Today’s family farms face several challenges: protecting income and viability, insuring property and crops, and perpetuating the family business through succession planning.
The good news is that an insurance professional who specializes in agribusiness can help you with all of these. Here are key aspects of farm family insurance where your agent can help your business succeed.
Securing the right insurance for your farm
No two farms are alike. Your insurance agent will likely visit your farm and assess your buildings, livestock and fields.
Insurers often cover a family farm’s residence and operation in a single farm policy. Farm family insurance policies are like a homeowner’s policy. However, they cover other structures such as barns, silos, sheds, and greenhouses. And they include liability coverage to protect you against claims of injury and property damage.
A farm policy that covers all your property
Like a homeowner’s policy, a farm family insurance policy protects against:
- fire
- lightning
- theft
- vandalism
- burst pipes
- hail
- wind
- other named perils in the policy
Be sure to discuss the included risks with your agent. You might need to purchase separate coverage for flooding, earthquakes and other catastrophes.
You’ll likely need an appraisal or recent estimate of the farm’s value, including buildings and equipment you own. These factors determine how much insurance you can and should purchase.
This ensures you have enough coverage to pay for a loss and rebuild your farm if it is destroyed. Your chosen levels of coverage, called limits, will help determine your premium.
Most residences have farm barn insurance to cover their replacement cost. This is the cost to repair or replace a building using the same kind and quality of materials. Actual cash value (or market value) may be an option for insuring barns, older buildings or structures you don’t use. Actual cash value is the replacement cost minus depreciation.
Other types of property coverage
There are many other types of property you need to insure besides buildings. These include farm equipment, machinery, irrigation systems, driveways and fences. In some cases, it makes sense to purchase blanket coverage for all these risks. In other instances, you may be better off with “scheduled” coverage, which is where you choose specific items to insure and for how much.
You may also need additional coverage if you raise horses, grow grapes for wine, or produce milk. Your agent should be able to offer specialized coverages for risks outside standard farm policies. Some of these risks include equipment breakdown and lost revenue.
If you own and use commercial vehicles off your farm, you’ll need to purchase commercial auto coverage with your farm insurance. It provides liability and collision protection.
Cover your farm’s liability exposure
Your farm policy should have general liability coverage to protect against claims of bodily injury, property damage, medical expenses or personal injury.
General liability insurance pays for accidents that occur because of your operation, both on and off the farm. These might include a tractor causing an accident on a public road or someone getting injured by a spooked animal.
Liability insurance covers legal defense costs and any judgments against you, subject to the limits in your policy. Some common exclusions include farmers markets, agritourism, chemical spray drift, and the use of aircraft. You can insure those separately if you participate in such activities.
Product liability and pollution liability are also typically excluded from farm insurance. Product liability claims could occur if you sell eggs, milk, fruits, vegetables, jams or other food products.
Pollution liability might cover injuries from chemicals, pesticides, smoke from burning pastures, or livestock manure. You’ll need to purchase the coverage separately or add it as an “endorsement” to your farm policy.
Finally, keep in mind that liability insurance doesn’t cover the employees of your farm. For employee coverage, you need workers’ compensation insurance. Family members who are employees can also be covered by workers’ compensation insurance.
Workers’ comp pays for lost wages and medical expenses. Even though most states don’t require it, consider workers’ comp insurance since farming is a dangerous occupation.
Succession planning is critical
If you want to pass your farm to a family member or employee, certain insurance policies and financial programs can help.
That includes creating a means of transferring ownership with succession plans for retirement and emergencies or unexpected deaths. Using these financial instruments, you can craft a plan that doesn’t require the next generation to go into debt.
A key-person life insurance policy is crucial for this. Its death benefits go to a beneficiary who can use the funds to sustain the farm. Your insurance agent can help you plan the details so things go smoothly legally and financially – even if there’s an unexpected death.
You can also purchase life insurance for a partner, family member, or other beneficiary. You can do this in addition to policies for your family’s or heirs’ financial care. While term and whole life insurance proceeds are flexible, key-person benefits are specifically tied to sustaining your business.
Family farms may be owned by families, but that doesn’t mean they aren’t businesses. Like any commercial business, your farm needs insurance to protect your property, equipment, livestock and crops.
And it needs a business continuity plan to ensure your heirs can keep the land and preserve your family’s legacy. Turn to a farm insurance specialist for the best care. Protecting your farm today and sustain it in the future.
Consult with an agent about Farm Insurance call 800-392-6532, or get started with a quote.
This article is for informational purposes only. Insurance needs and coverages vary; therefore, the terms of your policy will be specific to your situation. We recommend that you discuss your insurance needs with a licensed agent for details on pricing, coverages, and exclusions.
