Crafting the right farm property insurance coverage

As a farmer you are well acquainted with risk and the many forms it can take to impact your operation. An important risk mitigation tool that farmers can use is insurance on farm property. Insurance needs vary from farm to farm so it becomes important for you to understand your farm’s individual insurance needs and find a policy that covers your operation most adequately.

When considering your farm property insurance coverage it is important to consider what accurate replacement cost of an item would be and the potential property damage risks on your operation. These considerations can be taken into account when the policy is selected and then reviewed on a regular basis due to changes on the farm and/or changes within the insurance company. For a policy to be as impactful as possible it means that you, as the insured need to keep your insurance company informed of changes. On the other side you should expect your chosen insurance company or agency to keep you up-to-date on new or changed coverages. The following key factors are important to keep in mind regarding your farm insurance policy.

1. Build a relationship with your insurance agent- get to know them and let them know your farm
2. Keep an up-to-date farm property inventory
3. Have adequate values on facilities- taking into consideration what it would cost to rebuild if a catastrophe where to affect your area
4. Be cognizant of exclusions in the policy

It is important that you, as the policyholder have an understanding of your policy and what property is covered and what is not. In order to do this it is important to build a trusting and communicative relationship with your insurance agent. Beyond having a solid relationship with your agent it is important to communicate an up-to-date farm property inventory including farm machinery, livestock, harvested feeds and crops, inputs, etc. Typically your inventory should be updated on an annual basis if not more often. For farms that have a fluctuating inventory it is imperative that you amend your inventory on file more often. Creating an inventory Excel file that can be easily amended and emailed to your agent might be an option for you. Farms that have inventories consistent over the year may only need to review inventories and dollar values associated with property on an annual basis.

Some of the largest investments on your farm may very well have been in facilities so making sure that they are insured properly is a wise decision. Most insurance companies can utilize facility evaluation tools that take into consideration the cost of having to rebuild after a catastrophe. Finding the right coverage amount is more important than underestimating or overestimating the value of your facilities. Estimations will vary depending on the use, type, age, apparent condition, etc.

Lastly, as a policyholder it is important for you to be aware of exclusions that may be associated with your policy. There are certain things that most insurance companies do not wish to cover due to the associated risk, such as death of livestock due to communicable disease or pollution. Insurance jargon can be difficult to decipher which is why having a strong relationship with your farm insurance agent is imperative to getting the most peace of mind out of the funds you invest into your farm insurance policy.

As a risk mitigation tool insurance should not be left up to chance but an avid interest should be taken in crafting your coverage. As with most industries the insurance industry is always changing and therefore as a policyholder you should commit time to re-evaluating your policy and the coverages you need for your farm operation. Questions about this article can be directed to me, Farm Business Management educator with Michigan State University Extension, at thomp737@msu.edu.

— Katelyn Thompson, Michigan State University Extension