5 Things People Don’t Know About Farm Insurance
August 27, 2020Farmowner’s Insurance is one of the most comprehensive and complex types of insurance products available. In fact, even many agents who do not have experience in the field of agricultural insurance tend to get coverages wrong or insure things incorrectly on farm policies. There are just a lot of things people don’t know about farm insurance.
The general public has many misconceptions about insurance in general, and farm insurance is no different. The aspects of Farmowner’s Insurance policies misunderstood relate to what these policies can cover as well as what is excluded. As with any type of insurance, variations from insurance company to company exist, so it’s important to read your specific policy language to determine what is covered.
Still, there are some general concepts that hold true with almost all farmowner’s policies. Here are a few things people don’t know about farm insurance:
1. One Farm Insurance Policy Can Often Cover It All
Coverage for Both Personal and Commercial Risks
In the case of most family farms, farmers live at their place of business (the farm). For this reason, a Farmowner’s Insurance Policy needs to cover the liability for the personal aspects of the farmer’s life as well as the commercial farm pursuits. In this way, the Farmowner’s Insurance Policy acts as a hybrid of a Homeowner’s and Commercial Insurance policy.
If the family dog bites a farm visitor, the personal liability portion of the policy is there to pay such a claim. If the farmer’s cattle get out on the roadway and are struck by a vehicle, the commercial liability portion of the policy will pay for the auto owner’s property damage and/or bodily injury.
Liability is Comprehensive in Nature
Additionally, the liability of a Farmowner’s policy is comprehensive in nature. This means that any business pursuits the farmer engages in under the same entity as the farm is operated under will be covered by the Farmowner’s Policy (except those that are excluded in the policy language). The nature of comprehensive liability makes the underwriting process pertaining to farm insurance policies more nuanced and detailed in nature.
Include All Business Operations
Since the insurance company is signing on to insure all the business exposures in which the farm partakes, the insurance company’s underwriter will need to know exactly what types of business operations are occurring on the farm. For this reason, the farmer needs to have a detailed conversation with their independent agent so that an accurate picture of the farm and any associated business pursuits can be relayed to the underwriter.
It is always better to provide this information up-front rather than have the underwriter discover a roadside stand or pick-your-own produce operation is present on the farm after they do a quick google search of the address. The existence of these business pursuits is usually not a deal-breaker.
But, the underwriter will need to know if additional public foot traffic is present on the farm to accurately gauge and assess the risk level that the account presents to the insurance company. This is also something to consider when evaluating the coverage and needs for an agribusiness policy vs farmowners policy.
2. Farm Insurance Can Cover Multiple Locations
Farmowner’s Insurance Policies provide liability for multiple locations that are used by the farmer for the purpose of their agricultural business pursuits. This means that additional farms that are owned or rented can be covered on one Farmowner’s policy. The base liability charge on a Farmowner’s Insurance policy is calculated by the total acreage.
A secondary farm with a rental home on the premises is also insurable on a Farmowner’s policy. Farmer’s can acquire property coverage for the rental dwelling, in addition to the necessary Lessor’s Risk coverage that is needed to protect themselves from potential liability claims brought forth by their tenants.
3. It Can Insure Property and Equipment, Both Personal and Commercial Assets
Many people do not realize that a farm policy can insure more than one location for the purpose of covering both property and farm equipment. They also do not realize that a farm policy is equipped to cover the farmer’s dwelling structure and personal contents as well as farm and outbuildings on the property.
A Single Policy Can Offer Comprehensive Coverage and Avoid Overlap From Multiple Policies
In fact, a single farmowners policy is often the most advisable way to insure these property items. Having one policy that offers comprehensive coverage avoids overlaps in coverage from multiple policies. When coverage overlaps exist, not only is the farmer paying for the same protection twice, but a situation is also created where multiple insurance companies must determine proportional loss settlement based on the limits of each policy.
This is true for the liability portion of the policy in addition to the property section. Unlike a homeowner’s insurance policy, a Farmowner’s policy can provide the insured farmer with property coverage for dwellings, farm buildings and equipment at multiple locations. This eliminates the need for farmers to acquire multiple policies for each insured location, and usually provides a better rate, since any policy credits they receive on the farm policy will be applied to all the insured property items.
However, some companies will limit the type of secondary locations that can be added to a farm policy. For instance, a farmer who owns an investment property that is a townhome with no farmland attached might not be able to add that to their Farmowner’s policy depending on the carrier who insures the farm. Also, it’s a good idea to add pollution liability coverage to your policy.
4. You Can Also Get Coverage for Seasonal Dwellings
The majority of Farmowner’s Insurance companies provide a way for seasonal dwellings, such as cabins or hunting camps, to be added to a farm policy. The coverages they offer, or the criteria for doing this, will vary by carrier.
Some carriers may require the seasonal dwelling to be equipped with thermostatic heat control and others may only insure the property at the seasonal location on an Actual Cash Value basis rather than full replacement cost.
If you are insuring a seasonal property on your farm policy, be sure to discuss the details with your agent to ensure that there are no coverage gaps. If your seasonal property fits the appetite of the insurance company who insures your farm property, it is often the best and most cost-effective scenario to include it on your Farmowner’s policy.
5. Endorsements Are Available to Cover Other Business Pursuits
Farmowner’s Insurance policies offer both personal and comprehensive commercial liability to the insured farmer. As farmers search for new ways to create revenue streams with their agricultural properties, new risks present themselves. Insurance companies understand that the agricultural industry is rapidly and ever-changing.
To accommodate this, most farm carriers have built mechanisms in their farmowner’s policies to help farmers acquire coverage they need for certain business pursuits without the need of a Commercial Insurance policy. There are limitations to these endorsements and coverage extensions, so a detailed conversation with an experienced agricultural insurance agent is imperative. But, they are available and it’s one of the things people don’t know about farm insurance.
If you operate other business pursuits under the same legal entity name as you operate your farm, it is advisable to see if they can be covered for purposes of liability protection under your farm policy. In some cases, if the business is outside of the scope of the farmowner’s insurance company’s appetite, it is advisable to establish a separate legal entity for these business pursuits.
Doing so will make acquiring Farmowner’s Insurance for your agricultural pursuits an easier task. If you are able, and choose to insure some of your on-farm business activities under your farmowner’s policy, it is highly recommended that you explore the option of adding an Umbrella Liability Policy to cover all aspects of your personal liability, business pursuits, and commercial farming operations liability.
These are just a few things people don’t know about farm insurance. Obtaining a Farmowner’s Insurance policy that covers all aspects of your farm and on-premises businesses begins with a conversation with an experienced agricultural insurance agent. This can help you avoid coverage pitfalls when purchasing poultry insurance, other livestock insurance, or any other type of insurance you may need for your ag operation.
At Ruhl Insurance, we have been insuring all sizes and scopes of farming since our founding in 1943. To speak with one of our experienced agents about your Farmowner’s Insurance policy, give us 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.