Before discussing insurance for a farm business or any other specific insurance, you must first understand the role of insurance in your financial planning. Insurance is a legal contract intended to indemnify your loss, which will restore you to the condition you were in before the loss. You should expect nothing more or less than that. You should also not assume that your insurance would cover any and all losses. It is your responsibility to work with your insurance professional or broker to determine what your insurance needs are so that he/she can find an insurer who can provide a policy that adequately covers all your needs.
With a farm, you must first answer the question: What is a farm according to an insurance carrier’s guidelines? Some companies will cover farm operations as an endorsement on a homeowners policy but not business farm operations. The homeowners endorsement is usually used to cover the family who have a few horses or cows for their own use, sell some produce at a roadside stand or operate a small winery. Even in this case you need to inform the broker exactly what you are doing so that he/she can make sure your needs are covered because some insurers maintain that once you sell anything for a profit the operation must be considered a business.
The business farm is one in which the farmer raises animals, produce or other products for sale, boards horses for others, or supplies milk to a dairy, just to name a few possible operations. You will need to provide an estimate of your sales and other revenue.
Ask yourself the following questions and then take the information to your insurance professional who may have additional questions!
Do you own a home that is on the farm property?
What is the value of the personal property inside your home?
What farm buildings are on the property?
What is the size and construction of those buildings?
Do you sell produce or other farm products directly to the public or to a wholesaler?
Do you raise animals? How many and what is their value?
Do you board animals for others?
Do you have customers coming to the property on a regular basis?
Do you rent any of your land to others?
What business personal property do you own?
What is the value of your business equipment?
Do you have employees?
All of the above questions are meant to make sure that you have proper coverage for your valuable property and your business operations.
Your insurance representative will explain the following policy parts to you::
PROPERTY COVERAGE: This coverage will include your home, personal property, all buildings on the farm including the silo, business personal property including tractors, and any other equipment used to maintain the farm. Higher value items can and should be listed separately on the policy.
LIABILITY COVERAGE: this coverage protects you if you or your employees unintentionally damage another’s property or causes personal injury to others.
MEDICAL PAYMENTS: This coverage will provide payment for medical injuries to others occurring on your property.
LOSS OF USE: If you cannot occupy your home due to a covered loss, this coverage will provide payment for you to temporarily live in a motel or apartment.
REPLACEMENT COST COVERAGE: This is a very important coverage, that you should make sure you have for your buildings and property. The coverage provides you with the replacement of your property with replacement cost value instead of it being valued on an actual cash value basis.
WORKERS COMPENSATION INSURANCE: This will most often be a separate policy; it can be required even if you have only one employee. Your broker will be knowledgeable of the specific guidelines for your state.
There are other very specific coverages and endorsements available that would take care of any property or operations not discussed in this general overview.
The most important thing to remember is:
Do not ask if a particular property or operation is covered AFTER a loss. Ask when you are signing the insurance contract!