Are you a farmer and you are not yet insured? This article would educate you about the importance of insuring your farm. Let’s go!
Farm and ranch insurance is a hybrid form of coverage meant to protect you both personally and commercially. Like a standard home owner’s policy, farm insurance will cover your home, possessions, and personal liability. Beyond that, it also includes coverage for your machinery and livestock (though not for your crops).
What is Farm and Ranch Insurance?
Now let’s give you a clear understanding of what Farm and ranch insurance are all about. Farm and ranch insurance is usually a highly customized policy, you start with basic barebones coverage, and then tack on additional options based on the needs of your home and business. Because each farm or ranch is unique, an agent will often conduct a site visit to make sure your property is fully covered.
Furthermore, the amount of customization available is fairly detailed. For example, Nationwide’s Agribusiness farm insurance allows policyholders to pick and choose coverage for 12 different categories of perils.
You can also opt for broader coverage. It includes many of the same expanded coverages in most types of homeowners’ insurance policies. Some examples include falling objects, bursting heat or water pipes, the weight of ice and snow, and power surges.
Detached garages and other buildings that would be covered by a standard home owner’s policy remain covered by this portion of the policy as well. Also, it spreads to 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 100 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 (you’d have to get 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.
For example, your policy might cover each tree or shrub up to $250 or you might be covered up to five percent of the coverage of your home. In that case, if you have $100,000 of coverage for your home, that would mean the overall limit for trees, shrubs, and your lawn would be $5,000.
Note: As a farmer before you enroll for insurance you must know all about what the insurance would cover. so let’s quickly delve into it before you make your final decisions, ok!
What does a Farm Insurance Policy Cover?
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.
Consequently, most farm insurance policies allow policyholders to choose broad coverage’s over the categories or to schedule individual items (these options work similarly to endorsements and floaters).
The most fascinating thing is that farmers are given the privilege to 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 have broken down coverage’s under this portion of a farm insurance policy.
Farm Machinery and Equipment
Let’s look at all the types of farm equipment that could be insured, follow me!
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. If you use a truck for farm work, you may be able to bundle a commercial auto insurance policy and add it to your overall farm insurance package. 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 damaged 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.
Example of Cost: We have seen most farm equipment get insured for roughly $15 per $1,000 of value, but this will depend on your deductible. For example, say you have a tractor valued at $200,000. It would cost roughly $3,000 per year to ensure it against a group of named perils. If a covered peril impacts your tractor, you would get the proceeds net of the deductible you choose.
Here we provide you with detailed information about the types of animals that could possibly be insured. So before you enroll, think carefully if you would benefit from insuring specific types of animals
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 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 do not. Other livestock options for horses include major medical expenses, surgical expenses, and loss of use coverage.
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.
Example of Cost: The cost of equine or horse options depends on many factors including the type and age of the horse, where it resides, and what tasks it performs. Generally, mortality coverage costs 2.5% to 5% of the value of the horse. So if you have a horse worth $10,000 and a rate of 5%, the mortality coverage alone might cost the policyholder $500 per year.
As we mentioned earlier, there are adjusters who specialize in evaluating equine options, as there is a multitude of variables to account for when determining insurance.
Guess what? Farm produce is also covered by your insurance company.
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.
Farm liability coverage
Similar to a standard home insurance policy, farm, and ranch insurance also provide 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. Perhaps just as important, it covers attorney’s fees associated with covered incidents as well.
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 would be liable.
What is not covered by Farm Insurance?
You must be careful when it comes to insuring your farm because there are a few items that you think might be automatically included, but are actually not covered by your policy. For example, there are a couple of nuances around fencing and fires that homeowners should keep in mind regarding their coverage.
Fencing Not Automatically Included in Farm Insurance
Fencing is rarely covered by standard farm insurance policies. This might seem counterintuitive in terms of needs (many farms have a lot of fencing) but that’s exactly why standard farm policies don’t cover it. Some farms might not have any fencing while others might have miles of fencing.
There are many different types of fencing too, which could impact the cost to insure it. For example, a quarter of a mile of woven wire fence costs roughly $2,600 while a barbed wire fence costs $1,900.
For all of the above reasons, the decision to cover fencing is one insurance company lets the policyholder make in the form of a policy extension. To have a farm or ranch insurance policy broadly cover fencing would mean factoring in risk many policyholders aren’t subject to, even though it would be reflected in the form of a more expensive premium.
Many people choose not to insure their fencing. The only thing that might destroy a significant portion or all of a fence is a tornado. However, electric gates can cost $15,000 or more. If you have electric gates, you should definitely consider the importance of the gates and whether you need to insure it.
Note on Covered Perils in Farm Insurance Policies
Farm machinery and equipment is only protected by perils explicitly listed in your policy. Equipment that is not well maintained will not be covered and technical malfunctions are not covered. Like many things, farm equipment is getting increasingly technically advanced and unless you purchase a specific extension, it might not be covered.
Policyholders need to be absolutely positive their home and other buildings are covered in the event of a fire. Although farms are more often than none insured against fires, there are things that might activate exclusion. For example, road accessibility to farm structures is something your agent will take note of. Some carriers require there to be paved or solid gravel roads to buildings covered by the policy.
Regarding water sources, some people assume a pond on the property is adequate, but fire truck hoses need to be able to reach both the pond and covered structures if a hydrant is not available. In dry conditions, a fire truck would likely deviate from a road or gravel but if a field is covered in snow or too muddy, it might not. A lack of clear roads to your barn or stable, for example, would increase your risk of sustaining damage in a fire, which tends to result in insurers excluding fire as a covered peril on your policy.
Should you get Farm or Ranch Insurance?
In order to figure out whether farm or ranch insurance is right for you, we suggest you consider three factors that can impact your insurance needs:
- Additional structures
- Income-earning livestock
- Structures: If you have secondary structures on your land such as a barn or stable, then you likely need a farm insurance policy. Most buildings that are used for an agricultural function need specific coverage from a farm policy. This can apply to buildings that you have repurposed for agricultural use. For instance, an old garage converted into a greenhouse would require farm insurance.
- Livestock: If you keep animals that you rely on to generate significant income, then a standard home insurance policy may not provide enough “incidental income” coverage to protect your interest in those animals. Consider the difference between keeping a few hens in your backyard and caring for cows at a dairy farm. Farm insurance is designed to protect livestock in the latter case.
- Employees: If anyone works for you on the property, you’ll need farm insurance that provides coverage for potential liability situations and workers’ compensation claims. In some states, you can be required to have a worker’s comp policy in place if you have two or more employees.
And that’s all we have for you, I hope we have been able to enlighten you and not to confuse you. Farm and ranching are very important for a farmer because you would have a lot to benefit from this system.