As cattle values continue to climb, livestock insurance is becoming an increasingly important risk management tool for producers of all sizes. Thomas Merritt of Magill Livestock Insurance told Associate Farm Reporter Carli Davenport that livestock insurance is designed to protect producers against catastrophic losses and can be customized to fit operations ranging from small family herds to large commercial cattle businesses.
Coverage Built for Catastrophic Events
Merritt explained that livestock insurance for cattle is commonly written as a pasture policy or for cattle in feedlot and starting-pen situations. “So, in general for your cattle, it’s what we refer to as a pasture policy, or they can be covering a feedlot starting pen situation as well,” Merritt said. “That’s going to be a named perils policy that’s going to cover that producer for those catastrophic events. That’s what their intent is set up for.”
Rather than assigning a blanket value, producers select a per-head coverage limit. “They’re going to be based off of a per-head limit. They’ll pay you current market value up to that per head limit,” he explained. “They’ll use whatever your closest USDA report and sale barns. That’s how they’ll transition off that value, and then it’s rated per head per year effectively.”
Policies Can Be Tailored for Any Size Operation
While some may assume livestock insurance is reserved for elite or high-dollar cattle, Merritt said today’s market makes nearly every animal a valuable asset. “It’s really set up for everybody, and the way things are right now, everything’s a high-valued animal,” he said.
He added that producers can adjust both deductibles and coverage levels to fit their operation and financial goals. “The way that the policies are structured, you can set a deductible and a per head limit that would fit your budget,” Merritt said. “It wouldn’t matter if you’re the guy that has 20 cows turned out somewhere or you’re running 2,000 stockers year-round. They can be tailored to fit the individual’s need and their risk appetite and budget and everything in between.”
Many Producers Wait Until After a Loss
One challenge Merritt frequently sees is that many ranchers don’t think about insuring livestock until after disaster strikes. “A lot of times, unfortunately, it’s after their first big loss,” he said.
According to Merritt, producers often spend more time worrying about market fluctuations than catastrophic events. “When producers are thinking about their risk, they’re more thinking about their market risk,” he said. “They don’t think about the catastrophic weather event that could wipe them out or set them back.”
He added that seeing neighboring producers experience losses can also prompt ranchers to consider coverage. “A lot of times, that’s the driving factor—either they’ve suffered that loss, or their neighbor’s had a loss, and it’s one of those things that gets them thinking about it.”
Horse Coverage Offers Broader Protection
Merritt said horse insurance differs significantly from cattle pasture policies because it provides much broader protection. “The horse policies are a different animal than your pasture policies,” he said.
He explained that horse policies are typically written as full mortality coverage. “It’s a full mortality policy,” Merritt said. “It’s going to cover death that’s the result of an accident, sickness, injury or disease. So way broader coverage than what you would get on the pasture policies.”
Like cattle coverage, horse insurance isn’t limited to elite performance animals. “The rate’s reasonable enough that it could be your high-valued animals, or it could be just your guy that has a $10,000 to $15,000 horse that he likes to go to the team rope and jackpot when he has time,” Merritt said. “It’s set up for big and small to protect your risk.”
Ice Storm Loss Demonstrated the Value of Coverage
One claim that stands out in Merritt’s mind involved an early-season ice storm that devastated several customers’ cattle. “The first one that comes to mind is we had an ice storm in like October,” he recalled. “It was crazy because the trees still had leaves on them, and they were covered in ice.”
The storm caused hypothermia losses among cattle in starting pens. “I had a few different customers that were in a pretty close radius to each other, and they suffered hypothermia loss in their starting pens,” Merritt said.
Because those producers carried insurance, they were able to recover financially and fulfill obligations to their customers. “Being able for them to have coverage there—and they were customer cattle—they were able to make their customers whole, and everybody was real happy that they had it,” he said. “That’s one that really stands out to me.”
Know Your Risk Before Buying a Policy
For producers considering livestock insurance for the first time, Merritt recommends starting with a simple question. “The biggest thing is what your risk tolerance is like,” he said. “How much are you willing to lose before you feel like we need to protect it?”
He also encourages producers to carefully review existing farm insurance policies. “A lot of issues that people run into is they’re like, ‘Well, I have it on my farm policy already,’ which is correct in lots of cases,” Merritt said. “But the problem can be the limit’s not high enough.”
He offered an example of a producer carrying only a small livestock limit despite owning a much larger herd. “a producer might say ‘I’ve got $20,000 on my farm policy,’ but you really have $500,000 worth of cattle turned out,” Merritt said. “You could run into some issues if you were to have a claim.”
Unlike general farm policies, he said dedicated livestock insurance is designed specifically around the value of the animals. “These are standalone policies. They’re rated per head. There’s more protections there as far as the value side of it,” Merritt said. “Those would be the two simplest things up front.”
