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What is Farm and Ranch Insurance?

June 14, 2020
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Nowadays, setting up your own farm or ranch is becoming more and more popular in the United States.

The agriculture and livestock industry is now on the rise, and people are starting to shift on this vertical without knowing the basic prerequisites that are essential for this said industry. As a result, many farmers and ranch owners are forced to stop operations when something unexpected hits their property. May it be for a hobby, or as your livelihood farmers or ranchers should understand how important it is to protect your properties from potential losses due to inevitable circumstances. 

This article will provide us vital information as to how imperative an insurance policy can save us money and protect our return on investment. 

The kind of insurance policy your farm needs depends on the purpose of your farm. 

Here are the different purposes of farms:

  1. If you have a small land and decide to put up a farm or ranch but with no intention of generating profit, you will fall under a Standard Homeowners Policy. This covers some farming activities, and follows a few guidelines including but not limited to:
  • Single Farm location – the policy only covers one location address declared by the property owner. In the event that another location is desired to be covered a separate insurance coverage is required.
  • No paid employees – individuals other than the property owner are allowed to work in the registered property like family members, friends, and relatives given that they are not accepting salary or monetary profit from the owner. 
  • Property should be less than 500 acres – a standard insurance coverage normally covers up to 500 acres of land property; anything more than that requires a separate policy.
  • A limit of $10,000 farm receipts per annum – a total of $10,000 annual receivables are only allowed and covered anything more than the said value requires separate coverage.

  1. If you plan on generating profit out of your farm and make it your full-time job, then you will need a Farm Owner’s Insurance Coverage that covers the following but not limited to:
  • Property coverage
  • Liability coverage

We might also be under the impression that a Farm Insurance Coverage is a standard policy that covers a bunch of predetermined coverage. But no, it has different aspects that are tailor-fit for your farm's goals and target so it is best to discuss it with your insurance agent to make sure that the policy covers your needs. 

Most of the common  important coverage that can be included in your insurance are the following:

  • Dwelling Insurance – Is a part of your policy that covers repairs and reconstruction cost on any part of your property after being hit by a calamity such as lightning strike, wind damage, hail damage, burst pipes, motor vehicle collision, and some other things. Some farm and ranch owners might seem to be too focused on the actual farm or ranch itself and may have forgotten the fact that your dwelling is the heart and soul of the property as this is where you live, this is your HOME.
  • Farm Personal Property Coverage -  This policy covers farm owners possession that is being used in everyday farming activities, it has three general categories:

  1. Farm machinery and equipment – This pertains to any equipment, tool, device or machine that is being used in the property in order for the farm or ranch to operate. It protects the items from natural causes and criminal actions like theft and vandalism. The coverage is very advisable to areas where the crime rate and juvenile misbehaviors are excessive. 
  2. Livestock – This coverage protects your living assets like pigs, horses, cattle and other domesticated animals however this could also include exotic animals like llamas and bison. A farm policy covers these animals if they are in or outside the premises but is not covered while in transit by a contract courier. Basic perils normally cover livestock such as, lightning, fire, sinkhole collapse, collision or vehicular accidents in which the animals are being transported, and being struck by a vehicle. Being said, it is best to talk to your insurance agent to fully understand the inclusions of this policy.
  3. Farm products-like animal feeds, pesticides, grains, compost fertilizers and etc.

This policy also allows you to choose how you want the policy to take place and there are two ways:

Scheduled Coverage is an approach wherein you assign a value on each equipment or item for which you want the insurance to cover. This is a way of properly choosing just the highly valuable ones that you think would be the most vulnerable on any kinds of perils. In the event that you lose any of the items covered, your insurance company will pay for the actual cost or price of the said item given that it falls under the covered reasons.

Blanket Coverage, on the other hand, works differently; it covers all equipment and/or possession that you will declare to be included in the policy. So you need to account for all items that you want to include in the coverage, so in the event, you lose any of the items included in the coverage the insurance company will pay you the same price of that item but not more than the agreed policy limit.

It is best to discuss this further with your agent to maximize the coverage and tailor fit the policy so it could be more beneficial for you.

  • Farm and Ranch Outbuilding Coverage – this type of coverage protects buildings inside your property that serves a purpose in your farm or ranch this includes horse stables, sheds, barns, underground stock rooms, motors, water pumps for irrigation, and other equipment and machinery. This is different from the Dwelling Coverage in your policy. So let say, you went out on a fishing trip with your family and left your property for a couple of days. The moment you got back you saw that the whole barn was destroyed by some juvenile delinquents. They left the gas lamp on and burnt your farm to the ground that made it totally uninhabitable. Now you know for a fact that the people responsible won't be able to pay for it. This is one good reason to have insurance coverage to protect you from this kind of loss.

  • Fair Rental Value –  one of the most important things to consider if you are a lessor is to make sure that your property gains profit whatever happens. However, due to the fact that lessors more often than not don't do weekly or monthly visits to their rented property, they do not have a way to make sure that their property is well taken care of. Hence, coverage like this should be highly considered. This policy covers property or part of a property that is being rented by a different individual or company. It secures the monthly rental cost of the property in case it gets uninhabitable or of no use for the time being. The receivable insurance amount may or may not be equivalent to the actual value of the tenant’s monthly rent, it totally depends on how much support the lessor is providing. For example, the maximum insurance coverage for this policy is $5000, but if you do monthly maintenance and pest control it is an added value towards the $5000 coverage

  • Farm and Ranch Liability Coverage – numerous injuries and accidents can happen in and outside your property, so imagine if the accident was caused by your living assets like animals and pets or simply by one of your equipment that acted up and damages someone else's property, having coverage like this would come in handy.

For example, a potential customer comes by your property to take a look at one of your best cows for sale. But even before the customer reached out to check the muscle quality of the cow, the animal got spooked and kicked the customer that resulted in a couple of broken ribs. This insurance will help you pay for the medical expenses of the customer. Having this coverage, you do not need to worry about spending too much money on this kind of accident. Also, it may build a good impression to the customer that as a business partner you know how to take care of things in and out of your farm.

The agriculture and livestock industry is on the rise and competition is very stiff so you need to have an upper hand by protecting your living and non-living assets. Having insurance coverage may sound costly, but think about the events that may come up when you least expected it. How are you going to handle them? And think about your business goals and why you even started a business in the first place. Having insurance doesn’t just protect your assets it also secures your future and your business to reach your goals for a brighter future.

Having insurance is like having a family member helping you grow crops, raising animals, helping you collect rent and selling your produce. So think about it, would you not spend money on your family? Would you not consider a family member to help you? That’s how insurances work. It protects, it helps and most importantly it's a trusted ally.