Did you know that agriculture is the biggest industry worldwide? In the United States alone, there are over 2 million farms! That’s a lot of farms!
And while in the United States the number of large production farms is on the decline, lifestyle farming is on the rise. Over half of all the farms in the United States are hobby farms. In fact, 88% of all farms in the United States are small family farms. And in Pennsylvania alone, 90% to 95% of all farms are considered small farms.
Whether large or small, if you own a farm, you want to know that if something happens your farm is covered!
As an insurance agent in the heart of Southwestern Pennsylvania, I have the opportunity to write farm insurance policies quite often. And often I get questions about what is (or isn’t) covered in each policy? That’s usually followed up with, “How much is this going to cost?”
To give you a broad understanding of the various coverages and costs associated with this type of policy, I’ve written this article. In it you will learn:
- The 8 Most Common Coverages on a Farm Insurance Policy
- Additional Coverages That May Be Needed to Protect Your Farm
- How Much Farm Insurance Will Cost
- And Cautionary Statements to Make Sure You’re Well-Covered
So, get settled into a comfy chair, and let’s dive into this topic together!
8 Most Common Farm Insurance Coverages
Farm insurance is incredibly comprehensive! Your home, other outbuildings and structures, farm equipment, animals, and crop protection are all covered on one policy.
1. Property or Home Coverage
Some larger commercial farms may not have the traditional farmhouse on the property, but if you live in a home on your farm property that dwelling will be listed on your farm insurance. You do not need a separate homeowner’s policy to cover your home.
Your farm insurance may cover the fair replacement cost of your home. For instance, if you lose your home to a fire, your policy, in most cases will pay out what it costs to replace your house.
To determine the coverage you need on your property coverage, the insurance company will need a lot of information about your home including:
- Square footage
- Number of stories
- Year of construction
- Frame or brick construction
- Basement (finished or unfinished)
- Flooring (ceramic tiles, laminates, hardwood, etc.)
- Walls (painted, papered, or paneled)
- Custom features in your home
- Type of heat
- Porches, decks, patios
- Detached garage/attached garage
2. Personal Property
Just like with a typical homeowners policy, your farm insurance will also cover any personal property in your home and on your porch or deck.
You can think of personal property in this way. Imagine taking your house, turning it upside down, and giving it a good shake. Anything that would fall out of your house is your personal property.
To determine the amount of coverage you need for personal property depends on the carrier. In general, all insurance companies set these limits off of a percentage of the replacement cost of the dwelling.
There are rare occasions when you will be insured for the actual cash value of the actual personal property. This is very rare!
3. Loss of Use
Loss of use coverage is standard on any farm insurance policy. If for some reason, your home or rental space becomes uninhabitable, your insurance will pay for the loss that you experience from not being able to use your home or rental space.
It may seem unlikely that you would need this coverage, but it’s usually unlikely events that cause a policyholder to file a claim for loss of use.
In fact, I have a very unlikely example of a client who used this coverage a few years ago. My client was boiling baby bottles on her stovetop. She ran a quick errand outside, got busy, and forgot all about the bottles. When she remembered and returned to the house, the house was filled with thick black smoke. A layer of grime was all over the house. Fortunately, the house did not catch fire, but the smoke and grime caused the home to be uninhabitable. My client needed to file a claim to cover their expenses due to the loss of use of their home.
As I said, it’s an unlikely and uncommon scenario like this that can create a need for this coverage.
These limits are also based on a percentage of the replacement cost of your dwelling.
4. Scheduled Farm Property
Scheduled farm property coverage protects any equipment you need to run your farm – think tractors, utility vehicles, excavators, combines, etc.
Just a little side note here…any coverage on an insurance policy that is “scheduled” simply means that each item covered has to be listed individually on the policy. Only those things listed will be covered!
Because this coverage is scheduled, you will need to list each piece of equipment in your policy. You will want to make sure you make a thorough list of all the equipment you want your insurance to replace if it is accidentally damaged or stolen or catches fire.
To determine the limits for each piece of equipment, you can use a copy of any sales agreements or stated values from a replacement cost calculator. (Most insurance companies will have a cost calculator that they use to plug in the information you provide about each piece of equipment to help determine its replacement value.)
