Life insurance for farmers and rural families

The economics of a New Zealand farm make ordinary insurance advice fit badly. The balance sheet is large and the cash position is not. Debt is measured in millions and serviced from a payout that varies with commodity prices and the weather. Family labour is unpaid or under-paid. And the whole thing is one asset that cannot be split between three children without ceasing to be a farm.

That last point is where insurance earns its place. Succession is the defining rural financial problem: one child has worked on the land for fifteen years and expects to take it on, the others have careers elsewhere and a reasonable expectation of being treated fairly. Without a source of cash, the only ways to be fair are to sell part of the farm or to load the successor with debt to buy out their siblings. Both damage the business.

The second issue is the debt itself. Rural lending is typically secured over the land and personally guaranteed, and a guarantee is an estate obligation. A death that triggers a review of banking arrangements at the same time as an estate is being administered is a genuinely dangerous moment for a farming family.

1. 1Value the farm properly and establish what an equal share would actually be worth to a non-farming child.
2. 2Decide the succession outcome you want, in writing, with the family in the room.
3. 3Insure the difference — the cover pays the non-farming children so the successor keeps the land.
4. 4Separately size cover to the farm debt and any personal guarantees, so the bank is not driving events.
5. 5Deal with income protection and trauma for the working generation, remembering ACC covers only injury.
6. 6Review after every significant change: a payout, a land purchase, a child joining or leaving the business.

Income cover on a farm

Insuring income is harder here than in a salaried household. Farm income is seasonal, is affected by commodity cycles, and is often taken as drawings plus retained earnings inside a company or a partnership. An indemnity policy assessing income at the time of claim can produce a low figure in a poor season, which is exactly when a claim is most likely to hurt.

The alternatives are cover assessed at application where it is available, and business expenses cover to keep the fixed costs of the operation running while the farmer is unable to work. For a sharemilker or a contract milker, whose position sits somewhere between employee and owner, the definition of income in the policy deserves particular attention.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether personal guarantees over farm lending have been quantified and insured.
• Whether the succession plan, the will, any trust deed and the policy ownership all say the same thing.
• Whether the farm is owned by a trust or a company, which changes who should own the cover.
• Whether income protection is assessed on drawings, on partnership income, or on company profit.
• Whether occupation class reflects what you actually do — a farm owner doing physical work is not an administrator.
• Whether cover keeps pace with land values, because a sum insured set five years ago will not equalise today’s estate.

Every New Zealand insurer writes rural and farming cover to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• Turning a succession intention into a funded plan with a sum insured that matches a real valuation.
• Working with the farm accountant on how income is defined for a disability policy.
• Getting occupation class right, which on farming risks materially affects both price and available definitions.
• Coordinating with the rural lawyer so trust ownership, the will and the policies are consistent.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.