Farm Insurance (2023): Is Your Beautiful Farm Missing the Right Policy?

TLTR: Most farmers are at constant risk of loss due to natural calamities and infestations. Farm insurance protects crops and farmers from financial ruin due to accidental destruction. In this article, we talk about farm insurance and agriculture insurance and why you need them.

What is Farm Insurance?

Farm insurance is a packaged insurance for farmers that provides a wide range of protection from farm-related accidents and damage. It protects your farmhouse, livestock, tools, and equipment. Whether you own a ranch, vineyard, or run a farm as a hobby, farm insurance is for you.

Do You Need Agriculture Insurance?

On the other hand, if you want to cover losses due to crop damages, you should opt for agriculture insurance. Popularly known as crop insurance, agriculture insurance is typically purchased by ranchers and farmers. The covered perils include hail, droughts, floods, and other natural disasters. An agriculture policy will also compensate you for losses due to a decline in agriculture commodity prices.

Who Needs Agriculture & Farm Insurance?

Farming insurance caters to everyone’s needs, from hobby farmers with an acre of land to farmers with a sizeable commercial farming venture. The following parties usually opt for farm insurance:

• Crop growing businesses
• Hobby farmers
• Cattle and livestock-based businesses
• Cotton and field crop-growing businesses
• Dairy farming businesses
• Breweries, vineyards, and berry-growing businesses
• Hay and alfalfa growers
• Vegetable and row crop growers

What Does Farm Insurance Cover?

Farm insurance coverage applies to various livestock, losses related to them, and tools and vehicles used for farming. Here’s what farm policy covers:

Livestock

Insurance companies count your livestock as your personal property. Farm insurance covers your livestock, even when they are in transit. Typically, farm insurance compensates you in the event of their injury, disease, or death due to accidents. However, should anything happen while your livestock are in a public stockyard, slaughterhouse, or sales yard, your insurance provider may refuse to compensate.

Remember, your insurer most likely will not provide coverage for the livestock’s death due to old age or disease. However, you can add such coverage via a full animal mortality endorsement.

Home and Contents

The inspiration behind farm insurance was the traditional farm with land surrounding the house. Such land was used to raise animals or grow crops. As a result, most farm policies cover your home and its contents, similar to a homeowners insurance policy. However, coverage typically excludes items such as firearms, cash, jewelry, art, and more.

Outbuildings

Outbuildings are shelters for your livestock and equipment, including garages, horse stables, storage buildings, poultry houses, hay barns, hog houses, and more. Farm insurance covers you for the cost of damage to such buildings due to disasters, theft, vandalism, accidental fires, and more.

However, the coverage differs based on the age, condition, and value of the structure. You can cover outbuildings under a replacement cost policy whereby your insurer’s compensation totals the structure’s cost when new. The other option is the actual cash value (ACV) coverage that pays you cash value equal to the structure’s worth at the time of loss. For instance, you can opt for a replacement value policy for your new garage and ACV for the old shed.

Gears and Equipment

Farm insurance protects you from costs arising due to vehicle damage. It extends coverage to tractors, trailers, trucks, and other equipment you use on your farm. Since you might buy new equipment and get rid of old ones over time, the coverage should be updated annually. Usually, insurers provide this coverage under an ACV policy.

You can choose to purchase insurance for individual equipment. Otherwise, you can also go with a scheduled policy, which protects all your equipment under one blanket policy.

Farmer’s Liability

This coverage mainly deals with third-party liability. Farm insurance helps you pay if someone (other than you or your employees) is injured on your farm. For example, during a visit to your farm, an irrigation-sprinkler supplier trips and fractures their leg. Since the accident happened on your farm, the supplier can sue you. In such cases, farm insurance helps you pay for medical treatments as well as litigation expenses.

Rental Expenses

Your farm home can become temporarily uninhabitable due to a covered peril. In such instances, you may need to rent a house elsewhere until the home repairs are complete. Your farm insurance may cover such rental expenses.

Additionally, it also compensates you for the loss of rental income. For example, a farmhouse or space that you’ve rented out is damaged by a fire, making it temporarily uninhabitable. Such circumstances lead to a loss of rental income, which your farm insurance may compensate. Some insurers provide this coverage in their standard policy, while others offer it as an endorsement. Check with your insurance provider to confirm the coverages of your farm policy.