For each piece of equipment listed, you must provide the price, year, make, model, and VIN#.
One note here, if you have a car or truck that you use solely on your farm, you can cover that vehicle on your farm insurance policy. You will then receive a “farm plate” that allows you to drive the vehicle for farm purposes only; such as picking up hay. You can n.
5. Scheduled Personal Property
Just like with a homeowner’s policy, this coverage can be included in your farm insurance policy. Scheduled personal property covers any personal valuables that might be costly to replace. Your jewelry, guns, collections, antiques, etc. can all be covered on your farm insurance policy.
Again, because these items are scheduled, each item will need to be listed individually along with the value of the item. Your limits will be determined by the value of each personal valuable. You can present an appraisal or receipt to verify what the valuable is worth.
6. Scheduled Farm Personal Property
This part of your policy covers the animals on your farm. Because it is scheduled, you will need to list each animal.
You would file a claim under this portion of your policy if your animal is struck by lightning, wanders onto a road and is killed, or is killed by a coyote. You can file a claim on anything considered a “covered peril”.
Read your policy to learn what is and what is not a “covered peril.” Depending on the insurance company who is writing your policy, the coverages can vary.
Ask your agent specific questions about those coverages, so that you are not surprised by a claim that isn’t covered if something happens to one of your animals.
What animals can I have insured?
Your scheduled farm personal property coverage includes just about any animal you might think of on a farm.
- Sheep and lambs
If you have an animal not listed above that you want to be covered, ask your insurance agent if you can include that animal on your policy.
Also, if you are going to butcher and sell certain animals, check with your agent about coverage for those animals. Because of exposures like Salmonella poisoning, some insurance companies will not write coverage for animals who will be used in that way.
You will inform your insurance company of the value of each animal cost listed on your policy. The insurance company will need to agree to the amount listed.
7. Scheduled Farm Structures
If you have outbuildings on your property, you will need to list each of those structures individually on your policy. You can include sheds, barns, carports, garages, offices, etc.
The amount of coverage will be determined for each structure listed on your policy. Your insurance company will have a replacement cost calculator to determine how much you would need to spend to replace the structure.
You must provide the insurance company with specific information about each building like square footage, type of construction, and the number of floors. Each insurance company will provide you with a list of the information you need to provide.
Some of the coverages on your policy protect you if an accident occurs on your property. These coverages pay for medical expenses if someone is injured on your property. They can also cover legal costs if you are sued because of an accident that occurs on your property.
One important thing to note is that anyone injured on your property can file a claim against you. This is true if the individual was invited onto your property or came onto your property without invitation.
Practically this means if the Amazon delivery man is injured on your property, he can file a claim on your insurance. Or, if a stranger stopping to ask for directions is injured on your property, even though you did not ask them onto your property, they can file a claim against you.
In general, all farm insurance policies have farm liability and medical liability.
Farm liability covers you if someone is injured on your property. Negligence on your part would need to be determined to have payment issued to the injured party.
For instance, maybe the gate leading up to your house has a broken hinge. You have every intention to fix it but just haven’t had a free weekend to get to it. One day a delivery person opens the gate to drop a package off at your door. As he does so, the gate comes fully unhinged, lands on his foot, and shatters his bones. Easy to determine negligence in this instance. Your normally friendly dog bites a visitor. You could still be held for this unexpected accident.
A claim can be filed on behalf of the delivery person to cover expenses related to their injury. These expenses can begin to add up. Let’s say he needs reconstructive surgery, outpatient therapy, pain medication. Little by little, these expenses can turn into a large claim.
Farm liability protects you if you have a claim due to something that happens on your property. These claims are often medical in nature, but this liability coverage also covers loss of property and litigation costs.
Farm liability usually has a minimum limit of $100,000. Most often your agent will encourage you to set a higher limit than the minimum. And the option of an umbrella policy (an increased liability limit over your farm and autos) is always suggested.
You need to be adequately covered. The cost for extra coverage is usually minimal but is well worth the peace of mind you have knowing that if something catastrophic takes place on your property you will be covered.
Similar to farm liability, this coverage further protects you if anyone is injured on your property. In general, this coverage is set up to cover smaller claims.
