FARMERS whose machinery is written off or stolen can now protect themselves from being left out of pocket, thanks to a new GAP insurance policy.
Rural insurance broker Lycetts has launched a new guaranteed asset protection insurance (GAP insurance) product, specifically designed for agricultural machinery.
GAP insurance bridges the gap between the original amount paid for a vehicle or implement, and the amount an insurer will pay out, based on the value at the time of a claim.
In the event of a total loss, such as theft or a write-off, Lycetts’ new GAP insurance cover will help the farmer recover the agreed value, rather than the market value usually offered by insurers.
Whilst widely offered for private vehicles, such as cars and vans, GAP insurance cover is limited in the agricultural machinery sector.
Andrew Hay, farm motor expert for Lycetts, said: “Farmers face increasing uncertainty of income in future, especially as farm support payments reduce.
“At a time when they are already feeling the pinch due to low commodity prices, farmers are having to contend with a significant increase in the cost of machinery which in part has been fuelled by the devaluation of sterling.
“Machinery depreciation can be significant drain on farmers’ finances, accounting for a considerable portion of input costs.
“Lycetts’ new GAP cover will help provide a level of protection for farmers, so that they are fully compensated in the event of a claim.”
According to DEFRA’s Farm Business Survey (FBS), farms in England spent a total of £1.9billion on machinery in 2017/18.
When averaged across all farms, the average expenditure on machinery was £36,200 per farm.
In 2017/18, just under three quarters of farm businesses (74 per cent) bought at least one piece of machinery, and over the last three years, nearly all farms (94 per cent) have invested in machinery.
In the last recorded year, one in four (25 per cent) farms bought a tractor – at an average cost of £64,300 per vehicle.
Fifteen per cent of farms bought harvesting equipment, spending an average of £33,700 per farm, and £14,500 was spent on cultivating equipment on average per farm.
“It is clear that farmers are investing heavily in agricultural machinery, evidenced by the hundreds of millions of pounds spent on machinery in the past year,” added Hay.
“Machinery is essential to the running of farming businesses and farmers’ livelihoods are dependent on a smooth operation so if vehicles are irreparably damaged or stolen, it can have a huge impact.
“Anything that can provide a sense of security, such as Lycetts’ new GAP cover, can not only soften the financial blow but give farmers peace of mind.”
Lycetts’ GAP insurance cover is underwritten by First Underwriting, and the premium is calculated by the insurer based on the value of the vehicle and an agreed depreciation rate.