Agribusiness Policy vs Farmowners Policy
May 26, 2022Many people want to know the origin of their food and fiber. With this environment of the public wanting to know and being able to access all types of information, new opportunities are opening continually on the farm for a farmer/producer to grow and enhance their farm’s product line and interaction with the general public. That creates new opportunities and with that, new challenges on how to structure the enterprises and properly protect them with insurance coverage. For the farmer/producer, an accurate agribusiness policy vs farmowners policy comparison becomes even more important.
Farmowners Insurance Policy
Here is a brief overview of where a farmowner’s insurance policy is sufficient coverage for a farm operation:
1. Farmowner’s Insurance Works Well for Basic “Private Ownership” Models
The most common and oldest ownership arrangement would be the basic “private ownership” model. For example, this would be a husband and wife owning the family farm, including real estate, equipment, livestock, etc.
Everything is owned and operated under the name of the family. In this case, a farmowner’s insurance policy is usually the best fit and, as long as it has the right endorsements, limits, etc., provides sufficient insurance coverage.
2. A Farmowner’s Policy Protects the Farm Operation and Property
From the insurance standpoint, a farmowner insurance policy would be the product used to protect the farm operation against property loss and third-party liability claims. Any losses and claims would be filed against the farmer/owner of the farm.
This is a very typical scenario within the farming community. The critical consideration with this type of legal structure is that any-and-all assets are exposed at a time of loss and claim by the injured party. This type of comprehensive liability is one of the things many people don’t know about farm insurance.
3. Farmowner’s Insurance Provides Liability Protection for the Farmer
The farmowner policy will provide protection for the farm family in the event of a liability incident. This would be bodily injury or property damage to a” third party”. A resident relative or an employee is not a “third party”.
The critical thing to be aware of is, with this type of legal structure, all the assets, real estate, cattle, equipment, future earnings, etc. are exposed to the legal suit brought against you, the farm owner. Your only protections are your insurance limits and/or your bank account.
If you are a “typical” or “standard” farmer that is growing or raising typical crops and livestock, the farmowner policy can work well. The major consideration is that you have adequate limits to protect your assets. There are also maintenance tasks and other ways farmers can avoid frivolous liability claims that can help you protect yourself and your property from unwarranted litigation.
Agribusiness Insurance Policy
Here is a general overview of where an agribusiness insurance policy would be a better fit for providing sufficient coverage for a farm operation:
1. Agribusiness Insurance Works Well for Commercial Activities Related to the Farm
Where the standard farmowner policy begins to come up short is when the farmer expands their operation into what may be labeled “agribusiness”. The simple definition of agribusiness would be where the activity becomes more commercial in nature.
As an example, this could be processing farm products and produce into end-user products, such as jellies, jams, baked goods, etc. This also includes activities like inviting the general public onto your farm for direct farm marketing like produce sales, farm tours, or other agritainment activities. “Pick your own” operations are a very common venue that attracts hundreds of people to the farm and would fall under agribusiness or agritainment.
These types of activities also result in more risks and liability for you. Thankfully, there are ways to lower your risk and protect your agritainment investment. As a bonus, by lowering your risk, you may also be able to lower your agribusiness insurance premium without sacrificing coverage.
2. Agribusiness Also Applies When a Farmer Becomes a Dealer/Supplier of Agricultural Items
Another area of commerce that the farmer may step into may be that of becoming a dealer or supplier of agricultural items used by the farmer/producer. Examples could be a seed dealer, or animal health products.
Custom harvest operators would be possible agribusiness operations, and can also create unique workers’ compensation scenarios around the farm. The list goes on as far as the imagination!
3. Standard Farmowner’s Insurance Policies Fall Short on Covering Commercial Activities
When you step into this more definitive commercial activity, the standard farmowner policy most likely will come up short in providing you with the proper insurance protection. It becomes imperative that you review your insurance policy DEC page and have that conversation with your insurance professional.
You will need to make sure you know where your current policy starts and stops in providing you with the protection you need with your expanding operation. Never forget that the policy is governed by definitions.
If your operation does not fit the policy definitions, there is a good chance you have a gap in coverage. Depending on your operation, you may need additional endorsements for full coverage and you may even qualify for USDA-backed programs like Livestock Risk Protection (LRP).
Have Questions on Agribusiness Policy vs Farmowners Policy? Contact Us!
If you have questions about your current operation or a new venture you are considering, give one of our experienced and professional agents here at Ruhl Insurance a call for a free consultation of what your needs may be.
We can be reached at toll-free 800-537-6880, or 717-665-2283. Or, you may drop us an email at info@iruhl.com. We will be honored to speak with you.
Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.