What Affects the Cost of Farm Insurance in Australia

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Farm insurance cost in Australia is influenced by much more than the size of a property. Insurers may consider what you produce, where your farm is located, the value of your buildings and machinery, livestock numbers, crop exposures, public liability needs, claims history, excess levels and the optional extensions you choose.

This article explains the main farm insurance price factors so you can better understand why premiums vary between properties and why the cheapest quote may not always provide appropriate protection. It is general information only and does not take into account your objectives, financial situation or needs.

Why farm insurance premiums vary so much

No two farms have the same risk profile. A small hobby farm with limited machinery, no employees and a modest shed will usually be assessed differently from a commercial mixed farming operation with livestock, cropping, contractors, chemical storage, irrigation equipment, vehicles and multiple buildings.

When an insurer prices a policy, it is generally trying to estimate the likelihood and potential cost of future claims. The premium may reflect the types of insured events covered, the value of the assets insured, the complexity of the operation and the amount of risk the farmer agrees to retain through an excess.

For a broader explanation of what farm policies can include, see our guide to farm insurance coverage.

Main factors that affect the cost of farm insurance

The following factors commonly influence farm insurance premiums. The weight given to each factor will depend on the insurer, policy type, underwriting criteria and the details of your farm.

Farm type and business activities

The kind of farming you do can have a major effect on your premium. Cropping, grazing, dairy, poultry, horticulture, viticulture, aquaculture, mixed farming and hobby farming can all involve different risk exposures.

For example, a farm that stores hay, fertiliser, fuel or chemicals may present different fire, pollution or liability risks from a farm that primarily runs livestock on open paddocks. A property that allows visitors, agistment, farm stays, roadside sales or agritourism activities may need different liability considerations from a closed commercial operation.

Location and exposure to natural hazards

Location is one of the most important farm insurance price factors. Insurers may consider the property's exposure to bushfire, storm, flood, cyclone, hail, drought-related conditions or other regional hazards. They may also consider access for emergency services, remoteness, road access and proximity to watercourses, bushland or high-risk weather zones.

Two farms with similar assets can have different premiums if one is in an area with higher exposure to severe weather or natural perils. Cover for flood, bushfire, storm or other events may also be subject to specific policy terms, waiting periods, limits, exclusions or underwriting conditions depending on the insurer.

Value of farm buildings and infrastructure

The replacement value of homes, sheds, silos, workshops, dairy buildings, fencing, tanks, pumps, yards and other infrastructure can affect the premium. Higher insured values generally increase the insurer's potential payout if there is a covered loss.

It is important to consider replacement cost rather than relying only on what an asset might sell for. Rebuilding in regional areas may involve freight, labour availability, debris removal, updated materials and compliance-related costs. If sums insured are too low, a claim payment may not be enough to restore the damaged asset.

Machinery, equipment and vehicle values

Modern farm machinery can represent a significant portion of a farm's insured value. Tractors, headers, sprayers, balers, loaders, irrigation equipment, generators, tools, GPS systems and specialised attachments may be expensive to repair or replace.

Premiums may be influenced by the value, age, condition, storage arrangements and usage of machinery. Optional cover for machinery breakdown, electrical or mechanical failure, transit, hired equipment or loss of income following equipment damage may add to the premium but can be important for some operations.

Livestock numbers, type and management practices

Livestock cover may be priced differently depending on the type and value of animals, herd or flock numbers, breeding value, disease exposure, theft risk, transport arrangements and the events covered. High-value breeding stock, stud animals or large herds may create different insurance needs from smaller livestock holdings.

Insurers may also be interested in animal management practices, fencing, biosecurity measures, shelter, water reliability, record keeping and transport procedures. The more detailed and accurate your livestock information is, the easier it may be to compare policy options on a like-for-like basis.

Crop type, scale and seasonal exposure

Crop insurance premiums can be affected by what is grown, the area planted, the season, regional weather patterns, crop value, expected yield, storage arrangements and the perils covered. Hail, fire, storm, frost and other named events may be handled differently depending on the policy.

