If you’re starting a new farm or operating an existing one, you’ve got to make sure you have the farm insurance that’s right for your unique set of circumstances.
In this article, we’ll discuss farm insurance basics and the dangers of being underinsured so that you don’t open yourself up to liability if disaster strikes.
Homeowners Insurance vs. Farm Insurance
Will your homeowners insurance protect your farm?
The short answer is no; it most likely will not.
Homeowners insurance policies are designed to protect your home and the possessions in your home against loss or damage, as well as cover your potential liability if someone gets injured on your property.
Farm insurance coverage is designed to protect you from risks you might need to operate your farm or ranch, such as buildings, greenhouses, barns, equipment, vehicles, products, tools, and more. It’s a specialized type of insurance coverage for farmers. These risk factors can’t be adequately covered under a standard homeowners insurance policy and may also include:
- Home and possessions
- Personal liability coverage
- Outbuildings & structures
- Building materials & supplies
- Farm machinery & equipment
- Farm products
- Farm liability coverage
- Farm product liability coverage
- Fences & corrals
- Equine liability
- Vineyard coverage
- Chemical drift liability
Most farms located in New England ought to have farm insurance, regardless of size or agricultural industry:
- Organic farms
- Dairy farms
- Animal farms
- Mennonite and Amish farms
- Homestead and hobby farms
- Community-supported agriculture (CSA) farms
- Urban farms
Your potential insurance liabilities and the coverage you need will vary based on the size, type, location, and other factors that your local insurance agent can help determine to ensure you get customized coverage that meets your unique set of risk factors.
Tip #2 – Prevent or Reduce Falls
When people think of a farm, they often think of a traditional family farm owned and operated by individuals related to the operator.
However, the technical and legal definition of a farm varies widely based on classifications by the USDA (United States Department of Agriculture). The USDA bases its classifications largely on the annual gross cash farm income of the farm business, the primary occupation of the operator, and ownership of the farm.
GCFI, or annual gross cash farm income, measures farm size. GCFI is calculated by deducting expenses from a farm’s revenue. The USDA has created the following categories to determine farm size, which is important because it reflects your potential liability and the cost of your farm insurance coverage.
- Small family farms (GCFI less than $350,000)
- Midsize family farms (GCFI between $350,000 and $999,999)
- Large-scale family farms (GCFI of $1,000,000 or more)
- Large farms. Farms with GCFI between $1,000,000 and $4,999,999.
- Very large farms. Farms with GCFI of $5,000,000 or more.
- Nonfamily farms. Farms where an operator and persons related to the operator do not own most of the business.
Common Types of Farm Insurance Coverages
Depending on your type of farm will depend on what type of coverage you need and how much of it. This is something to discuss with your local insurance provider. However, farms need multiple coverages, and many farm policies can be packaged together to meet multiple needs and risk factors, which generally fall into one of four broad buckets:
Generally speaking, property insurance refers to farm assets, not personal housing or possessions such as:
- Barns & Outbuildings (sheds, silos, non-residential buildings)
- Farm Contents (equipment, machinery, tools, livestock, animal feed, non-personal possessions)
- Commercial Vehicles (trucks, trailers, flatbeds, etc.)
- Equipment Breakdown
- Loss of Income
By contrast, liability insurance protects you when you can be held financially responsible for liability. A few liability coverages commonly found in these policies are:
- General Liability Coverage, which often covers commonplace accidents occurring on farm property
- Product Liability Coverage, which often covers consumer goods produced on-site at a farm
- Commercial Umbrella Liability Coverage, which often covers large lawsuits by providing secondary protection
The third bucket is personal insurance coverage, which generally protects family-owned items and assets rather than farm-owned ones. Two of the most common types of personal insurance are:
- Household Dwelling Coverage, which often covers a farmhouse or other primary residence located on a farm’s property
- Household Personal Property Coverage, which often covers household belongings
The fourth and final bucket is a farm umbrella policy. Umbrella policies provide extra protection for your assets if you don’t feel adequately protected by the liability limits of your standard policies. To adequately protect your assets, farm umbrella policies give you additional liability protection for almost any type of policy, whether that be homeowners, farm, commercial, or auto.
Is Your Farm Underinsured?
Business underinsurance is a rising problem in America. Increasing operational costs coupled with decreasing returns, inflation, material and labor costs, and supply chain disruptions have all reared their ugly heads in the past few years.
And what about extreme weather, to which farms are particularly vulnerable?
You could be in for a nasty surprise if your current policies haven’t kept pace with rising costs to rebuild in the event of a disaster, such as the record flooding that recently hit Vermont and New Hampshire, devastating crops and causing billions in damage.
What does it mean to be underinsured? It means you lack insurance coverage to insulate your farm from losses in a major insurable event, such as fires or floods. In fact, 75% of businesses in the U.S. are underinsured by 40% or more!
When was the last time you had a valuation done by a local insurance expert?
If you haven’t gotten one, or it’s been a while, it’s time to do so now. The perils of underinsuring your farm can result in financial, legal, and non-compliance issues, as well as reputational harm and loss of business.
In the meantime, check your farm to see if you have any of the following signs of farm underinsurance.
- No Recent Valuation
- Commodity & Resource Price Fluctuations
- Rising Value of Farm Equipment & Machinery
- New Equipment & Machinery
- Diversification into New Business Areas
- Changes to Buildings
- Miscalculated Coverage Needs
How Much Does Farm Insurance Cost?
The cost of farm insurance varies depending on your unique situation, type of farm, location, size, GCFI, and many other factors, so the best way to get an estimate is to talk to one of our agents today.
Co-Op Insurance offers several other benefits to our farm insurance customers as well, such as:
- Many deductible options, including a zero deductible on animals
- Convenient payment plans
- Recovery services from CyberScout if your identity is stolen
- Fast, fair claims service
- Competitive rates
- Discounts and credits
- Payment options for almost any budget
Are you concerned about farm insurance?
*Disclaimer: We offer content for informational purposes; Co-Op Co-operative Insurance Companies may not provide all the services or products listed here. Please contact your local agent to learn how we can help with your insurance needs.
AM Trust Financial. Risks, Dangers of Being Underinsured. https://amtrustfinancial.com/blog/small-business/risks-dangers-of-being-underinsured
Burlington Free Press. Flooded fields leave Vermont farmers with major crop loss. https://www.burlingtonfreepress.com/story/news/2023/07/18/vermont-flooding-farms-intervale-burlington-damage-loss-irene-winooski-river/70415891007/
Insurance Journal. How to Help Small Businesses Avoid Underinsurance and Anticipate the Unexpected. https://www.insurancejournal.com/magazines/mag-features/2012/04/16/243594.htm
NFU Mutual. Could your farm be underinsured? https://www.nfumutual.co.uk/news-and-stories/make-sure-your-farm-isnt-underinsured/
Travelers. Farm and Ranch Insurance vs. Homeowners Insurance: A Quick Guide. https://www.travelers.com/resources/business-industries/agribusiness/farm-and-ranch-insurance-vs-homeowners-insurance
U.S. Department of Agriculture. Farm Structure and Contracting. https://www.ers.usda.gov/topics/farm-economy/farm-structure-and-organization/farm-structure-and-contracting/#