Whether you are doing farming as a past-time or you are making your farm your full-time occupation, you know that reaping the joys of farming gives you a sense of fulfillment. If you are still in the process of getting one or thinking about selling your greens to other consumers, it is just as timely to start thinking, “Does a farm need insurance?” You need farm insurance to protect your investment and any farm-related liabilities. The liability protection present in a farm insurance policy might be sufficient to protect your farm activities however, additional policies like product liability could give you enough coverage.
Farm insurance protects you against a broad range of risks including claims and lawsuits brought about by personal injuries and property damages that came from your farm business. Farm insurance also helps you cover abrupt losses on your livestock and produce during extreme weather conditions, random temperature drops, pest problems, fires, and other calamities.
You must be cautious about every aspect of farm insurance coverage. Knowing your farm insurance policies regardless if you have a trade farm or smallholding is essential. Coverage for animal assets, special machinery, and liability claims is your safety net during emergencies such as damage, but loss prevention should be on top of your list. Making use of the information available to you and understanding the information can help you with your farm operations. This could save you from out-of-pocket spending and anxiety if you can prevent possible incidents from happening.
Here Are Some Pointers and Types of Farm Insurance You Need:
A standard homeowner’s policy covers certain farming activities. - Many people consider their small farm or large garden as part of their hobby and they have no interest in making a profit out of it. If you belong in this group, chances are, your standard homeowner's insurance policy will include some of these farming activities in your coverage. Do note that homeowner's insurance policies more often than not exclude things like farm machinery and equipment.
Commercial farming may require a different type of policy. - Hobby farming and making money at the same time need different coverage apart from your basic homeowner's policy. If you begin selling your produce at a farmers market in your area, you may want to start getting a hobby farm policy. There are criteria to determine if a farm is to be categorized as a hobby farm.
Your farm must not reach 500 acres wide.
Your farm coverage is bound to only one farm location.
Your farm does not have any staff or employees.
The yearly farm receipts should not exceed $10,000.
The minimum coverage of your main dwelling is $125,000 and it is only for permanently-built houses. If you use your recreational vehicle as a permanent home, that makes you a full-time motorhome dweller and therefore, you are ineligible.
Farming as a full-time job will require a farm owner’s policy. - If you want your farming hobby to become a much better revenue-generating farming business and start doing it as a full-time job, you will need a farm owner’s insurance coverage. The basic farm owner’s policy usually includes farm liability coverage, farm property coverage, among others. To safeguard your investment and livelihood, this basic coverage should be adjusted with endorsements based on your farm's unique risks and needs.
Farm insurance coverage is not standard. - One popular misconception about farm insurance is that a policy is one big bundle of fixed coverages. Honestly, farm insurance policies have so many separate features that there is none you can call a standard farm insurance policy. Every farming management is special and policy should tailor-fit to the needs of farm owners.
Some coverage has limitations on business structures. - Homeowner's insurance policies usually limit the coverage on business structures, while the farm owner’s policies and hobby farming policies offer broader coverage. If a building or structure is being used for farming like stables, barns, sheds, and silos with a gross annual income, the building is then accounted for as a business or commercial building and may not be covered under a homeowners insurance policy.
Covered perils in farm insurance policies still have exclusions. - .Farms generally have insurance against fires but there are situations when it invalidates the coverage. For example, when your fire truck hoses are too far from both the pond and covered structures or you do not have a hydrant, you may not be able to claim if you need to. Farm equipment and machinery are covered by perils in your farm insurance policy only if it is explicitly listed. A piece of equipment that is not conserved or well-kept may not be covered and machine breakdowns are also not covered. If you do not keep up with technological advancements, you may not be covered except when you buy a specific extension.
Fencing is not an automatic coverage in Farm Insurance. - Fencing is rarely covered by standard farm insurance policies. Although many farms have a lot of fencing, it is rarely covered by standard farm insurance policies. As a farm owner, you have the option to negotiate with your insurance agent if it is possible to get a policy extension for fencing. If your farm insurance provider offers such a policy, you have to be prepared to pay a more expensive premium.
You need special coverage for growing crops. - Unfortunately, personal property insurance does not cover crops. If you want to ensure your crops, you are required to purchase crop insurance. You have two options on where to buy crop insurance. If you choose federal government-funded, you can purchase a Multiple Peril Crop Insurance. If you choose from any of the private insurance providers, you can purchase Crop-Hail insurance.
You need special coverage for livestock. - Livestock insurance is similar to crop insurance since farm liability insurance often excludes the coverage use of livestock or other animals for racing. It also excludes any damage or injury that occurs during the use of livestock to provide rides to someone either for a fee or for free. Livestock insurance is partially financed by the United States Department of Agriculture.
Custom farming may not be covered by your Farm Liability Insurance. - Farm Liability Insurance may also exclude custom farming done outside the insured location. For example, you meet an accident out on the road together with your employees or you cause damage to other farmers’ harvests, you can be accountable for such circumstances. The exclusion applies when you make an annual income of more than $5,000 from custom farming.
You may need Equine Insurance. - If you own horses or thoroughbreds and your farm is used for either horseback riding lessons or horse races, you should consider getting Equine Insurance. Forty-six states have Equine liability laws. Note that the laws limit the liability of individuals and businesses such as riding instructors and ranch owners who provide chargeable service for horse-related activities. The laws may vary by state but they protect horse owners from liability for injuries to riders when the horse becomes unruly.
Two Options You May Want to Include For Coverage Would Be Blanket Coverage and Individual Coverage.
- Blanket Coverage - Blanket coverage is also called Unscheduled and is designed to cover your farm’s property, from livestock to equipment and structures. The said coverage is insured in one lump sum amount. If you opt for blanket insurance, make sure you calculate correctly each of your assets so you will not end up being underinsured when you need to claim due to a loss.
- Individual Coverage - Also called Scheduled Coverage, this coverage allows you to pick individual assets you wish to insure and assign a specific amount of insurance. Scheduling assets individually may be the right choice since you can put a sufficient limit for higher-valued assets.
Note that the highest total payable per item is based on your choice of insurance. Whether you choose Blanket or Individual coverage, see to it that you discuss this to your insurance agent to guide you regarding your overall farm insurance needs.
As mentioned, farm insurance policies are not an all-purpose policy because of the complex features layered separately. You may also consider these two coverages:
Farm or Commercial Auto Coverage - Vehicles can cause damage to your property, regardless if they are your farm vehicles or vehicles owned by another individual. Having this coverage helps you cover a loss if your car or another vehicle collides with your property. Farm vehicles are not covered under both farm liability and farm personal property coverages. Depending on your area, you may need commercial auto coverage. The law varies by state and your farm vehicle might be subject to mandatory insurance law.
Workers Compensation - State laws apply for workers’ compensation differently for farmworkers. Only a very few states require farm owners to protect agricultural workers from on-the-job injuries by buying a workers’ compensation policy. Some states require farm owners to provide coverage only if the combined salary of farm workers goes beyond the maximum dollar amount. Farms that are not required by law to have worker’s compensation can voluntarily give benefits to injured workers by purchasing voluntary compensation coverage.
In conclusion, it’s up to you to decide whether to get farm insurance or not. However, with the factors mentioned above, it is seen how this said insurance can be a form of assurance regarding the state of your farm’s wellbeing. If you have any questions or inquiries, call us and we’ll get back to you as soon as we can.
Next article: What is Farm Owners’ Insurance?