Some crops are more vulnerable to certain weather events, pests or diseases than others. Cover may also differ between crops in the ground, harvested produce, stored grain and produce in transit. It is worth checking exactly when cover starts and ends, and whether there are special conditions for notification, record keeping or loss assessment.

Public liability limits and third-party risks

Public liability insurance can help protect against certain claims for third-party injury or property damage connected with farming activities, subject to the policy terms. The amount of liability cover selected can influence the premium.

Farms with regular visitors, contractors, seasonal workers, roadside access, livestock near public roads, product sales or activities that affect neighbouring properties may need to think carefully about liability limits. Higher limits can cost more, but inadequate limits may expose the business to financial stress if a serious claim occurs.

Employees, contractors and work health and safety risks

If your farm employs staff or regularly uses contractors, the insurer may consider the nature of the work being performed, safety systems, training, supervision, machinery use and documented procedures. Certain employment-related insurance obligations may sit outside a farm package policy and should be checked separately.

Good safety practices can support a stronger risk profile, although they do not guarantee a lower premium or acceptance of cover. Practical measures may include machinery maintenance logs, chemical handling procedures, induction processes, signage, personal protective equipment and incident records.

Claims history

Past claims can influence how an insurer assesses future risk. A history of frequent claims, large losses or repeated losses of a similar kind may affect pricing, excesses, coverage terms or whether an insurer is willing to offer certain cover.

That does not mean a previous claim will automatically prevent you from getting farm insurance. Insurers may look at what happened, whether repairs or improvements were made, whether the cause was outside your control and what steps have been taken to reduce the chance of a similar event.

Security, maintenance and risk management

Risk management can influence premiums and underwriting decisions. Insurers may ask about locks, alarms, cameras, fuel storage, firebreaks, electrical maintenance, machinery servicing, hay storage, fencing condition, water access, lightning protection, chemical storage and emergency plans.

Strong risk controls may make a farm more attractive to insure, but outcomes depend on insurer criteria. It is safer to view risk management as a way to reduce the likelihood and severity of losses, rather than as a guaranteed way to reduce premiums.

How excess affects farm insurance cost

A farm insurance excess is the amount you contribute towards a claim before the insurer pays the balance, subject to the policy. In many cases, choosing a higher excess may reduce the premium because you are retaining more of the smaller-loss risk. Choosing a lower excess may increase the premium.

The trade-off is cash flow. A higher excess can make premiums more affordable upfront, but it may be harder to manage if several claims occur or if a claim arises at a financially difficult time. Some policies may also apply different excesses for different events, such as storm, flood, bushfire, machinery breakdown or theft.

Before adjusting the excess, ask:

• Can the business comfortably pay this excess at short notice?
• Does the excess apply once per event, per item or per claim?
• Are there separate excesses for certain perils or locations?
• Would a higher excess still make sense if multiple assets were damaged?

Coverage choices that can increase or reduce premiums

Premiums are not just about risk; they are also about the scope of cover. A broader policy with higher limits and more optional extensions will usually cost more than a narrower policy, but it may also respond to more situations.

Common types of farm insurance cover and their cost impact

Farm insurance is often built from several coverage sections. Understanding these sections can make it easier to see why one quote costs more than another.

Farm property cover

Property cover may include dwellings, sheds, fixed improvements, contents, fencing, tanks and other structures. Premiums generally reflect location, construction type, age, condition, insured value and the events covered.

Crop cover

Crop cover may protect against specified events affecting crops, harvested produce or stored produce, depending on the policy. The premium can vary by crop type, acreage, value, season and region.

Livestock cover

Livestock cover may respond to specified losses involving animals, subject to exclusions and limits. The number, type and value of livestock are key cost considerations.

Machinery and equipment cover

This cover may apply to accidental damage, fire, theft, breakdown or other insured events depending on the policy. Higher-value machinery and optional breakdown extensions can increase premiums.

