Common Risks

A good insurance review includes a discussion of the risks on your farm.  Once those are identified, you can figure out if there are ways to mitigate those risks, or if you need to finance them through insurance, essentially paying a premium to hand the risk over to someone else.  With the way farming is changing so rapidly, it's a good idea to conduct an insurance review about twice a year.  Your insurance advisor should come to your farm and ask lots of questions.  Here are some of the questions you should expect to hear:

Are you involved in any side businesses?

Most policies refer to these as incidental businesses, meaning things that make you money other than the actual farming of your own operation.  These include custom planting/harvesting/spraying, seed sales, produce stands, etc.  What qualifies them as incidental is either a low percentage of overall income, or a flat sales limit set by your policy.

Does your entity structure match your policies?

If you have multiple entities, including both personal and business, you are probably separating things for accounting and tax reasons.  You should also be limiting your liability by insuring them separately.  Having multiple entities on the same policy only splits the limit in the policy.  It does NOT give each entity the entire limit.

Does your property have replacement cost coverage?

Replacement cost coverage puts you back where you were before the loss happened.  If you would rebuild that building, grain set-up or replace that piece of property, you want replacement cost coverage.    The other is actual cash value (ACV) and it takes the amount it would cost to replace it and depreciates that amount due to age, condition, etc.  The company will pay you the lower amount of the scheduled policy limit or the amount after depreciation.

Do you have an ATV, snowmobile or boat?

Whether they are for business purposes or for recreation, these types of property have unique risks outside of your normal home, farm and auto policies. Who drives them?  Do you ever take them to another state?  You usually need to add these on a separate policy of have a special endorsement on your current policy to make sure you have coverage for both property and liability.

Do you have workers compensation?

Every state has different laws when it comes to workers comp, but typically farmers have the option of taking it or having employers liabilityadded to the farm policy if you have a certain number of employees under the amount set by your state.  There is significantly more coverage under workers compensation than under employers liability.  Your unique operation will determine which is right for you. 

What if you or a partner were to die or be disabled?  Could the farm continue?

Life insurance and disability coverage can be used as a management and legacy planning tool.  Think about what you're trying to accomplish with a life or disability policy and review whether it actually helps you or only makes things worse and more complicated with your family or business. 

These tools can be used to cover debt that you personally guarantee.  You can give yourself and your business options if something happened you or to another owner or partner.  These kinds of insurance can also be used as a benefit for a key employee while at the same time protecting the business.

If you have questions, or would like a quote, contact us at ws-multilineinsurance@waterstreet.org or call 309-680-1200 .