You might use this coverage, let’s say, if your neighbor stops by your house on a snowy winter day and falls on your icy sidewalk. If your neighbor has a minor fracture in their wrist and needs a cast and a few follow up appointments, the cost of the claim would not amount to very much. Your medical liability coverage would cover the cost of this type of claim.
With the help of your agent, you can set this liability amount.
Farm insurance can be very complex. In addition to all of these coverages, some farms need additional coverages. Depending on the type of business a farm engages in, additional coverages may be needed.
While the following list is not exhaustive, it does give an idea of some additional coverages you may need for your farm.
Farm insurance can also include coverage for any crops that you grow for profit. Because it varies by the insurance company, you will need to ask your agent exactly what kinds of claims you can file under this coverage.
Many policies will include hail storm, flooding, and drought as part of this coverage.
Some farms have rental properties located on the farm’s property. Long-term or short-term rentals need to be listed on your farm insurance. These will be listed as additional structures.
As with your home, you will need to provide the insurance company with the same information to determine the replacement cost of those structures.
Additional Liability Coverages
If your farm provides a service for others, you will likely need extra liability coverage for those activities and services. While this list is far from exhaustive, the following list will give you an idea of what additional coverages you may need to add to your policy.
- Boarding dogs or horses
- Horseback riding
- Therapeutic animals
- Trail riding
- Breeding services
- Farmer’s Market
Most farm insurance policies will include some amount of pollution coverage, but depending on the use of your farm, you may need to include more on your policy.
This extra coverage protects you if you spray your crops, dispose of animal waste, have an oil spill, or inadvertently pollute a water source.
So, what’s this all going to cost me?
Now that we’ve thoroughly walked through all of the coverages you might need to protect your farm, you’re probably wondering what this amount of coverage is going to cost you. How hard is this going to be on the wallet?
Farm insurance can cost as little as $2,000 per year or as much, while a policy for a large production farm could cost over $30,000 per year.
These four factors will have the greatest impact on the cost of your farm insurance premium:
The cost to insure your residence will be one of the greatest costs on most farm insurance policies. Depending on the size of the residence, the number of stories, the type of construction, etc. will heavily influence the amount of your premium.
Another factor that will impact your premium is the number and type of additional farm structures on your property. Remember you will be insuring every barn, carport, shed, etc., and this will greatly affect your premium amount.
Your liability needs are determined by the various ways your farm will be used. You can expect the amount of this coverage to be determined by the amount of risk involved with the various ways your farm is used. This coverage will impact the bottom line of your premium costs.
Finally, if you have previously filed claims, your insurance carrier will consider these claims when determining how much they will charge you for coverage. Previous claims can greatly increase the cost of your farm insurance policy.
A Final Word of Caution with Farm Insurance
If you have a farm, one thing you already know is how quickly things change on a farm. From purchasing new animals to retiring old equipment, those things covered on your policy can change overnight!
Because of this farming reality, you must maintain excellent communication with your insurance agent!
Anytime you add an animal, new equipment, or a new structure, you need to contact your agent right away! There is nothing more upsetting than neglecting to add property to your coverages and something tragic happening to that property resulting in a loss for you.
On the flip side, when you sell a piece of equipment, an animal dies, or your old four-wheeler bites the dust, you need to contact your agent and inform them of the changes. You certainly don’t want to pay for something on your policy that you no longer own.
I’m not sure my farm is fully covered. What can I do now?
Are you wondering if your farm is fully protected under your current farm insurance policy? Your farm has immense value to you and making sure it is adequately covered is a priority.
At Baily Insurance Agency, we have access to the finest farm insurance companies. These companies have excellent coverages and pricing for farms of every size and type.
As an independent agent at Baily Insurance, I advise my clients on the amounts and types of coverages they need for their farm. I work with them to insure ALL of the valuable property they need to operate their farm.
And because our offices are located in Southwestern Pennsylvania, we are located in the heart of farmland. We understand the value that you, as farmers, bring to our community and we want to serve you!
If you would like a new set of eyes to audit your current farm insurance policy, we welcome the opportunity to look it over and make sure you’re getting the coverage you need. Just give us a call or send us a note requesting a consultation.
At Baily Insurance Agency, we advocate on our customer’s behalf as their trusted insurance advisor. Let us make a difference in your insurance program today!