Farmers and agricultural workers should think about income protection insurance. Here's what you need to know.
Farmers face more health risks than most workers. If you're seriously injured and unable to work, an income protection policy provides a monthly benefit worth up to 75% of your income. The benefit payments from an income protection policy can:
- Support you through a period where you can't work due to illness or injury.
- Help you cover expenses like mortgage repayments, rent, debt and living costs.
This article will look at some benefits of taking out income protection cover for farmers and help you compare policies.
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What risks are farmers exposed to?
According to 2015 figures from Safe Work Australia, 27% of the 195 workplace deaths in Australia occurred in the agriculture, forestry and fishing industries. There were also 3,410 serious injuries in the industry during that period, making farming one of the most dangerous industries in Australia. Farmers face such risks as:
- Animals. From animal bites and kicks to ramming, trampling and even the transmission of serious diseases, animal pose real risks to farmers.
- Heavy machinery. Chainsaws, motorbikes, tractors and other machinery with exposed moving parts can all cause injury and even death.
- Chemicals. Farmers are often exposed to serious chemicals, such as pesticides and herbicides, which can cause poisoning and other health problems.
- Heights. Falling from ladders, rooftops, sheds and pieces of machinery can cause serious injury and death.
- Water. Drowning in dams, rivers, lakes, tanks and creeks is another common risk.
- Electricity. From coming into contact with overhead power lines to working with faulty machinery, the risk of electrocution is higher for farm workers than for people in many other industries.
- Transport accidents. Crashes in or falls from utility vehicles, trucks, motor bikes, ATVs and horses can all cause serious injuries.
What insurance policies should farmers consider?
Aside from income protection insurance, farmers might also look at:
- Term life insurance. Also referred to as death cover, this type of insurance pays a lump sum benefit if you die or are diagnosed with a terminal illness. It not only allows your loved ones to cover any immediate expenses but also to pay the mortgage, manage ongoing costs and maintain their current lifestyle.
- TPD insurance. If you suffer an illness or injury that leaves you totally and permanently disabled, TPD insurance pays a lump sum benefit. This amount can be used however you wish, for example to replace lost income, cover medical costs, pay for home modifications or repay your mortgage.
- Trauma insurance. This form of insurance pays a lump sum if you are diagnosed with a pre-defined condition in the policy.
How do insurers categorise farmers for insurance purposes?
Insurers classify workers based on the nature of their work. This means two agricultural workers might have different classifications, even in the same workplace, depending on their roles. Here are some common classifications for farmers and agricultural workers:
|Farm employee or labourer|
|Farm owner – beef cattle, dairy, grape grower, mixed farming, oyster, poultry, sheep, sugar cane, wheat|
|Farm owner – fruit grower, orchardist, market gardener|
|Farm owner – harvesting contractor|
These classifications are general guidelines only, and it's always good to check with insurers about your situation specifically.
How much do farmers and agricultural workers usually pay for income protection insurance?
Costs always vary from worker to worker and depend on your income. According to figures from PayScale.com, the average incomes for some common occupations in the farming and agriculture industries are:
- Farmer: $56,841
- Farm manager: $58,356
- Farm hand: $40,000 - $44,000
- Farm worker: $42,000 - $52,000
Here are some examples of income protection quotes taken from finder's comparison engine. While these are merely hypothetical examples they can give you a rough idea of costs.*These are example quotes only based on a 45-year-old male crop farmer from NSW who doesn't smoke. Your actual quotes may vary. Quotes are accurate as of June 2017.
How can I get income protection cover that matches my needs?
If you want an income protection policy that covers what you need without costing more than you can afford, ask yourself these questions:
- What are my employment/business circumstances? Are you a farm hand with a stable income or a farmer who owns their own business and has a fluctuating income? The nature of your work and income affects the type of policy you choose.
- How's my financial situation? Think about how long you could support yourself without regular income. What are your debts and living costs?
- What's my family situation? If you have dependent children and a partner who doesn't work your cover needs will differ from a working couple with no children.
The type of value cover you choose in an income protection policy depends on the nature of your income:
- Indemnity value cover. This provides you with a benefit payment based on your most recent month’s salary and is a good option for farm workers with a fixed, stable income.
- Agreed value cover. Allows you to lock in a benefit amount based on a salary level agreed upon when signing the policy contract. This is likely a better option for farm owners whose income varies widely from month to month or season to season.
Learn more about these two different types of income protection cover.
What features should I look for in an income protection policy?
If you’re a farmer searching for income protection cover it’s important to compare a range of policies before choosing the right one for you. Consider the following factors when comparing policies:
- Waiting period. This is the amount of time you have to wait after an injury before your policy will start paying a benefit. Most policies provide a choice of waiting periods, but remember that choosing a shorter waiting period will lead to higher premiums.
- Benefit period. You will be able to choose your benefit period, which is the length of time for which your policy will pay an ongoing benefit. This could be for a specified time period, such as 1 or 2 years, or until you reach a certain age (such as 65). The longer the benefit period, the higher your premiums will be.
- Level of cover. What is the maximum monthly benefit payable? What percentage of your regular monthly income will the benefit cover? Are there any additional benefits, such as home nursing cover, that you can include with your policy for an additional premium? Will you still receive a monthly benefit if you are partially (but not totally) disabled?
- Exclusions. Check the policy's list of general exclusions to find out when the policy doesn’t provide any cover – are these exclusions likely to affect you?
- Cost. You’ll also need to consider the cost of cover, so obtain and compare quotes from multiple insurers. However, remember to assess the cost in relation to a policy’s features to determine whether it offers value for money.