered.
Review your policy
While it may not be the most exciting thing to do, reviewing your cover frequently is a must to ensure you have the right cover for your assets, especially when circumstances change.
Review your cover each year to make sure you have the right level of cover, and adjust your insurance to take into account new plant, machinery and equipment, and any modifications or upgrades.
Think before you lend
A word of warning about doing favours for mates. Some insurance policies may only cover your equipment if it's being used on your own property or on land which you work on a contractual basis.
So, if you lend your machine to someone else, you may find that you're invalidating some aspects of your cover, such as theft and vandalism protection.
Also be aware of third-party liability. You could be legally liable for any damage claims lodged against you if you lend your equipment to someone and they get injured due to defects.
So make sure you speak to your broker or insurance provider before you do someone a favour.
Top tips on insuring heavy machinery:
- Check insurance with a broker familiar with primary production or heavy machinery
- If buying farm equipment second-hand, check documentation to ensure that you insure the correct make and model
- If buying second-hand, check the repair history of the equipment and the ownership history
- Ensure you have the paperwork for the machinery
- Consider public liability insurance and cover for damage to third-party property
- Determine whether to insure equipment for agreed or market value
- Farm and plant equipment are easily stolen. Take appropriate steps to protect assets
- All equipment and machinery should be well maintained
- Ensure you read and understand your insurance paperwork including the Product Disclosure Statement and insurance schedule
- Review your insurance cover each year to make sure you have the right level of cover, and adjust your insurance to take into account new plant, machinery and equipment, and any modifications or upgrades
- When using equipment, make sure relevant licensing laws, building rules and other regulations are followed. A claim that arises from the illegal use of machinery or equipment may not be covered.