Farm Insurance: Coverage, Options and Exclusions

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Like a standard homeowners insurance policy, farm and ranch insurance covers your home, personal property, liability and additional living expenses. It's a hybrid with both homeowners and commercial insurance elements since ranchers and farmers work and live on the same property. With these double exposures, a loss can be both personally and financially devastating. 

Farm policies tend to be highly customized: you start with a basic barebones farm insurance policy, and then you tack on additional options based on the property you have on the farm and the liability protection you need. Because of the individual nature of each farm or ranch, an agent will often be involved, and it'll be in your best interests to have them conduct a site visit to make sure your farm and your investments are fully covered.

How Farm Insurance Works

You choose how narrow or broad you want this portion of the coverage, just like a standard home insurance policy. For example, Nationwide’s Agribusiness farm insurance allows policyholders to choose between coverage from 12 main categories of issues - what are called perils in insurance lingo - or broader coverage for your home and personal property. The broader coverage includes many of the same expanded coverages purchasable in most types of homeowners insurance policies. Some examples include falling objects, bursting heat or water pipes, weight of ice and snow, and artificially generated electrical currents (a power surge).

Detached garages and other buildings that would be covered by a standard homeowners policy remain covered by this portion of the policy as well, along with plants, trees, shrubs and your lawn. It will not cover anything grown for commercial use and usually only includes covered items within a certain distance of the home. For example, say you have a farm insurance policy and only 100 feet of lawn separates your home from a field of alfalfa that is baled and sold each year. Even though it is close to the home, that alfalfa would not fall under this portion of the farm insurance policy (you'd have to get separate crop coverage).

Like standard home insurance policies, there also are claim limits for trees, shrubs and your lawn. Depending on the individual policy, there might be a claim limit per tree or shrub or there might be an overall limit set according to a percentage of the coverage of the home. For example, your policy might cover each tree or shrub up to $250 or you might be covered up to five percent of the coverage of your home. In that case, if you have $100,000 of coverage for your home, that would mean the overall limit for trees, shrubs and your lawn would be $5,000.

Farm Liability Coverage

Similar to a standard home insurance policy, farm and ranch insurance provides liability protection. Liability coverage is not an option and part of every farm insurance policy because of the risks at hand. It covers bodily injury, medical expenses and property damage if necessary. Perhaps just as important, it covers attorney’s fees associated with covered incidents as well.

Even under the most strenuous precautions, accidents can occur. Farmers with years of experience operating machinery can misstep and hurt themselves. Something could startle  an animal and cause it to injure a senior handler. Or for example, say an animal manages to escape, wander into a roadway and cause an accident. Even though that incident didn’t occur on your property, you as the animal’s owner would be liable. 

Farm Personal Property Covered

Farm and ranch insurance also covers personal property directly related to the farming or ranch operation. This portion of the coverage can typically be broken down into three categories: farm machinery and equipment, livestock, and farm products such as seed, silage, animal feed, fertilizers and pesticides. Most farm insurance policies allow policyholders to choose broad coverages over the categories or to schedule individual items (these options work similarly to endorsements and floaters). You choose which is best for you when you speak to your agent and purchase the policy. Whether you choose to broadly cover categories or individually schedule items, we’ve broken down coverages under this portion of a farm insurance policy.

Farm Machinery and Equipment

This coverage protects the policyholder from financial loss or damage of their machinery and equipment due to covered perils. Almost everything you might guess that falls under this category is covered. Tractors, combines, cotton pickers, planters, field equipment, hay rakers and other machinery are all covered. Portable irrigation equipment and portable structures and fences are usually covered as well. 

Farm and ranch machinery is expensive and some of it will need to be scheduled. Farm tractors can cost more than $200,000 but they are necessary investments for many farmers. As durable as they are, a lot can happen to them. For example, say a tornado damages a tractor. There is little the owner can do to prevent that peril so they need to protect themselves financially against the loss of such an expensive piece of equipment with farm insurance. 

Example of Cost: We've seen most farm equipment get insured for roughly $15 per $1,000 of value - but this will depend on your deductible. For example, say you have a tractor valued at $200,000. It would cost roughly $3,000 per year to insure it against a group of named perils. If a covered peril impacts your tractor, you'd get the proceeds net of the deductible you choose.

