Tree farm damage from high winds. Federal crop insurance does not cover standing timber.

David Teed, Managing Director of Live Asset Insurance, describes the ins and outs of crop insurance services 

Federal crop insurance is not as cut-and-dried as you might think. The fact is, other protection is available for crop insurance brokers to offer their clients to fill in the gaps where government crop insurance services fall short. David Teed, Managing Director of Live Asset Insurance, answers a half-dozen questions on the nitty-gritty of federal and private crop insurance.

Q: What is the relationship between Live Asset insurance and federal crop insurance subsidized by the government? 

David Teed: Live Asset was created to fill coverage gaps left by the federal crop insurance and to compete directly as a private company rather than a subsidized one. Congress mandates they not compete when a private enterprise offers comparable coverage. The government program is used as a means to protect against catastrophic loss, but most buyers are self funding the majority of the loss and simply enriching the brokers selling them the policy. Taxpayers and the growers are footing the bill for coverage that rarely gets used, leaving everyone but the brokers upset. 

Our policy is a named perils death and destruction policy, meaning we only cover those perils named in the policy that kill or destroy the plant to the point it will likely die in the near future. National crop insurance offers “all risk” coverage which means they cover everything except that which is excluded. The exclusions make our crop insurance services comparable in many ways at the end of the day.  

Q: What is the practical benefit of obtaining the coverage provided by Live Asset coverage? What is unique about the crop insurance services Live Assets offers? 

DT: The practical benefit is that now growers can eliminate the huge gaps in coverage to protect their bottom lines and find coverage for plants that the federal crop insurance program has excluded. Growers whom are patriots and believe in self reliance will embrace our policy as a means of doing their part to reduce the national debt! There is no other source in the country currently offering our coverage, making us unique and exclusive as a private crop insurance program. 

Q: Are there some plants that federal crop insurance doesn’t cover that Live Asset insurance does?  

DT: Crop Insurance excludes vines and Christmas trees to name only two items, but these are major items for us. National crop insurance excludes vines and we are the only source in the country that insures the vines. Our policy is also unique because we can insure up to $250 dollars per vine which allows the grower to replace their destroyed vines with new roots/vines, but receive full replacement value payment for the loss. 

How can the government exclude Christmas trees?  They do not cover standing timber. They also do not cover containerized trees over a certain gallon size…300 gallons. But we will. We have no such limitations or conditions on garden centers that have a grow field where they derive over 50 percent of their income from the retail center; the government will not insure their operations. There is no federal crop insurance coverage for trees growing on residential or commercial properties not held for sale to the public – like a golf course or cemetery or zoo. They require clients to perform tasks for coverage to apply like lay down plants before a storm and cover them with pine straw, we have no such limitations. 

We are only writing in 19 states at this point, but we hope to pick up a lot more when the government starts to back away from competing against us as a private carrier. There are other issues I am learning everyday causing me to realize that the government program is not the answer for many agricultural citizens.

 Q:  If someone has both federal crop insurance and Live Asset insurance, how do those two areas of coverage interact should a claim be filed? 

DT: If someone has both policies, it depends on if the government is excluding the coverage, like on vines! Then there is no coordination, but if they are insuring only catastrophic coverage under the government policy then ours is primary and the government is excess. Typically we will know what the coverage is before hand and we will insure the total insured value (TIV), but only insure the primary portion not covered by the national crop insurance policy. 

So, if someone had 10 million trees held for sale in a nursery and they had a policy with the government covering 55 percent, we would insure the 10 million but discount the price by a factor using excess coverage discounts because we will not pay the full 10 million (as 5.5 million is covered by the govt). Our policy would be primary on the first 4.5 million replacing the growers self funded exposure. 

Q:  How about cost? Federal crop insurance is subsidized by the government. Wouldn’t other coverage be more expensive? 

DT:  Our policy is about 50 percent less than the government policy, apples-to-apples. But you are right that no private enterprise can compete with a taxpayer based subsidized program that does not have to turn a profit! We offer primary coverage for owners when the government makes them pay first dollar before they kick in a penny. 

Q: In your opinion, what are the main areas of misunderstanding or confusion when it comes to Live Asset insurance and crop insurance brokers? Why should crop insurance brokers offer Live Asset insurance to their clients? 

DT:  Crop brokers who care about their client’s exposure will tell you that a federal crop insurance policy is not worth the paper it is printed on, but they do not want to reduce their income of 17 percent commission from the government policy and take about half that amount from us. This is short sighted because the client can come to us directly and they will lose it anyway. Or another broker who is targeting their client can offer our protection as a solution and they can lose it to another broker. Or they can do the right thing and reduce their income from the taxpayers on a policy that they do not believe in and sell our policy as a blend with the federal crop insurance program. We want to reduce the nursery tax burden by billions.

Many people ask us:

 ”How do you value the plant inventory?  On cost or selling price?”

We provide coverage on a wholesale nursery plant replacement cost valuation.

For example; if a plant were purchased for $10 dollars and the grower held it for 2 years and sold it for $100 dollars, Live Asset would not pay a $100 dollar claim, because the $100 dollar amount includes profit. We do not insure lost profit on plant inventory.

However, we do pay 100% of the insured amount for “specimen plant items” on an agreed amount basis, when listed on the policy.

Specimen plant items are “one of a kind plant material” that can not be replaced with a commercially grown like, kind and quality replacement. Specimen plant status is determined by HMI when the inventory list is submitted as part of our application process.

If the Live Asset policy designates your inventory as “specimen plant status” we will pay 100% of the value on a structured payment with 55% upfront to cover debris removal, new inventory and installation; the balance paid in equal installments over the next 3 years; as long as the grower replaces the item with a new “replacement liner or vine”.

If you are unsure on how to properly manage your live assets and protect your plant inventory, feel free to contact your Live Asset broker.