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Ginners Should Learn More About Gin Stocks Insurance

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The purpose of this memo from the National Cotton Ginners’ Association (NCGA) is to remind ginners of potential issues with Gin Stocks Insurance Policies. Most gins use these policies to protect against loss while they are converting seed cotton into its finished products. These policies protect against loss to cotton products while they are being stored, transported and processed.

Gin Stocks Policies are generally written on an “All Risk” basis. This means that they cover all perils unless the peril is specifically excluded. They include dollar limits, warranties and physical requirements. It is important that each individual gin check with its insurance provider for details of coverage. While ginners are welcoming higher cotton prices and the potential for a larger crop, this does not come without increased liability for the gins. It is extremely important that gins take precautions to manage the risks that are associated with cotton prices and increased value of the various cotton products.

Our association’s pressing concern involves both the gin-yard configuration and the amount of seed cotton that is being permitted for storage in the yard. These yards are generally limited by a set dollar value and very specific distance requirements between yards. With the increases in cotton values, these yards will need to be planned carefully. Gin Stocks Policies also have a total aggregate dollar amount that the insurer will pay regardless of the extent of the loss.

With the increases in cotton prices and the gin’s liability for seed cotton storage, this aggregate amount may also require adjustment to address the higher risk that the gin will be assuming. With this potential increase in liability, it is imperative that gins strictly adhere to the warranties and the other requirements, which are found in their insurance contracts. Ginners should carefully review these contractual details with their insurance agents or brokers to make sure they understand and comply with all requirements.

In addition, it is crucial that gins inform producers of this increased risk and the importance of conforming to the requirements of the policy. After the individual gins consult their insurance companies, these requirements should be relayed to producers before the ginning season begins.

For more information, call NCGA at (901) 274-9030.

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