Covered Perils

Any loss due to risks not mentioned in your insurance contract falls outside the scope of coverage. These covered perils include:

• Fire and lightning
• Explosion and smoke
• Theft
• Sinkhole collapse
• Earthquake or flood
• Livestock accident—e.g., struck by a vehicle.
• Riot and civil commotion

Besides these, you can add other coverages for perils like:

• Dog or wild animal attacks
• Accidental shootings
• Falling objects
• Accidents while loading or unloading

Based on your needs, you can personalize your farm policy through endorsements or riders. Endorsements help you modify, add, or remove coverage. Some of the common riders are farm equipment breakdown, farm income coverage, borrowed machinery, peak season coverage, livestock hazard, and additional livestock. For more information on endorsements, talk to an insurance agent.

Exclusions of Farm Insurance

Below are some common exclusions of farm insurance:

Damage due to chemicals you spray on your farm

There are multiple chemicals and fertilizers available on the market. Some are designed to help your crop grow while some get rid of pest infestation. However, most insurance companies realize that these chemicals aren’t regulated and can cause irreparable harm to the farm in the long run. Using such chemicals can result in your claims being denied.

Agritourism

Farm insurance strictly covers just your farm, crops, tools, and vehicles used in the farm. If you’ve opened your farm for tourism and hospitality purposes, don’t expect your farm insurance to cover it. Rather, look into hotel insurance.

Release of pollutants

Most insurance policies exclude pollution liability. If your farm houses animals and poultry that produce a huge amount of waste, you must purchase a separate pollution liability insurance.

Technical malfunctions of equipment

Normal wear and tear of your equipment, tools, and vehicles is not covered by farm insurance. Unfortunately, the bill for upkeep must be paid in full by you. Farm insurance only covers accidental loss and damage.

Talk to your insurance provider and understand the exclusions as they can differ on a case-by-case basis. Also, you may be able to add the above exclusions via endorsement.

Policies Under Farm Insurance

Workers Compensation Insurance

If you employ workers on your farm, workers compensation insurance is a must, unless you’re in Texas. The insurance covers losses arising from employee injuries, disability, and death while on the job. Additionally, it also helps you compensate for your employees’ lost wages following a workplace accident or disease.

Commercial Property Insurance

In case of damage to your company-owned property, commercial property insurance compensates you. Farms and agriculture businesses use plenty of tools daily. This policy exclusively covers tools such as shovels, hoes, and axes, and areas such as barns, sheds, pastures, and more. Any cause of loss not defined in your insurance contract is excluded.

Commercial General Liability Insurance

People might be injured or they may damage their own property while visiting your farm. General liability insurance covers you against litigation costs, or any expenses brought about by such events. For instance, a visitor falls in a ditch, breaking their leg. The insurance can help you pay for their medical bills. This insurance is also known as farm liability insurance.

Business Owners Policy

A business owners policy is a packaged insurance that combines the following:

• Commercial property insurance: protects your business-owned properties and equipment.
• General liability insurance: saves you from litigation costs arising from third-party injury or property damage.
• Business interruption insurance: compensates you in case of lost business income due to a halt in business operations. Suppose a covered peril makes your rented-out farm space temporarily unusable. The insurance will reimburse you for the loss of rental income.

Commercial Auto Insurance

Under farm insurance, commercial auto insurance covers:

• Damage or injury due to on-site accidents when the accident happens within your farm or ranch.
• Vehicle damage or injury due to off-site accidents occurring outside your farm’s territory.

This insurance is mandatory in all states except Virginia and New Hampshire.

Inland Marine Insurance

Inland marine insurance provides you with compensation following the theft, damage, or destruction of goods during transportation. Farm insurance specifically covers you from losses of goods such as tools, equipment, or even dairy products while transporting them to or from the local market.

Ocean Marine Insurance

While inland marine insurance covers losses during road transportation, ocean marine insurance covers damages during shipping. For instance, if your crops are damaged during shipping, ocean marine insurance will cover the loss.

Commercial Umbrella Insurance

If losses exceed your commercial policy limits, you will have to bear the extra losses on your own. However, with commercial umbrella insurance, you have an additional layer of safety. This insurance compensates you for any loss that exceeds your primary commercial policy limits.

