What Your Farm Insurance Should Cover
Learn what coverage should be included with your farm insurance program.
Devastating losses can occur on farms throughout the country. If you experience a loss, are you confident you’ll have everything you need?
Read more to learn about what your farm insurance should protect. Afterwards, you can take a peek at your current coverage and see how it holds up.
Your Home and Any Rental Dwellings
Your farm is more than your business, it’s also your home.
Whichever location your home is on should be listed as location 1 on your policy’s declarations page. Listing your home isn’t enough though. Ensure you have enough coverage by asking the right questions of your farm insurance advisor. Among them should include the following:
How did you come up with these values?
Are you sure that will fully replace my home if something happens to it?
What additional coverage is in place just in case it costs more than this?
If your agent can’t reply quickly and honestly to those questions, I’m sorry, but you’ve got the wrong agent.
Similar to a typical homeowner’s insurance policy, protection for your home consists of 4 important coverages:
Coverage A: Your dwelling
Coverage B: Other structures not used in farming
Coverage C: Your household personal property
Coverage D: Loss of use of your home
Coverage A: Dwelling
Coverage A protects your home from covered perils, and requires an adequate coverage limit to fully rebuild in the event of a total loss. Ensure your policy allows for a complete rebuild without exhausting coverage prematurely.
Coverage B: Appurtenant Structures
Coverage B provides dwelling-like coverage to all personally used outbuildings (ie. detached garages, swimming pools, sheds not used in farming, etc.) Any structures used for farming will be addressed elsewhere in your policy.
Coverage C: Household Personal Property
Coverage C protects your personal belongings from covered losses. Generally, 50% of your dwelling coverage limit is extended for your household personal property but can be increased or decreased as necessary, based on your individual needs.
Coverage D: Loss of Use
Coverage D pays for additional expenses you would face following a loss to your home. One example includes the cost for long-term hotel stays during the reconstruction period. This is generally a 20% extension of your Coverage A value.
Rental dwellings will consist of the same coverages, with the exception of Coverage C: household personal property. Your tenants’ property does not belong to you, and is better off covered under a renter’s insurance policy, and paid for by them.
Additionally, in the event your rental property became uninhabitable due to a covered loss, Coverage D on that dwelling will provide you with the loss of income you were entitled to from the rent.
Barns and Other Farm Structures
You can’t run your farm without barns or other farm structures. This section of the farm insurance policy ensures you adequate coverage for structures that are used in your farming endeavors.
Much like the coverage for your home, your barns and other farm structures should be insured for full replacement cost if you plan to rebuild and continue farming after suffering a loss.
The caveat to insuring at full replacement cost would be in the instance that you would not rebuild the structure at all, and if you did, you would alter the style to better suit your needs moving forward. If this is the case for your situation, your insurance advisor should be able to make suggestions on how to address the change in your situation without losing the coverage you’re looking for.
Farm Liability
A farm insurance policy is structured as a hybrid between a homeowner’s and business insurance policy. Your farm liability should adequately address the exposures of each.
When you own property, you face a liability exposure. You need to be sure that others who may be on your land will be indemnified if they suffer a loss.
Farm property often spans thousands of acres, and you or your employees may not be there at times supervising all activities. That temporary unoccupancy leaves an opportunity for negative occurrences to take place without your knowledge.
When someone experiences a loss while on your property, they will undoubtedly hold you responsible for the unfortunate consequences. The premises liability coverage on your farm insurance policy will address your claim, and defend you in court, should it get to that point.
The flipside of a farm liability policy addresses the commercial risk exposures of your operation.
As a farmer, there are many end users of your products who could potentially sustain injury from your products.
Personal liability will protect you in the event you’re personally liable in a lawsuit for this loss, however if your farm is a separate entity, there will be no coverage without commercial and products liability insurance included in your plan.
Ensure these instances are covered under your plan should a future need arise.
