Farm Insurance

Nov 9, 2020 | Business Insurance

Being a farmer or agricultural business owner is far from playing some online game where you can just click and transfer elements as needed.  Farming is as real as any business. Although the possible contentment it can give a ranch or farm owner may really be rewarding but the risks involved that he should face are just as real.  

What is Farm Insurance?

Farm and Ranch insurance is a combination of coverage that aims to protect the policy owner both personally and commercially.  Many farmers and agricultural business owners prefer to live within their property where they also raise their crops and livestock.  It combines the basic features of a standard homeowner’s policy offering protection for the home, possessions, and personal liability due to accidents related to the business.  It also helps cover unexpected losses of crops or livestock and machinery in extreme weather situations, disease and pest pressures, fires, or other disasters.

Why should a Farmer Get a Farm Insurance?

According to a study conducted by Cornell University, “Insurance is not a tool to make money, rather it is a tool to help compensate an individual or business for losses that might otherwise cause a financial disaster.” 

Every business involves risks.  Farming is a business. Every sensible business owner knows enough to consider getting liability insurance.  There will be risks like natural disasters to potential diseases of both livestock and crops, to the ups and downs of the market.  A farmer as a business owner knows he needs some sort of coverage to protect their investment.   

What Does Farm Insurance Cover?

This is a highly customized policy that could start the basic coverage only then enhanced with additional features depending on the needs of the owner’s home and business.  As a “need-based” policy, an agent normally had to visit the property to be insured, so he can properly help the policy owner get the best coverage.  

The “Home Coverage”

This covers the usual homeowner’s insurance policy features like protection from fire, lightning, windstorms, hail and most accidental losses, including vandalism and theft.  It also includes protection for detached garages and other buildings within a certain distance from the home. This may include plants, trees, shrubs and lawn not grown for commercial use.

The “Farm Coverage”

This includes personal property directly related to the farming or ranch operation. It can be further broken down into three categories: livestock, farm machinery and equipment, and farm products such as seed, silage, animal feed, fertilizers, and pesticides. 

  • Livestock

Farm animals are livestock being raised for the purpose of breeding, meat production among others.  Farm insurance policies include broad protection for livestock in case they are killed or injured by any of the specified risks in the coverage. This also extends to death by accidental shooting, being run over by a vehicle, attacks by wild animals, even flood and earthquake. 

It should be noted that special insurance coverage for horses and other equine animals is recommended on top of the regular farm insurance.  Generally, horses are not raised for their meat but for mainly for breeding, work or show purposes. Policy owners are recommended to protect these assets as the risks involved in keeping them is indeed great. Normal coverage includes mortality due to a broad number of risks and theft.  The special coverage, on the other hand, includes death due to sickness and disease, major medical expenses, surgical expenses and loss of use. The additional coverage may be customized according to the animal’s role in the business. A horse for herding other livestock or as a show horse may need broader coverage than a horse being used for the owner’s riding pleasure only. 

  • Farm Machinery and Equipment

This category is admittedly essential to this business operation and costs a lot of money not just with its purchase but more so in their maintenance. Farm Insurance is a good investment since it can protect the policyholder from possible financial loss due to unforeseen damage to machinery and equipment that can be affected.  Farm machinery and equipment such as tractors, combines, cotton pickers, planters, field equipment, rakes and among others are all covered in this list. Vehicles like farm trucks may be also be bundled with a commercial auto insurance policy, an addition to the overall farm insurance package. Meanwhile, portable irrigation equipment and portable structures and fences are usually covered as well.

  • Farm Products

Farm insurance only covers farm products such as feeds, grains, seeds and similar items during storage only.  It does not cover crops like feeds or grains growing on the property or even seeds that have been planted already.  Once planted or being grown, a separate commercial insurance policy is recommended especially if the sale proceeds exceed the policy’s incidental income limit. 

  • Additional Coverage

On top of these, Farm Insurance also covers liability protection like a standard home insurance policy.  This is not an option but a part of every farm insurance policy because of the expected risks. This covers bodily injury, medical expenses and property damage as needed.  It also includes attorney’s fees involving the aforementioned incidents. 