Livestock

Most farm insurance policies offer broad coverage of livestock in the event they are killed or injured as a result of a basic peril that is covered. There also are extensions that cover a much wider array of perils that that can happen to farm animals. Some of the extended policies cover things such as the death of animals by accidental shooting or if they are struck by a train or vehicle. They also might cover attacks on livestock by dogs and wild animals, as well as flood and earthquake loss of livestock.

Horses and equine animals are unique because of the variety of purposes they serve. Whether you use one or more horses for work, breeding, show or pleasure, the animals are investments that make financial sense to purchase insurance for. Companies that offer farm and ranch insurance employ special adjusters specifically for equine animals and offer a list of purchasable options to cover them. Choosing what protection is most appropriate is a decision you make with your agent.  

Typical coverage options for horses include animal mortality coverage, which covers death due to a broad number of perils and theft. Perhaps more importantly, the option also covers death due to sickness and disease - this is a unique covered peril that standard livestock portions of farm insurance policies does not. Other livestock options for horses include major medical expense, surgical expense and loss of use coverages. What purpose the horse serves the policyholder determines which of the options you need to purchase. For example, say you ride your horse to herd other animals. That horse is probably a vital part of your livelihood so you need to protect that asset with insurance in the event of perils, accidents and disease. A horse you have purely to ride for pleasure might not require extensive coverage.

Example of Cost: The cost of equine or horse options depend on many factors including the type and age of the horse, where it resides and what tasks it performs. Generally, mortality coverage costs 2.5% to 5% of the value of the horse. So if you have a horse worth $10,000 and a rate of 5%, the mortality coverage alone might cost the policyholder $500 per year. As we mentioned earlier, there are adjusters who specialize in evaluating equine options, as there are a multitude of variables to account for when determining insurance.

Farm Products

Feed, grain, seed and similar items considered farm products are covered by farm insurance. Remember these products are only covered while stored. Feed or grain (or other crops) growing on the property and seed that has been planted are not covered - those would typically require a commercial insurance policy if the sale proceeds exceed your policy's incidental income limit.

What Farm Insurance Does Not Cover

Be careful when it comes to insuring your farm: there are a few items that you think might be automatically included, but are actually not covered by your policy. For example, there are a couple of nuances around fencing and fires that homeowners should keep in mind regarding their coverage.

Fencing Not Automatically Included in Farm Insurance

Fencing is rarely covered by standard farm insurance polices. This might seem counterintuitive in terms of needs (many farms have a lot of fencing) but that’s exactly why standard farm policies don’t cover it. Some farms might not have any fencing while others might have miles of fencing. There are many different types of fencing too, which could impact the cost to insure it. For example, a quarter of a mile of woven wire fence costs roughly $2,600 while a barbed wire fence costs $1,900.

For all of the above reasons, the decision to cover fencing is one insurance companies let the policyholder make in the form of a policy extension. To have a farm or ranch insurance policy broadly cover fencing would mean factoring in a risk many policyholders aren’t subject to - even though it would be reflected in the form of a more expensive premium. 

Many people choose not to insure their fencing. The only thing that might destroy a significant portion or all of a fence is a tornado. However, electric gates can cost $15,000 or more. If you have electric gates, you should definitely consider the gates importance and whether you need to insure it.

Note on Covered Perils in Farm Insurance Policies

Farm machinery and equipment is only protected by perils explicitly listed in your policy. Equipment that is not well maintained will not be covered and technical malfunctions are not covered. Like many things, farm equipment is getting increasing technically advanced and unless you purchase a specific extension, it might not be covered.

Policyholders need to be absolutely positive their home and other buildings are covered in the event of a fire. Although farms are generally insured against fires, there are things that might activate an exclusion. For example, road accessibility to farm structures is something your agent will take note of. Some carriers require there to be paved or solid gravel roads to buildings covered by the policy. Regarding water sources, some people assume a pond on the property is adequate, but firetruck hoses need to be able to reach both the pond and covered structures if a hydrant is not available. In dry conditions, a firetruck would likely deviate from a road or gravel but if a field is covered in snow or too muddy, it might not. A lack of clear roads to you barn or stable, for example, would increase your risk of sustaining damage in a fire, which tends to result in insurers excluding fire as a covered peril on your policy.

More Info: Determining if You Should Get Farm Insurance

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