Financing Insurance?

[gusg]

I read that Kubota will require insurance if I finance part of the B2710 I plan on purchasing. The dealer said nothing about it. Is it true that I will have to get insurance on the tractor like you do for a car loan? I was assuming that the tractor would be covered under my homeowners insurance.

 

[Ozarker]

You have to ask your home insurance agent. You may have to buy additional coverage for it.

 

[cstocks]

New Holland required me to carry insurance when I financed part of the cost of my tractor last year. I bought the policy they offered... I don't remember how much it was but seems it was not very much. The policy only covered the tractor.

 

[Bird]

Yep, it will have to be insured, but your insurance agent can write separate policy or possibly cover in with your homeowner's policy or you can get the insurance from Kubota Credit Corporation along with the financing.

 

[JRP]

Yes, and as I recall the insurance is expensive. I think it's one of those don't pay high interest rates but you'll make it up to us with our insurance price plans. Of course they also put a lein on your tractor. I found a group in Texas called Farm bureo (sp?) insurance. They insured my tractor for only $60 per year. Also, as I remember, the kubota policy has a sentence that said I agree to not drive the tractor on roads. Rediculous. Of course at times I would have to drive the tractor on roads. I chose to borrow from my 401K policy and pay myself interest instead of Kubots financing.

Take time to look at your options. I think I saved about $650 per year on insurance. Ask some local farmers where they get insurance.



JRPoux

 

[Gary_in_Indiana]

Any lender will want their collateral insured. It's not "financing insurance" so much as it is comprehensive and collision insurance just like that any lender would require on your car or truck that's financed.

"Financing insurance" might be something like credit life, accident and health insurance on your loan so that if you die, it will be paid off by the insurer or if you're disabled either temporarily or permanently the payments will be made for you during that time. By the way, CLA&H is one of the absolute WORST buys you can make in most cases.

If you think you want that kind of coverage, contact your insurance agent and see what they can do for you. You'll not only save yourself a bundle in almost all instances, but you won't have to pay the premium for the entire term of the loan all up front or have it bundled into the loan where you get to pay interest on top of it.

Well, I'm climbing off my soapbox now. /w3tcompact/icons/blush.gif Sorry, but the way that's done is just a pet peeve of mine. /w3tcompact/icons/smile.gif

 

[Soundguy]

I purchased a tractor from NH, 3yr term, and took the insurance they offered.. it was only something like 145.00 for the 3 years. Then again, I only financed 8500.

Soundguy

 

[Gary_in_Indiana]

I'd be curious to know what a rider on your homeowner's policy for the same $8500 would have added. I'm sure you wouldn't have had to pay that all up front for the three year term.

Remember, too, that if you're just covering the loan balance, it's declining every month. In your example after year one your balance is only around $6,100 and at the end of year two it's around $3,300.

Note: For those intent on checking my math, I estimated a $300.00/month payment on $8,500 over 36 months which figures out to about 16.3% APR.

 

[gusg]

My insurance agent told me that it will be covered with no additional cost if the tractor is under 40 HP and is to only be used for maintaning the property. Best news I heard all day.

 

[rancar]

I needed to buy financing insurance when I bought my 4710 in order to cover JD's investment in the tractor in case something ever went wrong....such as burned in barn fire, stolen, sank in pond, whatever. They wouldn't finance without the extra insurance coverage. I could have purchased the insurance anywhere but I went through JD Credit. Paid about $200 over the 5-year loan period. Thought it was reasonable enough and I'm paying that off on the installment plan over 5 years.

 

[EdKing]

I have my home owners insurance through Farmers and Mechanics. My agent recomended a farm policy, which makes it easy to add equiptment and exterior buildings, even livestock. When I got my tractor, I just went to his office and had him add the tractor to the policy. It is fully covered against theft or damage, and it only raised my insurance about $30 dollars a year.

 

[Soundguy]

The salesman told me I could go through my homeowners insurance, and get them to send out an insurance certificate showing the tractor as additional insured. I contacted my h/o ins. and that wasn't a problem, if I wanted to wait a week or so! I didn't particularly want to wait, so I went for the immediate insurance.
I'm sure they have a profit margin hooked in there, but there is a convienience factor too, and they 'bank' on that, as was in my case. From what the salesman told me ( i know, i know.. not the greatest source... ) the insurance premium was based on the amount owed, withou regard to the term limit, I.E., I was essentially buying a bond for the amount financed, payable to the financier. I may be wrong, you never know about info from a salesman who is finishing up on a sale...

Soundguy

<font color=blue>"I'd be curious to know what a rider on your homeowner's policy for the same $8500 would have added. I'm sure you wouldn't have had to pay that all up front for the three year term.

