Farm insurance is a key part of running your business and protecting your family. The challenge comes in knowing which policy offering what coverage and which price from which insurance company is right for you.
What is insurance?
Insurance exists to protect you, your family and your farm against losses to your property, equipment, livestock and crops. It also protects against liability arising out of interactions with third parties, such as an injury to someone buying vegetables from a farm stand, or escaped animals damaging a neighbor’s property.
Do I need farm insurance?
There are 8,100 farms in Maine, occupying more than 1.3 million acres. We produce more wild blueberries and brown eggs than any other state and are second only to Vermont for our maple syrup harvest. Our dairy industry is one of the rural economy’s leading sectors. Perhaps most importantly, Maine has long been a leader in the organic and sustainable farming movement and is the second-most locavore-friendly state in the country. Agriculture is important to Maine, and to Maine’s insurance agencies.
Apart from the smallest farms, where production is primarily for personal consumption and where a personal homeowners insurance policy may well be adequate, most operations require a specialized farm insurance policy, which would typically provide coverage in the following areas tailored to your specific circumstances:
Residential Property Damage: This includes your dwelling, non-farming out buildings, contents and personal property of the members of family residing with you.
Additional Living Expenses: If your farmhouse is damaged or unlivable because of a loss, this coverage will provide for temporary housing, hotels, restaurants, gas and other expenses incurred due to the loss of or damage to your home.
Farm Property Damage: Protecting barns, silos, farm equipment, farm supplies and farm products.
Liability: Managing farm exposure is becoming more complex because of the public’s presence on the farm. General liability policies insure your farm and business against lawsuits due to bodily injury, personal injury, property loss or advertising injury. If a complaint goes to court, your insurance pay for your legal fees and for damages (if any) awarded to the plaintiff. Essentially general liability insurance can help secure your financial assets when you are involved in litigation due to an accident or mishap.
Medical: If a visitor is injured on the farm with no fault of yours, this portion of the policy will cover the medical bills.
Because no two farms are identical, farm policies are tailor-made to fit your specific needs. Depending on your exposures, your farm may need to explore options for crop/livestock coverage, eco-tourism (u-pick, petting zoo, farm tour, etc.), flood, business auto and workers compensation.
How do I get Farm Insurance and how much does it cost?
According to the Maine Department of Agriculture, Conservation and Forestry there are well over 100 sources of farm insurance in the state. This means that you have several options when shopping for insurance.
If you are considering purchasing commercial property insurance coverage in Maine, it is understandable that you would be concerned about the price. Insurance can be a major expense, even for the most lucrative business, but it is necessary to safeguard the future of your property. The cost of your farm policy is determined by your farm operations. There are a variety of influencing factors that determine your premium.
Risk Factors on Your Property: If you have a horse ranch where the public visits and pays for horse rides, your farm insurance premium will be higher than average. This is because there is a higher chance of your family or the public being injured due to your exposures.
Commercial Exposures: Given that you are producing food for consumption by the public, you still face exposures once your produce or product is off your property. Your farm may create products that could cause damage to clients. Maple syrup or cheese that was contaminated, for example, causes an illness. The larger the commercial operation, the larger the possibility of risk, thus the larger the premium.
Age and Condition of the Home: One of the factors that insurance companies pay attention to is the age of the farm that needs insurance. An older home or barn that has not at least been renovated is more expensive to insure than a new structure with updated electrical, plumbing, and HVAC systems.
Property Size: How large is your property? Large properties cost more to insure.
Location: Some regions have been rated as high risk areas. This is due to vulnerability to natural disasters, such as earthquakes and floods. Having a home in such areas will no doubt attract high premium charges since your property is more susceptible to damage than most. Also how close is the nearest fire hydrant or fire pond?
Frequency of Risk Occurrence: A good record means lower premiums. For instance, a farmowner who has filed several claims in the past will be charged higher premiums than a farmowner who has never filed a claim.
These factors are only some of the many that influence the cost of your insurance, but when you work with the right agency, you will be able to find a policy that fits your needs and budget.
How do I choose the right insurer?
When it comes to buying insurance you have some options. You can shop for coverage by phone or online, either directly from a single insurer or through a website that offers products from several insurers. You can buy from a captive or exclusive agent, meaning an agent that represents a specific insurer. One advantage for captive or exclusive is that they usually have a good grasp of the one option offered. A disadvantage is that there is only one option for the client to choose from, normally resulting in a higher price. Insurance may also be available through a trade group or professional organization. If you are looking for a spread of options and for local service options after your purchase, you can also obtain coverage through an independent agent.
Why use an Independent Agent?
Independent agents usually work for an Insurance Agency. That agency represents multiple insurers, thus they can obtain quotes on your behalf from several sources (carriers). Price and scope of coverage varies from carrier to carrier and policy to policy, all based on your specific exposures. Independent agents can assist you to compare these differences, helping you find the best fit for your needs, then negotiate with the insurers on your behalf. Your agent will direct your submission to the most appropriate carriers, saving you time.
A disadvantage to using an Independent Agent is that you can be spoiled for choice. It is good to have an agency that is local and understands Maine farms. Ask around and see if anyone can recommend an Agency. Each Independent Agency has more than one agent, so find the one that best fits your farm’s needs.
Independent agents are trained in assessing risks associated with your operations. In addition to researching and recommending insurance products, your independent agent can also advise concerning non-insurance based methods of risk management and mitigation for exposures that may not fall under the purview of an insurance policy. Independent agents will also work with you as your business grows or changes to make sure your coverage flexes as appropriate to meet your evolving needs.
Other resources for more information
Maine insurance Bureau: Insuring Your Farm, The Basics
MOFGA: Farm Insurance: What You Should Know
This guide developed by Jeremy Pickford of Allen Insurance and Financial, Camden, Maine.