Farm Insurance: What Your Farm Really Needs
Farm insurance covers risks related to your farm. Farm insurance is a packaged insurance that provides a wide range of protection from farm-related accidents and damages. It protects your farmhouse, livestock, tools, equipment, etc. According to Statista, in 2020 there were just over 2 million farms in the United States. So, whether you own a ranch, vineyard, or run a farm as a hobby, this insurance is for you.
In this blog
- Is Agriculture Insurance Different?
- Who Needs Agriculture & Farm Insurance?
- Coverages of Farm Insurance
- Covered Perils
- Exclusions of Farm Insurance
- Policies Under Farm Insurance
- Coverages of Agriculture Insurance
- Why Agriculture and Farm Insurance?
- Cost of Agriculture and Farm Insurance
Is Agriculture Insurance Different?
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. Moreover, an agriculture policy will also compensate you for losses due to a decline in agriculture commodity prices.
Who Needs Agriculture & Farm Insurance?
- Crop growing businesses
- Hobby farmers
- Cattle and livestock-based businesses
- Cotton and filed crop-growing businesses
- Dairy farming businesses
- Breweries, vineyards, and berries growing businesses
- Hay and alfalfa growers
- Vegetable and row crop growers
Coverages of Farm Insurance
Here are what farm policy covers:
Livestock is Usually Covered in Farm Insurance
Insurers 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 is in a public stockyard, slaughterhouse, sales yard, etc., 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 were traditional farms that had land around the house. Such lands were used to raise animals or grow crops. As a result, most farm policies cover your home and its contents, similar to a homeowners policy. However, coverage typically excludes items such as firearms, cash, jewelry, art, etc.
Outbuildings are shelters for your livestock and equipment, including garages, horse stables, storage buildings, poultry houses, hay barns, hog houses, etc. Farm insurance covers you for the costs of damages to such buildings.
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.
This coverage mainly deals with third-party liability. Farm insurance helps you pay if someone (other than you or your employees) gets 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.
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 them as an endorsement. Check with your insurance provider to confirm the coverages of your farm policy.
Farm insurance explicitly expresses the risks that are covered. Any loss due to risks not mentioned in your insurance contract falls outside the scope of coverage. The covered perils include:
- Fire and lightning
- Explosion and smoke
- 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
Exclusions of Farm Insurance
- Damage due to chemicals you spray on your farm
- Non-farm activities like landscaping, snow removal, etc.
- Release of pollutants
- Technical malfunctions of equipment
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.
- Farm equipment breakdown
- Farm income coverage
- Irrigation system replacement costs
- Borrowed machinery
- Peak season coverage
- Livestock hazards
- Additional livestock
Policies Under Farm Insurance
Workers compensation insurance
If you employ workers on your farm, workers compensation insurance is a must, unless you are 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. For agriculture and farm businesses, this is an essential policy as they use plenty of tools. This policy exclusively specifies the risks that are covered. Any cause of loss not defined in your insurance contract is excluded.
Commercial general liability insurance
People might get hurt or damage their 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 insurance:
- 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 compensation following the theft, damage, or destruction of goods during transportation. For example, the insurance 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 types of crop insurance, crop-yield insurance, and crop revenue insurance.
You can find two types of policies under crop-yield insurance:
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, etc. 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 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, death, or disease of livestock, as well as damage to the farm itself. The possibility of such risks hitting you is more than you think. For instance, according to the Insurance Information Institute, hail related insured losses in the past two decades was between $8 billion to $14 billion per year.
Moreover, Statista reports that the total claim settlement by crop insurers in Texas alone was $730.97 million in 2019. Had the farmers not had crop insurance, they would’ve had to bear those hefty losses themselves.
If you are a hobby farmer, you may think that farm insurance is not for you. However, that is not true. Firstly, your homeowner’s policy excludes farming activities. Secondly, even as a hobby farmer, your farmland, equipment, tools, livestock, etc., 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 insurances 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
The costs of these insurances depend on several factors, such as:
- Nature of the business
- Size of your farm business
- Amount of coverage
- Number of livestock
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