Farm Vehicles
Your farm is a business. As with all businesses, you rely on vehicles in your daily operations. Whether you’re driving a grain truck to the elevator after harvest, or going to the bank to deposit checks in your personal vehicle on behalf of your company, your vehicles should be properly insured.
Some coverages to consider include:
Liability (required to drive in Ohio)
Physical damage for your vehicle (comprehensive and collision)
Medical payments (for yourself and your passengers)
Uninsured/Underinsured motorists (covers your bodily injury from an accident with uninsured or underinsured driver)
Gap coverage on financed or leased vehicles (covers the depreciation of the vehicle in a total loss)
While transporting products to and from your farm, there is also a likelihood that you could have a pollution liability exposure as well.
Your exposure may or may not be covered under your farm auto policy currently and it is imperative that you review it with a competent third party to ensure you have the protection you need when you’re on the road.
Equipment
There are a couple ways your farm equipment can be included in your farm insurance policy, and both have their advantages and disadvantages.
Scheduled Farm Personal Property (FPP):
The Scheduled FPP form is generally used for your equipment with a higher value per item. However, any piece of equipment can be included on the Scheduled FPP list.
Scheduled items will be individually listed on your policy’s declarations pages with a value assigned to each. Any item listed provides you with the comfort of knowing that you’re protected in the event of a covered loss.
Unscheduled Farm Personal Property (FPP):
Also known as Blanket FPP, this coverage assigns a total overall value to the equipment and implements it is meant to cover. An example is below:
Tractor 1: $5,000
Tractor 2: $8,000
Disc: $3,000
Total Blanket Value $16,000.
In this case, you will not see each item listed on your policy, therefore should have a comprehensive list on file determining the values of each item.
Additionally, there are certain items which are specifically excluded from coverage under a blanket FPP form. These items must be scheduled for coverage to apply.
If you’re unsure whether or not your equipment is correctly protected as you expect it to be, you should schedule a review to address any coverage shortfalls in your current plan.
Livestock/Other Animals
Does your farm rely upon livestock or other animals for revenue? These assets must be adequately covered as well.
From cattle and poultry, to hogs and goats, they all have economic value to your farm for revenue generation purposes. What would happen if you suffered a loss to the animals you farm, would you be able to survive that and rebuild?
Understand what you may consider as livestock may be viewed as other animals by your farm insurance carrier. This isn’t a concern as long as your coverage can adequately protect you in the event of a loss.
Excess/Umbrella Liability
What plan do you have in place if you are liable for the injury to another and you don’t have enough coverage from your policy? Do you have the financial wherewithal to cover the excess payment from your farm’s cashflow?
Most farm liability policies have a limit of $1,000,000 per occurrence – will that be enough to protect you from a catastrophic loss in today’s dollars.
While $1,000,000 may prove its efficacy for a normal liability claim, in the event of a major disaster, it likely won’t be enough to protect you. In our litigious society, people routinely sue for more than what you may be able to withstand with your current coverage.
Your farm umbrella or excess liability policy provides an extra layer of financial support above the current liability limits of your farm and auto policies, shielding you from an outsized loss.
Pollution Exposures
From pesticides to fertilizers on your farm, you face pollution liability exposures from your operations.
How does your current policy measure up if you were to become enjoined in a lawsuit over accidental pollution? Will you be covered for the cleanup and removal of such contaminants?
While most farm insurance policies provide a modicum of protection from certain pollution exposures, oftentimes a higher limit, or a separate environmental liability policy is required to fully protect your exposure. It’s worth discussing your situation with a qualified professional to get the level of protection you need to recover from an unfortunate pollution event.
Do not mistake this list to be the complete list of considerations for your farm insurance program, but it is enough for you to look at your policy with a more critical eye.
It’s easy to read about what should be covered by your farm insurance program. Yet too often, in seeking the lowest premium, the protection aspect of the plan is tossed to the wind, leaving it lacking at best.
The value from your farm insurance is generated by its ability to help you manage your overall risk. If your current strategy isn’t working, reach out to discuss your situation and address any gaps you have in your coverage program.