Liability cover

Liability cover can be important where farming activities could cause injury or property damage to others. Premiums may reflect the limit selected, business activities, visitor exposure and claims history.

Business interruption or loss of income cover

Some farms consider cover for lost income or increased working costs after an insured event. This can add premium, and the calculation of an appropriate limit may require careful assessment of seasonal cash flow and production cycles.

Affordable farm insurance does not mean underinsured farm insurance

It is natural to look for affordable farm insurance, especially when operating costs are high. However, focusing only on the lowest premium can create problems if important assets, risks or policy extensions are left out.

Underinsurance can occur when sums insured are too low, when certain assets are not listed, when business activities are not disclosed, or when exclusions are not understood. In a major loss, this can leave the farmer funding part of the recovery from their own resources.

For more on this risk, read our article on common insufficient coverage mistakes in farm insurance.

Practical ways to manage farm insurance premiums

While premiums depend on your circumstances and insurer criteria, there are practical steps that may help you manage cost without making uninformed cuts to cover.

Compare quotes on a like-for-like basis

When comparing farm insurance quotes, check the sums insured, excesses, exclusions, optional extensions, liability limits and claim conditions. A cheaper quote may simply provide less cover, a higher excess or narrower policy terms.

You can start a comparison through Farm Insurance Online, but any quote or policy option should be reviewed carefully against your farm's actual risks and needs.

Keep asset values current

Review the values of buildings, machinery, livestock, stored produce and infrastructure regularly. If values are too high, you may be paying for cover you do not need. If values are too low, you may face a shortfall after a claim.

Review optional extensions

Optional extensions can be valuable, but not every extension suits every farm. Consider which extensions match your actual activities, such as machinery breakdown, transit, business interruption, theft, spoilage, pollution or farm stay-related risks.

Improve risk controls

Maintaining machinery, improving fire preparedness, securing fuel and tools, keeping electrical systems checked, documenting safety procedures and maintaining good records may assist your overall risk profile. These steps are worthwhile even where they do not directly reduce the premium.

Consider excess settings carefully

Adjusting excesses can change the premium, but it should be done with cash flow in mind. A higher excess may not be appropriate if it would make it difficult to lodge a necessary claim.

Discuss complex risks with a specialist

Farms with mixed operations, high-value assets, visitor activities, contractors, exports, specialised crops or unusual exposures may benefit from tailored assessment. You can review available support through our farm insurance brokers page.

Questions to ask before choosing a farm insurance policy

Before selecting or renewing cover, consider asking the insurer or broker:

• What assumptions were used to calculate the premium?
• Are all farm buildings, machinery, livestock and business activities included?
• Which events are covered, and which are excluded?
• Are flood, bushfire, storm, theft, machinery breakdown or crop losses treated differently?
• What excess applies to each type of claim?
• Are there sub-limits for fencing, tools, hay, chemicals, stored produce or portable equipment?
• How are claims assessed and what records should be kept?
• What changes must be reported during the policy period?

When to review your farm insurance

Farm insurance should be reviewed whenever the risk profile of the property changes. Waiting until renewal may leave gaps if the farm has changed significantly during the year.

Common review triggers include:

• buying or selling machinery;
• constructing or upgrading sheds, yards, silos or irrigation systems;
• changing crop types or acreage;
• increasing or reducing livestock numbers;
• starting farm stays, direct sales, events or visitor activities;
• employing staff or using more contractors;
• leasing additional land or changing ownership structures;
• experiencing a significant claim or near miss.

Final thoughts

The cost of farm insurance in Australia depends on the interaction between your farm's assets, activities, location, risk controls, claims history, coverage limits, excesses and optional policy features. Understanding these factors can help you ask better questions and compare policies more effectively.

Affordable cover is not simply the lowest premium. A useful policy should balance cost with the risks your farm can realistically absorb and the losses that could threaten your livelihood. Review your policy regularly, keep records up to date and seek professional assistance where your operation is complex or changing.

Published: Thursday, 10th Oct 2024
Author: Paige Estritori