Why Tractor Insurance is a Ray of Hope for Farmers?

Agriculture is one of the most common occupations in India. About 60% of the country’s population works in the agriculture sector and contributes nearly 18% to the GDP of India. This makes it important to address the needs and challenges faced by the agriculture industry. For instance, farming is a labour-intensive activity but the increase in labour cost is a major challenge faced by small and medium level farmers. The only alternative to employing labour for farmers is to buy a tractor. Read more

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Tractors help farmers to mechanize several farming activities/ applications, including sowing, spraying, threshing, cultivation, rotavation. Given its adjustable rear track and compact design, tractors are ideal for use in orchards and between two crop rows. The machine is also beneficial for farmers in carrying out haulage operations. A single tractor can reduce labour cost substantially and ensure ease of operation,s especially for farmers with small lands and those involved in intercultural applications.

Tractors were mostly imported in the 1940s and 1950s for use in India. But today, they are produced domestically reducing its cost and the plight of Indian farmers. However, a good tractor cost more than a few lakh, which is too much to afford for an average farm household with less than a hectare of farmland and making roughly Rs 10,000 per month. The only way for them to manage buying a tractor under such circumstances is by taking a loan, which makes tractor insurance the need of the hour.

Tractor Insurance & Its Benefits

Tractor insurance is basically commercial vehicle insurance that covers perils associated with the use of a tractor. It ensures financial assistance to the farmer in case the insured tractor gets damaged due to unforeseen weather events, accidents or manmade disasters. It also takes care of third party liabilities of the farmer resulting from causing accidental damages or injuries to third parties. It also ensures that the farmer is adequately compensated if his/her tractor is stolen. Even damages sustained by the tractor while in transit through inland waterways, road or rail is covered by the insurance company.

A tractor insurance policy not only covers a tractor but also the person driving it. It comes with the personal accident cover that provides compensation in case the farmer or his/her family members die due to an accident of the tractor. Moreover, the farmer can also extend personal accident cover to hired drivers to lower their legal liabilities on payment of an additional premium.

Besides, the farmer can also ensure coverage for any electrical and non-electrical accessories fitted to the tractor by paying the extra premium amount. In fact, some insurers have also extended the scope of insurance coverage to other farm machines, such as reapers, chaff cutters, threshers, harvesters, lawnmowers, etc.

Without commercial vehicle insurance for tractors, farmers can find it difficult to cope up with the sudden financial distress that may arise out of a tractor. Besides, the constant pressure of paying the loan taken to purchase the tractor can also add to the misery of the farmer.

Lack of Tractor Insurance Penetration in India

As per the survey conducted by the Indian Council of Agricultural Research, almost one-third of the total farm accidents are caused by farm machines. Nonetheless, the penetration of tractor insurance is pretty low in India. Only 30% of the farmers owned a tractor insurance policy in 2015, which is extremely low as compared to the global benchmark of 85%. The majority of the tractor sales in the country resulted from only 11 Indian states as of 2015.

One of the biggest reasons for low insurance penetration in the sector could be the unpredictable outcome of farming activities. The fate of farmers depends largely on the weather conditions. Poor monsoons can adversely impact crop productivity and lead to losses to the farmers. With losses and little income, the sale of tractors take a hit and in turn, leads to fewer people buying commercial vehicle insurance for it.

Another major reason for low insurance penetration is the lack of awareness regarding the advantages of tractor insurance amongst the farmers. Most farmers are unaware of how tractor insurance can help them to combat unforeseen financial burden due to accidental and weather-related calamities. Farmers are also unaware of the benefits of the No Claim Bonus and how it can help to reduce the renewal premiums.

Over the years, the government has started several initiatives to increase insurance penetration in the agriculture sector. The Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched to help farmers save on their insurance premiums.

The government also launched the Unified Package Insurance Scheme that provides a range of insurance covers to the farmers, including life insurance, tractor insurance, crop insurance, fire insurance, etc. They also introduced multiple targeted schemes in sync with the weather conditions allowing fixed and longer moratorium to farmers on tractor loan interest payment.

However, there is still a need for boosting awareness regarding the benefits of tractor insurance amongst the farmers. Moreover, the distribution and assistance for the various government schemes should be done at the localized level by increasing the number of customer support centres.

In a Nutshell

Farmers are the backbone of our country and tractors one of the most important farming machines for them. The risks faced by the farmers not only impact them but somehow the entire country. Hence, all farmers must be covered under the various government schemes and buy commercial vehicle insurance for their tractors. Only a tractor insurance policy can help them to fight against the unforeseen risks posed by the usage of tractors.

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