By: Charlie Gfeller
Every farmer has likely purchased some kind of insurance, but do you have the right types and amounts of coverage? Insurance can be a complex issue for any business owner, and farmers have some of their own unique concerns and risks. Even knowing the right questions to ask your agent can sometimes be a challenge.
To assist with determining whether you have the right coverage to protect yourself, your farm and your family, here is a list of the most common forms of insurance, with basic definitions and examples of when it would be the appropriate insurance to consider.
General Liability Insurance: This type of insurance protects the insured in the event that they are sued for third party claims. If you offer tours of your farm or host an onsite market there, this insurance often covers medical costs if a guest is injured on your land.
Auto Liability Insurance: This common form of insurance protects the insured against financial loss because of legal liability for automobile-related injuries or property damage. All farm vehicles can be insured under a single commercial auto liability policy.
Umbrella Liability Insurance: This type of insurance is generally written over various primary liability policies and provides protection for catastrophic loss when the limits of underlying policies are exhausted by the payment of claims. Medical costs from an injury can mount very quickly, and the higher limits of umbrella policies provide an additional layer of protection for farmers.
Product Liability Insurance: This insurance provides protection against loss arising from injury or damage resulting from the use of a covered product. If you sell your food or product at a farmers’ market, this insurance will protect you if your product causes foodborne illness or injury.
Property Insurance: This is first-party insurance on buildings and their contents that indemnifies the owner of the property for the property loss, or the loss of income-producing ability when the loss or damage is caused by a covered peril. Farmers should make sure their insurance also covers farm structures like barns, animal pens, silos, and dairy facilities.
Collision Insurance: This is a type of insurance that provides reimbursement for loss to a covered vehicle due to colliding with another vehicle or object. It covers damage to the vehicle itself. Farmers should also purchase comprehensive coverage for expensive farm vehicles, like tractors, in case of damage by fire, natural disasters or falling objects.
Livestock Insurance: This insurance pays for a covered loss or damage (such as death during transport) to livestock, such as sheep, cows, swine or goats. It is also an option for a tenant farmer that owns livestock but not agricultural real property.
Flood Insurance: As its name suggests, this is property insurance coverage for damage caused by a flood. Coverage may be available from the National Flood Insurance Program.
Crop Insurance: This is coverage for farmers that is overseen and subsidized by the federal government and marketed and serviced by private insurers and agents. It covers loss of crop value due to uncontrollable events like hot weather, drought, excessive moisture, earthquake, flood, insects, disease and wildlife damage.
Life Insurance: This insurance provides protection against financial loss that would result from the premature death of an insured. For farmers with dependents, it provides financial security for your family and farm in the event that you die.
Key Person Insurance: This is life insurance owned by a business entity on the life of a key individual that, in the event of his or her death, offsets loss resulting from the death. This insurance is vital for a farm with a crucial employee whose death would result in reduced sales, production flow or impaired credit.
Worker’s Compensation Insurance: This insurance covers an employer’s statutory liability under worker’s compensation laws for job-related injuries (including death) resulting from an accident or occupational disease. This insurance is required by state law, and specifics may vary according to the number of employees on your farm.
Title Insurance: This is insurance for financial loss arising from defects in the title to real property. It protects against the risk that the title to a farm property is not valid.
Insurance – Payment/Performance Bonds: A payment bond guarantees that suppliers and subcontractors will be paid for materials and labor furnished to the contractor. It provides assurance that the project will be delivered free of liens. A performance bond guarantees that a contractor will perform the work in accordance with the contract.
Fishing Vessel Insurance: This insurance provides hull and machinery coverage, protection and indemnity coverage and cargo insurance for vessels used for fishing or carrying passengers or cargo. This insurance is necessary for commercial fishermen and fisherwomen who own and make their livings on commercial vessels.
Accounts Receivable Insurance: This insurance protects against loss on accounts receivable, including default, bankruptcy, and slow payment. It also offers protection against loss of sums owed to the farm by its customers that are uncollectible because of damage by an insured peril to accounts receivable records. This insurance is helpful for new and growing farms that do not have the resources to do credit checks on all customers.
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