Coverages of Agriculture Insurance

There are two basic types of crop insurance: crop-yield insurance and crop revenue insurance.

Crop-Yield Insurance

You can find two types of policies under crop-yield insurance:

Crop-Hail

Hail can significantly destroy portions of your planted fields while leaving the remaining portion undamaged. This coverage is popular in areas where hail occurs frequently. Farmers usually cover their high-yielding crops under crop-hail coverage.

Multiple Peril Crop Insurance (MPCI)

MPCI policy extends protection against perils of drought, disease, excessive moisture, and more. It also protects you from a loss in revenue due to price changes and low yields. Additionally, your insurer may extend coverage for insect or bacterial crop diseases. To get MPCI coverage, you should purchase the policy before you plant your crops.

Crop Revenue Insurance

Under this coverage, your insurer compensates you during low yields. Regardless of the cause, this insurance helps you protect your earnings. Crop revenue insurance also protects you from price shock. For instance, your revenues may be adversely affected by a price decline of agricultural commodities. At such times, your insurer compensates you. The compensation depends on how much less your year’s revenue is as compared to your previous annual earnings.

Why Agriculture and Farm Insurance?

Your farm is exposed to risks like equipment damage, loss of crops, and death or disease of livestock, as well as damage to the farm itself. The chances of such risks affecting you are higher than you think. For instance, Insurance Information Institute (III) reports that hail-related insured loss in the past two decades was between $8 billion and $14 billion per year.

Moreover, The Hill reported in June 2021 that the California forest fires were rapidly destroying thousands of acres of land and threatened to affect thousands of residents and around 8,000 marijuana farmers. If these people don’t have insurance, then they’ll have to pay for all replacements and losses on their own.

If you’re a hobby farmer, you may think that farm insurance is not for you. Think again. Firstly, your homeowner’s policy excludes farming activities. Secondly, even as a hobby farmer, your farmland, equipment, tools, and livestock are susceptible to risks. Therefore, the best way to protect your farm and finances is via farm insurance.

Financial trouble can knock on your door at any time. To transfer such risks, you need agriculture and farm insurance. The great thing about these policies is that they are incredibly flexible. You can only purchase the coverage that you want and need, keeping your costs in check.

Cost of Agriculture and Farm Insurance

Farm insurance cost depends on several factors, such as:

• Nature of the business
• Size of your farm business
• Amount of coverage
• Number of livestock

Advantage Insurance Solutions reports that, on average, you could be paying about $187.50 annually for farm insurance. Of course, the number of employees, size of your business, and the types of crops may add to or subtract from the estimate. For example, Statista reports that corn became the crop with the highest total volume of insurance premium with a total of $3.51 billion in 2020.

Find The Best Farm Insurance Agent Near You

Searching for the best farm insurance agent near you can be a daunting task. With so many different companies, policies, and coverages to choose from, it can be hard to know where to start. A good farm insurance agent can help navigate the complex landscape of farming insurance and make sure you get the coverage you need at a price that fits your budget.

Here are some ways to help you get started.

Research potential agents: Start by searching for farm insurance agents in your area. Look for agents who have a good reputation in the industry, as well as experience in handling farm policies. Ask for recommendations from other farm owners, or search online for reviews and ratings.

Ask questions: Contact each agent you’re considering and ask questions about their experience, qualifications, and services. Find out how long they’ve been providing farm insurance and make sure they understand your farm and its specific needs.

Compare quotes: Ask each agent to provide you with a quote for the coverage you need. Compare the quotes to make sure the coverage is the same, and to ensure that you’re getting the most value for your money.

Choose an agent: Select the agent that best meets your coverage needs and budget. Make sure to read over any contracts and/or agreements you’ll need to sign with the agent before you commit to them.

Finding the best farm insurance agent for you and your family is an important decision. The agents you find on Agency Height are experienced and knowledgeable enough to provide you with the best farm insurance coverage and rates for your farm and its assets.

With their comprehensive coverage and attentive customer service, Agency Height is the perfect choice for your farm insurance needs.

In Conclusion

Farm business insurance is not an option, but a necessity. Most perils that can destroy your business are covered in a standard coverage plan. For as low as $200 per year, you could save yourself the incessant worry in your life. If you’re not sure where to start, find an agent from Agency Height’s very own insurance directory.