Remember, too, that if you're just covering the loan balance, it's declining every month. In your example after year one your balance is only around $6,100 and at the end of year two it's around $3,300."

 

[Gary_in_Indiana]

<font color=blue>"the insurance premium was based on the amount owed, without regard to the term limit, I.E., I was essentially buying a bond for the amount financed, payable to the financier."</font color=blue>

I think you've been given some bad information here. Actually, the term matters a great deal. Think about it this way. You have more opportunities to die or become ill or injured over the next five years than over the next two. Of course insuring against those risks with life and health insurance on yourself is going to be more expensive. It's the same with your tractor. It has more opportunities to be stolen or burned in a fire. Insuring against those risks will be more expensive over a longer term as well.

Also, rather than looking at it as a 'bond' you might want to try to think of it more like declining term insurance because every month as you reduce your balance. As in the illustration I gave in my last post on this thread, it's cheaper to insure against a $6,100 loss than an $8,500 loss.

Term is VERY important. I hope I've done an adequate job of explaining how and why.

 

[Soundguy]

I understand fully how an amortization works, with the declining principal, etc. However with a bond, within the maximum term of the bond, the actual time of loss does not matter. Take for instance a western union money order. You purchase the money order and send it to person 'x' via post. It is lost. You can have w/u replace the money order, but you must pay about a 5% fee plus a service charge to do so. The 5% fee is a contingincy bond. If the original money order is found and cashed fraudlently, the bond will pay off. The bond expires when the w/u money order is passed its negotiable period... usually 6 months. If the original money order is never used, w/u ( or the bonding company ) has profited on the 5% contingency fee.
Either way, you are paying to protect against future liability.

I'm not privy to NH actual lending practices, so I have no way to verify if what was told to me was how they actually work.

Soundguy


<font color=blue>I think you've been given some bad information here. Actually, the term matters a great deal. Think about it this way. You have more opportunities to die or become ill or injured over the next five years than over the next two. Of course insuring against those risks with life and health insurance on yourself is going to be more expensive. It's the same with your tractor. It has more opportunities to be stolen or burned in a fire. Insuring against those risks will be more expensive over a longer term as well.

Also, rather than looking at it as a 'bond' you might want to try to think of it more like declining term insurance because every month as you reduce your balance. As in the illustration I gave in my last post on this thread, it's cheaper to insure against a $6,100 loss than an $8,500 loss.

Term is VERY important. I hope I've done an adequate job of explaining how and why.

 

[Gary_in_Indiana]

Soundguy, what you describe is a fixed liability (the amount of the Money Order) over a fixed term (the six month 'stale date' of the Money Order).

What I was discussing was the varying amount of principle remaining AND varying repayment terms affecting liability to the underwriter (and then, logically, the premium you have to pay).

These are two totally different animals. I'm sorry I couldn't explain it better. I have a hard time when I can't use my hands and wave my arms. /w3tcompact/icons/smile.gif

 

[Soundguy]

Again, I completely understand both situations, I was just passing the 'explanation' along as it wes told to me by the salesman.
Whatever vehicle the finance company used to insure against the liability doesn't overly concern me. Their offer was cheaper than my insurance companies i/m rider policy.

Reminds me of the new 'insurance based retirement accounts'
very clever idea.... borrowing against your own insurance policy, and getting some tax advantages to boot.

Soundguy

<font color=blue>"Soundguy, what you describe is a fixed liability (the amount of the Money Order) over a fixed term (the six month 'stale date' of the Money Order).

"What I was discussing was the varying amount of principle remaining AND varying repayment terms affecting liability to the underwriter (and then, logically, the premium you have to pay).

These are two totally different animals. I'm sorry I couldn't explain it better. I have a hard time when I can't use my hands and wave my arms. "

 

[spencer200]

I can tell you this the insurance thru the dealers works very well. We had a customer with a 7 day old round baler that caught fire and burnt up one morning that afternoon the adjuster was there declared it a total loss. The customer had a New baler the next day and we had a check from the insurance company in three imagine that I said 3 days thats good coverage.

 

[Maker102]

I also assumed that the tractor was going to be covered under my homeowners insurance. I talked to my agent and he assured me that it was. I decided to go with part financing from Kubota and they sent a form to my insurance agent. The agent called and explained that my homeowners only covered fire and theft and that Kubota wanted "rollover protection" That would be another $185.00 a year, gee sorry bout that can we write you a policy? Heck no I will dip into the savings and pay it off. When you add all the little extras like this "extra insurance" filing fees. interest you are going to end up pay 11% for a bota 3.9 APR. If someone can recommend a solid 11% interest on my money I would jump on it in a heartbeat with the market in the shape that its in.

 

[Soundguy]

Big business, in general, likes to tag little 'gotchas' on the deal, right at the end where they are betting you will not pull out.

Soundguy