Farm Insurance

New Picture-jpgThinking about farm insurance is often an easy topic to put to the side and try to remember to think about sometime next week. The main purpose of any insurance is to protection from a catastrophic financial loss.

Risk and insurance are pretty closely tied together. Insurance is one way to handle some of the different risks that we face. There are 5 different ways to handle risk.

  1. Control the risk. Wearing seatbelts is a way to control the risk of physical injury in a car crash.
  2. Avoid the risk. I am tempted to not grow sweet corn in my garden next year because of skunks and coons.
  3. Retain the risk. Even though there is a possibility of a chimney fire, I continue to burn wood, but I burn dry wood, clean the chimney each summer, and keep a fire extinguisher nearby.
  4. Transfer the risk. This is insurance, we pay them to handle our risk.
  5. Ignore the risk. Commonly done, but often not the best strategy.

After a loss, there may be several costs. The cost to replace the damaged property. The loss of use of the property which results in extra expense and lost income. There may be lawsuits from injured people. Then there could be medical bills, or even disability or death.

Farmowners insurance policies are a combination of several different kinds of insurance: personal, commercial, property, loss of use, income and extra expense, and liability. The cost of a policy depends on location, value of buildings, equipment- production and processing, size of operation, liability limits for injuries on the farm and product liability, and more.

Homeowners insurance policies do not cover selling products. Some companies offer ‘small farm’ policies that may provide the coverage that you need.

How much insurance do you need? Talking with an insurance agent can give you an idea of what risks your business faces. If you are selling food products to the public, you need to have some product liability insurance. Unless you have nothing to lose. Which slot machine do you play? $10? $5? $1? 25¢?


About Dennis Kauppila

I work with farmers on finances. I started with UVM Extension in 1983, and have worked with hundreds of farmers on issues ranging from starting a farm, how to get a loan, leasing a farm, understanding farm finances, to retiring from farming. I teach 1 or 2 courses for farmers each winter. I am working with several farmers now on business plans, and I continue to work with many farmers on balance sheets and budgeting.
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One Response to Farm Insurance

  1. heidikrantz1 says:

    Thank you for including the need for food product liability coverage if you are producing and selling a product. It is easy to overlook this as a separate risk. It is important to understand how different organizational structures impact risk and liability as well – if you are unclear about the differences among sole proprietorship, Limited Liability Corporations (LLC) and S- Corp for example, then have a conversation with your accountant and a lawyer to be sure you understand how your business structure can impact your risk management.

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