SLEEP TIGHT The Policy

by Sharla Ishmael

Being a seedstock producer often requires making a big investment in new genetics—a new herd bull or top-notch donor cow can run into the tens of thousands easily. And because your investment is a living, breathing animal that will be walking around on four legs out in the elements, that money is at risk every day. That’s why taking an hour or so to learn the ins and outs of how to best protect your investment by visiting with an insurance agent is time well spent.

Mark Smith of Grassroots Genetics has more than two decades experience helping producers minimize their risk. He explains livestock mortality insurance is a risk management tool like any other kind of insurance—house, medical, etc.

“It’s kind of a sleep tight policy in case your investment is bigger than you’re comfortable with,” Smith says. “If you walk out one morning and that animal you have so much money in has cratered … you’re not going to sleep well for a long time if it wasn’t protected with mortality insurance.”

Reasons Why Insurance Makes Sense

In addition to protecting your loss against a breeding animal’s death, another common reason producers seek out a policy is to buy time. In other words, you might buy a year-long mortality policy in order to give you time to get that pricey herd bull’s semen collected, or the donor cow flushed or a first calf crop on the ground. After that, your risk in the investment in those genetics goes down considerably. What about those guarantees from the purebred operation you buy bulls from—shouldn’t that be enough? Not necessarily.

“I know a lot of breeders give a first-year guarantee or first breeding season guarantee sometimes, and those are all great with the ones that offer it,” Smith says. “The thing about that, it usually comes with credit back to the same operation that you purchased from. Some of them will bring you another bull, but what if you really wanted a specific animal? The insurance gives you your money immediately and then you can buy when and wherever you want instead of having to wait and use credit at the sale next year. Those are some good reasons why you need to be paying a little bit of attention to whether mortality insurance is for you or not.”

Another common example of seedstock producers utilizing mortality insurance is when they send bulls off to a bull test. The same logic would apply for sending replacement heifers to be developed off ranch. In this scenario, the producer might insure the whole group for $3,000 a head, as an example, so that if one (or more) of them dies while they are under someone else’s care, they can get compensated.

The Different Types of Policies

A key distinction to be aware of is there are two different types of mortality insurance—full mortality and specified perils. Full mortality covers the animal whether it dies from natural causes, like bloat or cancer, in addition to dying from an accident or weather event, such as lightning, blizzard, drowning, etc. Specified perils policies do not cover natural causes, only the accidental/weather causes. Exactly what events are covered in a policy can vary somewhat, so be sure to read the fine print.

Shari Holloway with Ag Defense Risk Management also works with producers on both kinds of mortality policies, though her company also sells a completely different category of livestock insurance called livestock risk protection that only deals with price risks. Holloway says the specified peril policies, or pasture policies if you will, are typically used to cover an entire cow herd—but only up to a specified limit.

“Usually, it’s not for a higher-priced type of cow herd,” she explains. “We can do a valuation up to about $5,000 per animal but it only runs about 1% of the value of the herd for those specified perils, like lightning. There is a deductible you have to establish per incident, but they’re pretty affordable policies for people that are just looking for catastrophic type insurance.”

Even with full mortality policies there are limits in terms of the length of the policy. The longest term available tends to be for only one year, but after that it can be renewed and at a lower rate potentially. So, if a $10,000 bull is insured for the full $10,000 in year one and goes on to be collected or sire a calf crop, his owner may decide to continued on page 46