5 Types of Farm Insurance
Just as people purchase insurance to protect their homes, those in the agricultural business need to purchase insurance to protect everything on the farm. If you own a farm and are looking for insurance, here are five types of insurance that are available.
Dwelling: This is your homeowners’ insurance and it protects against fires, storms, theft, vandalism and other similar events. It also protects attached structures like garages.
Liability: If someone is working on your farm or visiting your farm, liability insurance protects you from a lawsuit if that person gets hurt. Liability policies protect you against accidental bodily injury, medical expenses, and property damage.
Other Buildings: Just as you protect your home with homeowners insurance, you need to protect your barns, stables, silos, corrals and any other building or structure that is not attached to your house.
Livestock: These insurance policies generally cover accidental shooting, drowning or death due to loss of electricity. You can choose between individual coverage, where you list each animal separately, or blanket coverage that includes your equipment and structures. If you have a farm with a few animals that are worth a lot of money, talk with your independent insurance agent about individual coverage or a combination of individual and blanket. You can also get herd insurance, which covers a large group of animals.
Crop: This insurance can be the most confusing. Talk with your insurance agent about multi-peril crop insurance and crop-hail insurance. Multi-peril crop insurance protects your crops against hail, fire, floods, insects and other natural disasters. It also protects you against a loss of income due to the prices declining. Crop-hail insurance is just for hail damage.
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Like a standard homeowners insurance policy, farm and ranch insurance covers your home, personal property, liability, and additional living expenses. It’s a hybrid with both homeowners and commercial insurance elements since ranchers and farmers work and live on the same property. With these double exposures, a loss can be both personally and financially devastating.
Farm policies tend to be highly customized: you start with a basic barebones farm insurance policy, and then you tack on additional options based on the property you have on the farm and the liability protection you need. Because of the individual nature of each farm or ranch, an agent will often be involved, and it’ll be in your best interests to have them conduct a site visit to make sure your farm and your investments are fully covered.
How Farm Insurance Works
You choose how narrow or broad you want this portion of the coverage, just like a standard home insurance policy. For example, Nationwide’s Agribusiness farm insurance allows policyholders to choose between coverage from 12 main categories of issues – what are called perils in insurance lingo – or broader coverage for your home and personal property. The broader coverage includes many of the same expanded coverages purchasable in most types of homeowners insurance policies. Some examples include falling objects, bursting heat or water pipes, the weight of ice and snow, and artificially generated electrical currents (a power surge).
Detached garages and other buildings that would be covered by a standard homeowners policy remain covered by this portion of the policy as well, along with plants, trees, shrubs, and your lawn. It will not cover anything grown for commercial use and usually only includes covered items within a certain distance of the home. For example, say you have a farm insurance policy and only a certain number of feet of lawn separates your home from a field of alfalfa that is baled and sold each year. Even though it is close to the home, that alfalfa would not fall under this portion of the farm insurance policy (we would have to discuss separate crop coverage).
Like standard home insurance policies, there also are claim limits for trees, shrubs, and your lawn. Depending on the individual policy, there might be a claim limit per tree or shrub or there might be an overall limit set according to a percentage of the coverage of the home.
Farm Liability Coverage
Similar to a standard home insurance policy, farm, and ranch insurance provides liability protection. Liability coverage is not an option and part of every farm insurance policy because of the risks at hand. It covers bodily injury, medical expenses, and property damage if necessary.
Even under the most strenuous precautions, accidents can occur. Farmers with years of experience operating machinery can misstep and hurt themselves. Something could startle an animal and cause it to injure a senior handler. Or for example, say an animal manages to escape, wander into a roadway and cause an accident. Even though that incident didn’t occur on your property, you as the animal’s owner may be liable.
Farm Personal Property Covered
Farm and ranch insurance also covers personal property directly related to the farming or ranch operation. This portion of the coverage can typically be broken down into three categories: farm machinery and equipment, livestock, and farm products such as seed, silage, animal feed, fertilizers and pesticides. Most farm insurance policies allow policyholders to choose broad coverages over the categories or to schedule individual items (these options work similarly to endorsements and floaters). You choose which is best for you when you speak to your agent and purchase the policy. Whether you choose to broadly cover categories or individually schedule items, we’ve broken down coverages under this portion of a farm insurance policy.
Farm Machinery and Equipment
This coverage protects the policyholder from financial loss or damage to their machinery and equipment due to covered perils. Almost everything you might guess that falls under this category is covered. Tractors, combines, cotton pickers, planters, field equipment, hay rakers, and other machinery are all covered. Portable irrigation equipment and portable structures and fences are usually covered as well.
Farm and ranch machinery is expensive and some of it will need to be scheduled. Farm tractors can cost more than $200,000 but they are necessary investments for many farmers. As durable as they are, a lot can happen to them. For example, say a tornado damages a tractor. There is little the owner can do to prevent that peril so they need to protect themselves financially against the loss of such an expensive piece of equipment with farm insurance.
Most farm insurance policies offer broad coverage of livestock in the event they are killed or injured as a result of a basic peril that is covered. There also are extensions that cover a much wider array of perils that that can happen to farm animals. Some of the extended policies cover things such as the death of animals by accidental shooting or if they are struck by a train or vehicle. They also might cover attacks on livestock by dogs and wild animals, as well as flood and earthquake loss of livestock.
Horses and equine animals are unique because of the variety of purposes they serve. Whether you use one or more horses for work, breeding, show or pleasure, the animals are investments that make financial sense to purchase insurance for. Companies that offer farm and ranch insurance employ special adjusters specifically for equine animals and offer a list of purchasable options to cover them. Choosing what protection is most appropriate is a decision you make with your agent.
Typical coverage options for horses include animal mortality coverage, which covers death due to a broad number of perils and theft. Perhaps more importantly, the option also covers death due to sickness and disease – this is a unique covered peril that standard livestock portions of farm insurance policies does not. Other livestock options for horses include major medical expense, surgical expense, and loss of use coverages. What purpose the horse serves the policyholder determines which of the options you need to purchase. For example, say you ride your horse to herd other animals. That horse is probably a vital part of your livelihood so you need to protect that asset with insurance in the event of perils, accidents, and disease. A horse you have purely to ride for pleasure might not require extensive coverage.
Feed, grain, seed, and similar items considered farm products are covered by farm insurance. Remember these products are only covered while stored. Feed or grain (or other crops) growing on the property and seed that has been planted are not covered – those would typically require a commercial insurance policy if the sale proceeds exceed your policy’s incidental income limit.
What Farm Insurance Does Not Cover
Be careful when it comes to insuring your farm: there are a few items that you think might be automatically included but are actually not covered by your policy. Your All Points Insurance agent will walk you through the process.
Get the coverage you need. Speak with one of our experts today. 207.989.8880