How to Insure Trucks for Farm Use vs Trucking for HireJanuary 9, 2020
In today’s age of agricultural pursuits, many farmers have a fleet of equipment that allow them to farm at scale. This means substantial investments are made into machinery and other vehicles that make the farming process more efficient and more profitable. Along with that comes the desire, and often the need, to create other revenue streams with those pieces of machinery. Often, farm owners turn toward contracting with other farms and businesses to take advantage of custom harvesting or hauling opportunities. Many crop farmers have several trucks they use in their own harvesting operations and in the off-season these vehicles can earn their keep by hauling other types of goods for hire. What is not commonly considered is how this type of farm use vs trucking for hire vehicle usage can affect insurance coverages. Here is a brief outline of each type of use and a few of the insurance implications that accompany each of them:
How to Insure Trucks for Farm Use
There are various things to consider when it comes to insurance for vehicles on the farm. When insuring trucks for farm use, it’s important to get the right policy with enough limits for full coverage.
Get Coverage on a Commercial Auto Policy
When a farmer buys a semi or tri-axle truck to use within the scope of their own farming operations, the process of insuring these types of vehicles is relatively simple. There are a few types of farm truck insurance policies available.
Because of their gross vehicle weight, insurers will cover these types of vehicles on a commercial auto policy instead of a personal auto policy – even if they aren’t titled to a commercial entity, such as a farm that is structured as an LLC.
In these situations, it is not farm use vs trucking for hire as the farmer will have limited the truck’s use to hauling his own product. For example, a farmer hauling his harvested grain to the elevator. Insurers will ask for a list of drivers and they will likely want to know the radius of operations.
Obtain Enough Liability Coverage
The farmer’s farm owner or business auto policy may offer some coverage for property in transit or owner’s cargo. Also, additional limits of insurance for this exposure can be purchased. As with any type of insurance policy, an important consideration is how much liability insurance should be purchased.
With heavy and extra-heavy vehicles, $1,000,000 liability limits should be purchased on a business auto policy and an Umbrella Liability policy should be seriously considered. Insurance providers who write a farmowner policy and a business auto policy for a farm operation will place both of these policies under an umbrella, so the additional liability limits provided by the umbrella will sit on top of both policies.
How to Insure Trucks for Trucking for Hire
Insuring vehicles used for trucking for hire is a little different. Even if you use your trucks on your own farm, insurance coverage gets more complicated if you use those vehicles for hire.
Get Coverage on a Comprehensive Trucking Policy
When trucks purchased primarily for use on the farm are used in the off-season to haul products of others, the farmer needs a comprehensive trucking policy. These policies are less often offered by the same insurance carriers that write farmowner insurance policies.
Usually, an independent agent can acquire this coverage for the farmer through an insurance carrier that specializes in trucking risks or a surplus lines brokerage with access to trucking insurance markets.
Make Sure You Have the Required Filings
If a farmer is trucking property of others within the state of Pennsylvania, they will need to complete PUC filings. If the farmer is transporting goods across state lines, IFTA filings will be needed.
This information, along with providing a DOT number at the time of quoting, will ensure that an accurate premium quote can be provided and the proper paperwork submitted to state and federal authorities by the insurance carrier when the policy is written.
Consider Adding a Cargo Policy
Farmers who are hauling the products of others should also consider obtaining a cargo policy that will pay for damages to goods in transit or if they are lost or damaged in a claim. Hauling products for compensation is looked upon by insurance companies with more scrutiny and considered to be a higher risk exposure than hauling one’s own goods.
For this reason, these policies are rated differently and typically will carry higher premiums than a business auto policy that a farmer may be able to obtain when they are simply hauling their own products.
Obtain a Separate Umbrella Policy for Full Coverage
Additionally, because farmers must often obtain this type of policy through a specialty market, an umbrella written to sit over the farm operations will usually fail to cover the Trucking Insurance Policy.
Some carriers may not issue an Umbrella policy for the farm entity if the trucking operation is outside of their risk “appetite” and conducted under the same business entity name as the farm. They do this so that they are not drawn into trucking claims that exceed the base trucking policy liability limits.
This means that the farmer may need to acquire a more expensive umbrella from a surplus lines carrier that will cover the farm and the trucking operation; or more commonly, the farmer ends up purchasing two separate surplus lines umbrellas for the farm and the trucking exposure.
Set Up Trucking for Hire as a Separate Legal Entity
Since farms that are of the size and scope to utilize heavy trucks in their operations are almost always candidates for umbrella liability policies, this potential insurance obstacle makes it a good idea for a farmer to set up the Trucking for Hire aspect of their farming operations as a separate legal entity.
An experienced, independent agricultural insurance can help sort out any of those potential pitfalls. It is just another reason why open communication is increasingly necessary when obtaining insurance policies in the current legal environment in which businesses operate today.
When it comes to insuring trucks for farm use vs trucking for hire, the differences between business auto policies and trucking policies are nuanced. But, they are important distinctions that must be made and accounted for so that farmers can receive the appropriate, comprehensive coverages to protect their businesses, families, and livelihoods.
Farmers who are expanding operations and creating additional revenue streams within the trucking realm should consult with an experienced agent to ensure that they have the correct policy, coverages, and limits in place. If you have questions regarding your farm insurance policy or a business auto/trucking exposure, feel free to give one of our experienced ag agents a call at 1-800-537-6880 or 717-665-2283.
Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.