How Much Farm & Ranch Insurance Do I Need for a Family Farm?

Running a farm takes dedication and passion. It also takes the right kind of insurance. Farm and ranch insurance can provide coverage for your entire property, offering protection for your land, buildings, livestock, and agricultural equipment. But how much insurance do you need for a family farm? 

Types of Farm and Ranch Insurance Coverage

Farm and ranch insurance will provide coverage for your agricultural property — something homeowners insurance alone will not. A farm insurance policy will also typically include coverage for your residential home in addition to your farm. 

However, the exact amount of coverage can be tailored to your specific needs. Here are some insurance options to consider as you operate your family farm.

Equipment Insurance

Farm equipment insurance covers things like your planting and harvesting equipment, as well as equipment you use to manage your livestock. This can be an important policy inclusion for those who grow crops, and you may need coverage that matches the number and value of your farm vehicles.

Livestock Insurance

Livestock insurance protects your animals and will generally include veterinary care, coverage for stray animals, and business protections that guard against unexpected price drops. The amount of livestock insurance will depend on the nature and number of farm animals under your care.

Equine Insurance

Caring for horses is a unique challenge, which is why farm insurance providers offer equine coverage in addition to general livestock insurance. This policy will provide coverage for medical care, loss of use, theft, and mortality. Consider this policy if you own horses, particularly if these animals are a part of your revenue cycle.

Dwelling and Structure Insurance

Farm and ranch insurance typically includes coverage for your home, as well as any other structures on your property. This can include other residential structures, such as cabins, as well as barns, garages, silos, and storage facilities. Most farmers will need some type of insurance coverage on their structures, though the exact amount depends on the type and number of structures as well as the valuation of their home and its contents.

Farm Liability Insurance

Farm liability insurance is designed to protect against disputes that arise from your agricultural activities. 

For instance, chemical drift coverage protects you from claims of damage caused by pesticides drifting to neighboring properties. This can be important depending on the size of your farm, as well as your proximity to neighboring residences and businesses.

Should I Consider Umbrella Insurance for My Family Farm?

Some farmers choose umbrella insurance for their farms. This policy extends the limit of a standard insurance policy to protect against catastrophic business losses. 

While these are excellent policies, they are best suited for large commercial operations and direct-to-consumer farms. Small, family-based farms may not benefit from the additional costs of an umbrella policy.

How Much Farm Insurance Do I Need?

Before you calculate your coverage, you’ll need to review the above list to determine your insurance goals. By talking with a qualified insurance agent, you’ll be able to invest in a policy that aligns with your needs — and your budget.

What Is an Act of God in a Farm & Ranch Insurance Policy?

Farms and ranches stand more to lose from “acts of God” than any other business. Unforeseen weather disasters cause immediate damage to the products farms and ranches make. While other businesses can protect their inventory from these events, that’s not as easy with acres of crops or herds of livestock.

While every underwriter has different coverage standards, there are common understandings of what events qualify as acts of God. How do they relate to the fields of farm and ranch insurance?

What Is an Act of God?

Legally, an act of God is defined as an unpredictable natural event for which no human being could be held responsible. “Unpredictable” is the keyword in this definition. It separates acts of God from disasters that can be anticipated and managed.

Acts of God can take many forms in the context of farms and ranches. Periods of heavy rainfall or high winds can devastate crop fields. Tornadoes can upend barns, equipment, and other farm structures. Over the last few years, we’ve seen how extended droughts have crippled entire agricultural industries in the Western United States.

Farm and ranch insurance companies that account for acts of God do so in several ways. Many of them include or exclude specific acts of God in their policies. Premiums and deductibles to cover unexpected disasters may be different from other coverages (usually higher).

Because of their nature, assessing the risk of acts of God on farms and ranches can be quite complex. They don’t just suffer property losses — they also experience income and inventory losses.

Are Earthquakes and Floods Acts of God?

Many insurers exclude earthquakes and floods from the list of “acts of God.” True, you can’t blame any specific person for earthquakes or floods. However, they are, in the slightest of ways, “predictable.”

It comes down to geography. Certain parts of the world experience earthquakes more frequently than others. Other areas are mapped as floodplains that are much more susceptible to heavy rains.

Some farm and ranch insurance companies do include earthquakes and floods as acts of God. For the most part, however, those who run agribusinesses and want additional earthquake and flood insurance policies must purchase them on top of standard liability coverage.

How Are Acts of God Covered?

A typical farm insurance policy covers equipment, buildings, structures, feed, livestock, irrigation systems, and vehicles for their insured repair or replacement value. This usually includes acts of God like tornadoes, lightning strikes, winds, thunderstorms, tornadoes, pest infestation, wildfires, and drought.

Insurance policies typically distinguish crops from other farm and ranch assets. Most agribusinesses take out “multiple peril crop insurance” (MPCI) for events resulting in low harvest yields. The federal government regulates the purchase of MPCI policies, and farmers must buy them before growing season deadlines. 

Hail storms are typically covered in separate “crop-hail” policies. That’s because hail could decimate a particular area of a rancher’s farmland but leave others intact.

What Does Your Insurance Cover?

Insurance companies have different policies and limits on losses caused by acts of God. Farmers must examine their insurance documents carefully to see what’s covered and speak to their agents to make adjustments.

Sources:

https://www.law.cornell.edu/wex/act_of_god

https://www.iii.org/article/understanding-crop-insurance