The insurance needs of the family farm.
A family operated farm or ranch typically has a variety of real and personal property such as farm equipment, livestock and buildings. Losses can come from perils that affect any other kind of business, such as fire or windstorm, but also from unique risks, such as the death of livestock or destruction of crops by hail.
For most farms or ranches the most cost effective and efficient way to obtain property and liability coverage is with a package policy that combines a variety of coverages in a single contract, similar to a Businessowners Policy (BOP) but tailored to a farm or a ranch. Though marketed under a variety of names, these policies will typically have provisions similar to the property insurance and liability insurance sections of the BOP, with the option to add various other coverages that you may need.
The advantage of this product is that it gives a broader range of coverage at a lower cost than is available by buying various separate policies for different risks.
The property section of a farm package policy typically provides coverage for dwellings on the farm premises, including mobile homes, household personal property, both scheduled (listed) and unscheduled (unlisted) farm personal property and other farm structures. Mobile agricultural machinery and equipment is covered. Also covered is loss of use of any of this property when due to a covered cause of loss.
There are many other types of property insurance coverage that will be appropriate for some farming or ranching operations such as these:
- Transportation Floater: This provides coverage for an insured’s property while in transit, either while being delivered to the insured or en route from the insured to the customer.
- Livestock Coverage: This provides coverage for loss due to death or necessary destruction of cattle, sheep, swine, goats, horses, mules and donkeys as a result of any of the basic causes of loss.
- Crop Insurance: This covers growing crops from loss or damage due to various perils, including hail and windstorm, damage by wildlife, adverse weather conditions, insect infestation and other perils. The federal government and private insurers provide various types of coverage for crops.
Up to the policy limit, the liability section protects the farmer, rancher or similar agricultural establishment owner from claims alleging bodily injury or property damage caused by an incident involving the premises or operations of the insured. You have the option of adding additional coverage through endorsements. For example, if you lease employees from labor-leasing firms, there is an endorsement to add coverage for injury to leased workers.
BUSINESS VEHICLE INSURANCE
The farmer’s package policy does not cover any vehicles—including cars, trucks or trailers—designed for use on public roadways. For these, you need separate motor vehicle insurance.
Your personal auto policy probably provides coverage for some business use of your vehicle. A personal auto policy is unlikely to provide coverage, however, if the vehicle in question is used primarily in business. It will not provide coverage for any vehicle owned by a business.
Should you be driving your truck for a business purpose and get into an accident for which you are liable, an injured person could sue you personally. Will your personal auto policy have enough coverage to pay all the damages? If not, a lawsuit may be filed against your business. You may want to discuss with your insurance agent whether you need a business auto policy.
WORKERS COMPENSATION INSURANCE
States have varying rules about when an employer must provide workers compensation insurance, including, in some states, rules that are different for agricultural operations than for other businesses. If you have three or more employees, you should check with your state department of workers compensation to see if you are required to provide workers comp insurance.