Farm insurance is a unique type of insurance, much different from homeowners or commercial insurance. It’s also a broad category, as it can include small family farms, hobby farms, large agribusinesses, and ranches. In addition to being able to cover any type of farming equipment, it can also cover your house, and provides liability protection against lawsuits that could arise from your farming operations.
Since it’s fairly complex and requires a thorough understanding of both your farming activities and the insurance options that can cover it, it’s best to speak with a trusted independent insurance agent who can guide you through the process and make sure you are properly covered. This article is compliments of Trusted Choice. You may view the full article here: https://www.trustedchoice.com/farm-ranch/farm/
What Does Farm Insurance Cover?
Farm insurance is often a hybrid of personal insurance and commercial insurance. Sometimes it looks a lot like homeowners insurance, while at other times it very closely resembles commercial insurance.
Farm insurance is very flexible in what it can cover, and is able to be tailored to the exact needs of each farm. Most farm insurance policies contain at least the following things.
| Farm Insurance Coverage Levels | ||
|---|---|---|
| Dwelling |  | |
| Farm Liability | | |
| Barn/Outbuilding Coverage | | |
| Crop Coverage | | |
| Livestock Coverage | | |
| Farm Equipment Coverage | | |
| Multi-Peril Crop Coverage (MPCI) | | |
| Crop-Hail Coverage | | |
| Specialized Peril | | |
| Grain Fire Policy | | |
| Rainfall Policy | | |
| Citrus Freeze Policy | | |
| Citrus Business Interruption Policy | |
Basics
Farm insurance is essentially an a la carte insurance program where you can pick and choose what you want to cover. However, most farm insurance policies have at least a house and liability on them.
- Dwelling: Most farm insurance policies cover the farmer’s house, though technically this isn’t required. When the house is on the policy, it’s usually covered at replacement cost or actual cash value, just like a homeowners insurance policy. You can still have farm insurance even if you don’t have a house on the policy.
- Farm liability: Farm liability is fairly broad and flexible. It provides liability coverage in case you or your farm is responsible for somebody else’s injuries or property damage. And it can be structured to cover more than one location, such as farms with many acres that are spread out over multiple farms.
Extra options
The nature of your farm will determine what type of extra coverage options you’ll want to put on your farm insurance policy. There are rarely any automatic coverages that come with a basic farm insurance policy, so you’ll want to make sure everything is specifically listed on your policy that you want coverage for.
- Barn/outbuilding coverage: If you insure your house on your farm policy, you’ll receive an automatic 10% of your home’s coverage that applies to any outbuildings. However, those outbuildings can’t be used for any type of farming activity, and this really only applies to things like detached garages and sheds. Barns and any other outbuildings that are used for farming must be specifically listed on your policy. You can typically choose the amount of coverage you want on it, but typically only new barns in excellent condition will be eligible for replacement cost coverage.
- Crop coverage: Traditional crop insurance is not an option to add to your farm insurance policy, so you’ll need to buy crop insurance separately if you want to insure it. But you can typically add peak season storage of your crops to your farm insurance policy. Crop insurance may be limited in how long it covers your crops for, so you may want to add crop storage in addition to having crop insurance.
- Livestock coverage: You can choose to insure your livestock on either a blanket or a scheduled basis. Blanket coverage means that all of your livestock are covered under one limit, while scheduling lets you pick and choose which livestock you’d like to insure. Be sure to discuss the value of the livestock with your independent insurance agent, because livestock values can fluctuate considerably from year to year, which increases the risk that you’re not adequately insured.
- Farm equipment coverage: Similar to livestock coverage, your farming equipment is not automatically included when you buy a farm insurance policy, so you’ll need to add it. Your farm equipment could include anything from tractors and harvesters, to farm tools and drones. You can also choose whether you want to have blanket coverage or scheduled coverage. Blanket insurance is more expensive but lets you have more wiggle room in the value of each covered item. Whichever method you choose, you’ll need to provide an equipment list that shows each item you have and what its value is. Some items won’t need to be listed out, like low value miscellaneous tools that are worth a total of a few thousand dollars.
- Multi-peril crop insurance (MPCI): This program developed by the Federal Crop Insurance Corporation offers coverage for inescapable crop loss and covers nearly all available crops. The MPCI consists of various policies and coverage options that insure farmers and agriculture producers against a decrease in crop yield or a loss of crops due to natural disasters, weather events, and disease. It also protects you from revenue loss as a result of price changes in the commodity markets. You can choose products customized to your individual operations and needs or general policies that use county yields and prices.
- Crop-hail insurance: While many crop-hail policies cover much more than hail, insurance professionals have kept the traditional name. Usually these policies also cover loss due to fire, during transit to storage, while in storage, and more. You can also add options for loss due to windstorms, freezing conditions, and other weather-related events.
- Specialized peril: Many crop insurance companies also offer coverage for specifically defined perils excluded from an MPCI or crop-hail policy. These would include, but is not limited to, the following specialized policies.
- Grain fire policy: Covers most crops against natural, manmade or lightning fire loss
- Rainfall policy: Covers loss of crops, such as tomatoes and raisins, due to rainfall issues
- Citrus freeze policy: Protects citrus growers against loss due to early freezes
- Citrus business interruption policy: Covers citrus packers if their business is interrupted as a result of a freeze
- Hay fire policy: Covers fire damage while hay is in stacks
- Other specialized policies: Ask your insurance agent for coverages available in your state or region
Business
Many larger farms are called agribusinesses and operate similar to fully fledged businesses, and require similar insurance. Large commercial farms or agribusinesses may need at least some of the following insurance coverages.
- Business income: Business income or interruption insurance can be added to commercial agribusiness insurance policies to keep the money coming in if your farm has to temporarily shut down due to a covered loss. If you have a fire and have to halt your farming operations, business income will still give you money to pay the bills, pay employees, and continue operating while your building is repaired.
- Workers’ compensation: Unlike most state regulations that require standard businesses to carry workers’ compensation insurance, there aren’t many states that require farms or agribusinesses to have workers’ compensation. This leaves it up to the farmer to decide whether to have it, but it can provide valuable insurance coverage if a farm employee gets hurt on the job in a profession that does carry quite a bit of risk.
- Commercial auto: Any standard vehicles, such as a car or truck, will need to be insured on an auto insurance policy. If you’re hauling your grain or livestock, you're likely to need a commercial auto insurance policy to adequately cover these activities. Even if you just use your pickup truck occasionally on the farm, your insurance company may be able to rate it as a farm-use only vehicle, which typically has better rates.
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