21 February 2025

Proper insurance cover is vital

Correct insurance cover is vital to protect your business if an accident occurs on the farm. It is important to understand your insurance cover when you pay your annual premium. Gerard McCutcheon outlines key areas to review, to ensure your farm stays protected.

There are three main areas that should be covered when you insure your pig farm:      

1. Stock value
2. Building replacement value
3. Loss of profits or Consequential loss

You should also have cover for public liability and employer’s liability, personal accident and wages/salary cover. Each area should be discussed with your insurance company annually as you renew your policy to ensure that your cover is suitable for your business.

Insuring stock values

When insuring the stock on a pig farm their value must be estimated. This will vary depending on the pig sale value and the feed cost on your farm. 

The value of piglets, weaners and finishers will vary in response to the pig sale price, feed performance and feed costs (€/tonne). Assuming a sale weight of 118kg LW and a 76.5 % kill-out will allow a valuation for these pigs as shown in the table below. This values the pigs at a sale value minus the feed cost with some allowance for the other variable costs to bring the pig to sale weight.

Table 1 Value of a Piglet, Weaner and Finisher based on two sale prices

Assumes a finisher FCE of 2.7 and a weaner FCE of 1.8. Transfer to finisher at 38kg LW.
Creep/starter diet €1040/t, Link €760/t, Weaner €405/t, Finisher €340/t.

The average sale price for pigs in 2024 was c.220 c/kg DW. If we take the 220 c per kg sale price we get a €2,378 stock value per sow plus progeny (with sows valued at €500 each). This figure is €2,130 per sow plus progeny if the finisher sale price is 200 cent per kg DW.

For insurance cover of stock you need to decide what other risks are you to insure against. Cover should also be sought to cover the value of pigs being transported from the farm (pigs in transit) if you transport your own pigs for sale. Again, discuss this with your insurance company as you renew your policy.

Insuring farm buildings

When you insure a farm building you are really insuring the replacement cost of the farm building if it was damaged or destroyed, not the current value. For example, if you have a pig finisher house with 1000 places and it was built ten years ago, its book value is probably only €100,000 today. The current cost of new finisher accommodation is at least €550 (excluding VAT) per finisher place – so the replacement cost of the building is 1000 multiplied by €550 – so the building should be insured for a value of €550,000. This valuation should be done for all your buildings on the pig farm (including feed mill if one is present).  Be careful to inquire if your building cover includes fixtures and fittings (e.g. feed systems and feeders, pen divisions, ventilation equipment, etc.) to be 100% clear on what cover you are getting for your premium.

If you only insure the building for its current value you will get less than 20% of the cost of replacing it (i.e. €100,000/€550,000 multiplied by 100). This will not replace the building if the building was destroyed. The overall figure is probably now in the region of €7,100 per sow plus progeny (based upon €1,200/dry sow place, €3,500 per farrowing place, €300 for first and second stage weaner place and €550 per finisher place).

Check the risk cover that you require insurance for; fire, storm damage, lightning, explosion, suffocation etc. You should also discuss cover for removal and disposal of dead stock or building debris in the event of a fire or other tragedy on the farm. This is very relevant if there are any buildings with asbestos roofing on your farm.

If you have staff accommodation on site this should be highlighted to your insurance provider.

Loss of profits or consequential loss

The cost of profit loss, or consequential loss is usually defined as the gross margin/profit that is lost as a consequence of some tragic event that may be insured. Read your policy and/or ask your insurance company for an explanation of how the cover is defined and what it covers. As pig prices and feed prices fluctuate the gross profit will vary from year to year.  The gross margin figure in your business accounts for the most recent two years is a good indication of what your cover should be.

The next decision is what length of cover you may require. If you have a fire on your farm and need to depopulate the herd, the time that you are out of production could well be a year, but if you run into planning issues or other problems this could even be longer. It is important to know when the consequential loss is triggered. It is usually the date of the incident. The period of cover needs to be considered. A year may suffice but if there is a fire or building collapse it could take a lot longer than a year to be fully operational again.

Conclusion

Adequate farm insurance is essential if an unfortunate event occurs on your farm. It is important to review the cover for your building costs, the values of stock and consequential loss each year.

Unfortunately accidents do happen, and you need good insurance cover if your business is to survive.