Income insurance for farmers is sometimes called rural income protection. Income protection is an insurance policy that protects the annual income of workers, including farmers, in the event that they become disabled due to a non-work related illness or accident.

Farming is unlike most business or jobs, and for a long time it was difficult for farmers to obtain income protection insurance because of the way that crops and livestock are sold. The problem was that farming income is not a monthly or biweekly scheduled event. Crops and stock are raised and sold seasonally or even annually, and as such, farmers do not have a monthly income. Insurance companies require a monthly income to qualify for income protection insurance which was a problem when farmers income are considered on an annual basis. Fortunately for many farmers, the industry has begun to recognize the income of farmers and policies that protect the income of farmers are available.

Why is This Important?

Currently as a nation, only 11 percent of people take advantage of income insurance. Farmers know that without an income farms fail. If an injury or illness prevented a farmer from working their land, the downward financial spiral would likely spell disaster for the farmer, his farm and his way of life.  According to statistics from the New Zealand government, upwards of 50% of working men will likely experience a disabling event before they reach the retirement age of 65.

The older we become the more likely it is that we will suffer a disabling event. With advances in modern medicine diseases and injuries are being successfully treated on a higher and a higher percentage basis. What this means to someone has suffered an injury or illness that causes the patient not to be able to work is a much longer recovery time. This is exactly why many people believe income protection is important.

What Should Farmers Expect From Insurance?

To start off with, farmers should expect a monthly payment from the insurance company. Sometimes this payment is weekly, though most of the time it is monthly. In the case of partial recovery, some policies offer a partial disability level of benefits.  Since income protection is designed to protect your annual income, expect that the insurance company will divide up  your annual income into monthly or weekly benefit payments. Expect that the benefit payments will last for the term of your policy or your recovery from your illness or injury.

What Should Farmers Look For When Choosing a Policy?

Consumers, not just farmers, need to pay close attention to how the insurance company figures out annual income. Because farmers are paid annually, income can change drastically from year to year. Determining how the insurance company figures out annual income can make a big difference in how much benefit is awarded monthly. It is important that farmers and other consumers shop the insurance market. Do not just rely on one estimate before you decide on which policy to buy.

Be willing to read the policy over completely not every insurance company offers a square deal. Some may only offer benefits based on 20% of your annual income, while other companies may offer benefits based on 30% or more of your annual income. The difference can mean hundreds or thousands of benefit dollars each month. Make sure that your policy has what is called a recurring disability benefit clause. What this does is it eliminates the qualifying period for injuries or illnesses that reoccur. This means that you do not have to wait for a period of time to be compensated. The insurance company simply begins benefits immediately.

One of the important features in an income protection policy is the length of the policy period. You may want to consider carefully if purchasing a short term policy that expires in five or ten years is right for you or not. Remember that income protection is about protecting your income for your entire working life, not just a short period of that working life.


(This article and all articles on this site are not to be taken as professional insurance advice, for such advice please speak to a registered insurance broker. We can connect you with a broker by using the form on this site.)