1. Forms
2. FP
3. FP-04-28

What the form is

The FP 04 28, titled "Coverage G – Barns, Outbuildings and Other Farm Structures – Blanket Insurance," is an endorsement to a farm insurance policy. Its primary purpose is to allow an insured to cover multiple farm structures, such as barns, silos, sheds, and other outbuildings (collectively known as Coverage G property), under a single, aggregate limit of insurance. This is an alternative to specifically scheduling each structure with its own individual limit of insurance. The endorsement modifies the policy's standard coinsurance and valuation provisions to apply to the blanket limit.

Classes of business it applies to

This endorsement is designed for commercial farming and ranching operations that own multiple detached structures used in their agricultural activities. It is particularly useful for:

• Large farms with numerous outbuildings where scheduling each one would be cumbersome.
• Operations where the specific values of individual structures might fluctuate or where a degree of flexibility in coverage across structures is desired.

Real-world example: A dairy farm with a main milking barn, several hay sheds, equipment storage buildings, and a few silos could use this endorsement to insure all these structures under one total limit, for instance, $500,000, rather than listing separate values for each.

Special considerations

• Coinsurance: A key feature is the coinsurance clause, which typically requires the insured to maintain a blanket limit of insurance that is at least a certain percentage (commonly 80%) of the total value of all covered structures. If the limit is inadequate at the time of loss, the insured may face a coinsurance penalty, meaning the insurer would only pay a portion of the loss.
• Statement of Values (FP 16 01): Insurers often require or recommend the completion of form FP 16 01, "Coverage G – Barns, Outbuildings and Other Farm Structures Statement of Values," in conjunction with this endorsement. This form lists all the structures included under the blanket coverage and their individual values, which helps in establishing an adequate blanket limit and in premium calculation.
• Valuation: The endorsement will specify whether the covered property is valued on an Actual Cash Value (ACV) or Replacement Cost (RC) basis, as shown in the policy Declarations. This is critical for determining the appropriate blanket limit.
• Property Not Covered: The endorsement schedule may allow for the exclusion of certain structures from the blanket coverage if desired.
• Policy Attachment: This endorsement is attached to a Farm Property Coverage Form, such as the FP 00 10 or FP 00 14.

Key information for agents and underwriters

• Risk Assessment: Agents and underwriters must emphasize the importance of accurately determining the total current value of all structures to be insured under the blanket limit. This involves a thorough inventory and valuation. Using the FP 16 01 is best practice.
• Pricing and Rating: The premium for this endorsement is based on the total blanket limit of insurance. The Statement of Values (FP 16 01) helps in developing an average rate for the blanket coverage.
• Avoiding Coinsurance Penalties: Educating the insured about the coinsurance provision is crucial. The blanket limit must be reviewed regularly (e.g., annually or when new structures are built or values change significantly) to ensure it remains adequate and to avoid underinsurance.
• Underwriting Guidelines: Underwriters should review the Statement of Values to assess the nature, condition, and concentration of risk across the insured structures. They may have specific guidelines on the maximum blanket limits they are willing to offer or the types of structures eligible. The choice between ACV and RC will significantly impact the required limit.
• Loss Settlement: In the event of a loss to one or more structures, the blanket limit is the maximum amount available, subject to the coinsurance clause and other policy terms. The loss to each damaged structure will be assessed, and the total payable will not exceed the blanket limit.