Farmers regardless of years of experience may still experience accidents and could hurt themselves even with all due diligence.  Both animals and handlers may get hurt with all possible situations. A runaway animal could also hurt someone on the road. The farmer will still be held liable for the damages caused by the animal although it happened outside his property.  

What is Not Covered in the Farm Insurance Coverage?

Coverage is almost synonymous with protection. Protection is further defined as “…any measure taken to guard a thing against damage caused by outside forces….”.  What could further serve as tangible protection than having to put a fence on your entire property?  

Imagine owning a homestead where your family home has been proudly standing for generations in the middle of your farm/ranch.  Is it possible to have a reliable insurance company to cover that for you? Can it be included in a farm insurance policy? Interestingly, according to the USDA, farms are measurable in acreage.  A small family farm average 231 acres; large family farms average 1,421 acres and the very large farm average 2,086 acreages! 88% of all farms in the US are made up of small family farms. In the same manner, a land with cattle and horses in it may be considered a ranch if it occupies at least 1000 acreage! That’s a huge track of land! 

Fencing Not Automatically Included in Farm Insurance

This is the reason why fencing is not often covered by typical farm insurance policies.  There are different kinds of fences could raise the cost of the policy as well as the size of the land area which will need to be included.  However, most insurance companies leave it to the policyholder to decide whether to include the fencing of the property through a policy extension at an exceptionally high premium. 

Are there other things to consider in getting a Farm Insurance?

  • Farm Insurance indeed provides coverage on specific risks listed in the policy for farm machinery and equipment.  On the other hand, it is also expected that due diligence should be observed in maintaining them since technical malfunctions are not covered.  Farm owners may consider adding specific extensions to keep covered and upgrading their equipment as needed.  
  • Farm owners should consider securing and including all buildings and structures in their farm as a precaution in case of fire.  It includes anticipating all possible hazards not limited to structural material, but the conditions of the road and the proximity to water sources to minimize risks of exclusion.   To illustrate, the road near the buildings or structures should be not just accessible but should be passable also to help the fire trucks navigate the property easily. A possible scenario is a road covered with snow or too muddy that the fire truck will have to find another way to reach the structures.  Another is the accessibility to a water source – be it a pond or a well perhaps. This will help the fire marshals get to the water easily in case there are no nearby hydrants to attach their hose. In the absence of both provisions, both the road and water supply conditions may pose a greater threat to sustaining damage to fire. Most insurance companies might just exclude fire as a covered risk in the policy.

Is it better to get a Farm or Ranch insurance?

There are three factors to consider in deciding which insurance policy will offer the best coverage for a person engaged in agricultural business. Whether a farmer is raising crops or livestock, additional structures, income-earning livestock, and employees are essential to their business.

Structure

A farm structure may include the main house for the family and other secondary structures in the farmland. Other structures that can be added would be barns, garages, greenhouses, and stables. Most farm insurance policies already have coverage for these structures related to their type of work.

Livestock

Most home insurance policy coverages may not provide enough “incidental income” to protect the interest of a farmer who depends solely on his animals for livelihood.  alternatively, Farm insurance is specially designed to address both these needs – protecting the home and the farmer’s agricultural business as well.    

Employees

An agricultural business owner who has farmhands working for him is expected coverage for them for any potential liability situations and possible compensation claims.   Some states already require farm owners with two or more employees to provide a company policy as protection. 

In Conclusion

Perhaps it is best to say that this policy is a winner!  Farmers can have the best coverage possible by customizing according to their business needs.  Agents should be able to assist the farmer in seeing what needs to be given more attention than the others so greater care may be provided.  Pros and cons, as well as possible exclusions, should be discussed.  

Some people are a little bit hesitant about the probable high cost of the premium they will pay. Although considering the potential savings and avoiding even more financial problems due to great coverage, this is something worth getting. These people may include new farmers who are just starting off with their trade or even veteran farmers. In the case of seasoned farmers, even if they’re already used to risks they can still use the help of a good policy. All risks involve loss – not just of money, other resources, but more so, time.  Nothing is more devastating than seeing harvest ruined by a tornado or floodwater after a hurricane. Or a blazing fire razing the stable with your prized horses inside, all because there was no nearby fire hydrant in sight. As they say, it’s always better safe than sorry.