Frequently Asked Questions

• I want to insure my cattle, but I will probably never lose all of them at once, do I have to insure to my total herd value?

  When you have your cattle scheduled on your dairy farm insurance policy, you will want to figure a value per head and multiply it by the number of cattle you have to determine your herd’s value. Keep in mind that some companies will only pay $1,000 per head for any cattle under 1 year of age and up to $2,000 per head for cattle over 1 year of age. It is important to insure your herd to value because of how your loss will be paid.

  Example: If you have a herd of 100 cows, consisting of 50 lactating cows, 25 heifers over 1 year of age and 25 heifers under 1 year of age you may value the herd as follows:

  50 Lactating Cows @ $2,000/head= $100,000
  25 Bred Heifers @ $2,000 /head= $50,000
  25 Heifers under 1 year @ $1,000/head=$25,000
  Total Herd Value= $175,000

  Suppose you milk in 2 shifts and the most cattle you expect to lose in any one loss is 25 and so you purchase a coverage limit for your herd in the amount of $50,000 for "cattle of all ages". In the event of a loss to your cattle, an insurance adjuster will come in and determine the number of animals you insured prior to the loss. She will then divide your limit of insurance by the number of cattle you have and multiply the quotient by 120% to reach a maximum payment per head, or, in this case, ($50,000/100)1.2=$600/head.

  Improperly insuring your herd can result in a substantially underinsured loss and a coinsurance penalty. One way around this is to insure your herd of cattle by age and specify an individual limit for each group so that lower valued younger cattle do not average into a partial loss of only lactating cows.

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• Do I have coverage from my dairy farm insurance policy if I ship contaminated milk?

  Your liability insurance will cover third party losses due to the contamination of milk on the tanker. It does not, however, provide you with any indemnification for loss of your own milk. To receive coverage for your own milk, you would need to schedule a limit on your farm personal property coverage for milk.

  Scheduling milk on the FPP inventory would also allow you to receive a payment for your lost product if you had an equipment breakdown of your cooling plate and your milk spoiled in the tank (provided you had equipment breakdown coverage with a spoilage limit on your policy). Some milk co-ops offer their member farmers coverage for one or two dumps a year due to spoilage or contamination. In this case, your milk may be something you choose to self-insure.

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• If my milking complex burns down, how will I continue my operations?

  Many dairy farmers consider their primary property loss exposures when purchasing dairy farm insurance; however, they fail to consider secondary losses like loss of business income or extra expense. A dairy farmer having a loss to his complex may have substantial extra expenses to move cows to other farms so that they can continue to produce through their lactation.

  The dairy farmer may also have to rent another facility to continue to milk and this could cost substantially more than the facility he or she left. Depending on the situation, a sizable loss of income could occur as well. Loss of Income coverage provides coverage for earnings the dairy farmer loses as a result of a covered property loss. Usually, this is written as a monthly maximum limit for a specified number of months.

  Example: 10,000/4 would give a dairy farmer a maximum of $10,000 per month for income losses for a total of four months while his facility was rebuilt. Extra expense works in a similar way and pays for added expenses incurred above and beyond typical operating costs. Loss of Income and Extra Expense can either be attached to a specific building or written for the whole Farmowners policy, depending on the insurance company. It is a relatively inexpensive coverage and an option that should be discussed with your agent.

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• I contaminated the neighbors well while spreading manure, do I have coverage?

  Hopefully, you purchased Pollution Liability insurance in conjunction with your dairy farm insurance policy. In the case that you did, your insurance policy will respond and pay for the damages to the third party’s property. Pollution coverage is usually written as a sublimit of liability, meaning your general liability may provide you with $1,000,000 of coverage while your pollution liability only gives $500,000 or less.

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• I am thinking about selling raw milk directly to consumers on the farm, is there liability coverage for this?

  The short answer is yes, there is liability coverage for raw milk sales on a dairy farm insurance policy. However, depending on your insurance provider, you may need to switch companies in order to receive the proper coverage for this loss exposure. Many farm insurance companies will not write a policy for a farmer who sells raw milk; therefore, if you decide to undertake this business pursuit, you should expect your options of where to obtain coverage for your farm to shrink. Having appropriate controls, regular inspections, and adhering to best practices is a must for this kind of venture.

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