If you have been in business for several years, and have begun to see the need for added protection for some aspects of your farm, you may wish to consider one or more type(s) of specialty insurance for your business. While some insurance products may not be applicable to new or beginning farmers, or may only pertain to some types of farms, it is still extremely important to consider all coverage options, discussing those that are appropriate with your insurance provider. This document briefly describes the following types of additional specialty coverage:
- Disruption of farm income
- Peak season endorsement
- Dwelling ordinance and law
- Temperature sensitive farm personal property
- Milk contamination and spoilage
- Equine breeding, boarding, and training
- Identity theft expense
Disruption of Farm Income
All farms run the risk that there will be a fire, flood, or other issue that will prevent their receiving the income expected. Disruption of Farm Income coverage protects against losing a substantial portion of your income because of such interruptions. Although disruption may take many forms depending on what is grown or raised, an example would be fire destroying a milking parlor so that cows cannot be milked at regular intervals. When this happens, milk quantity and quality suffers and the dairy herd may exhibit health issues. The insurance would provide at least a part of the income that was anticipated until another building can be constructed and regular milking resumes. To apply for this form of coverage, you will need to provide to your insurance provider:
- verification of past sales (amount and quality) and
- the level of income for which you need to receive compensation.
Peak Season Endorsement
Some farms experience fluctuations in inventory of farm products throughout the year, requiring an endorsement to provide adequate additional coverage during periods when there are higher volumes on hand (for example, just after harvest when there are large quantities of dried grain stored in bins). An endorsement will remain in effect while your grain inventory is high, prior to your beginning to sell the grain, and once the inventory returns to a normal level (through your marketing efforts) the coverage level is reduced.
Some farmers depend on crop insurance to cover higher inventory levels - however, because crop insurance coverage stops at harvest, you should make sure that any crops in storage are covered in your farm owner's policy. Hay catching on fire while stored either inside or outside is a fairly common event -- if this hay is not insured, potential income from sales, or feed for livestock on the farm, will be lost. If the plan was to feed livestock on the farm, a resulting insurance payment can be used to purchase hay to maintain your production potential as much as practical. To initiate this endorsement, you will need to provide a schedule of inventory levels throughout the season, as well as anticipated levels of inventory, to your insurance provider.
Dwelling Ordinance and Law
Coverage for replacement cost for your home or farm structures will ordinarily limit rebuilding to like kind and quality construction. If there are ordinances in your area that require different standards for the rebuilt structure, this endorsement will provide coverage for additional costs required to conform those local laws. For example: in the past, Pennsylvania statutes imposed the requirement to install sprinklers into new or rebuilt homes after a claim. Standard insurance policies do not pay for requirements of local ordinances or law unless an endorsement has been added. If your research shows that you will need to make changes, if your house or other farm structure needs to be replaced, then you should discuss this with your insurance provider and determine how to best anticipate this expense. Typically, a policy with this endorsement will provide an additional 10% of the dwelling value in coverage.
Temperature Sensitive Farm Personal Property
This endorsement broadens coverage on refrigerated farm products and supplies, beyond the standard policy covering an on-the-farm market store, in that it covers products rendered unsafe to sell due to refrigeration problems. Examples of covered events would be electrical interruption, mechanical breakdowns or electrical breakdowns of a refrigeration system that result in spoiled product. When a claim is made, the perishable product that was prevented from remaining at a safe temperature will be covered - paying for the loss of revenues for the product. To initiate this endorsement, you will need to supply information about your current equipment, inventory levels that are routinely maintained, and an estimate of the value of those items.
This endorsement provides liability coverage when milk from your bulk tank is commingled with other farms' milk, and yours is proven to have contaminated the load. An example: The cooperative has a trucking company picking up the milk from several farms. If upon arrival at the processing plant, the load is deemed contaminated, each farmer on the load has to provide their test results as proof they did not contaminate the milk. If tests show that your milk was the culprit, this coverage will provide a shared cost of replacing the value of milk for all parties.
Milk Contamination and Leakage
Milk can become contaminated in several ways. For example, medicine you give your livestock can lead toward contamination. You also can lose milk inventory if one of your tanks suddenly springs a leak. When these incidents happen, this endorsement covers your lost or damaged milk, up to a specific level of compensation.
Equine Breeding, Boarding, and Training
This endorsement provides liability protection arising out of your boarding, breeding and training of horses. An endorsement is also available that covers loss to horses left in your care (e.g. boarding). Keep in mind that if you board horses for a fee, and one of the horses causes injury to a third party, the horse is your responsibility and you will be required to pay damages. You can also purchase coverage for the "value" of the horse should it pass away from a covered claim. To learn what the most appropriate type(s) of equine activity coverage you need, discuss the types of services you provide on your farm to your insurance provider - in detail.
Identity Theft Expense
Identity theft occurs when someone uses another's personally identifying information, like their name, identifying number, or credit card number, without their permission, to commit fraud or other crimes. The victim of identity theft (here meaning the person whose identity has been assumed by the identity thief) can suffer adverse consequences if they are held responsible for the perpetrator's actions. This coverage will provide funds, up to amount allotted in endorsement, for expenses incurred to help restore the insured's identity and includes an assistance service for all tasks to restore identity. This type of coverage is not specific to agriculture, and your insurance provider should be able to assist you in pinpointing your areas of exposure.
Prepared by Lynn F. Kime, extension associate; Winifred W. McGee, extension educator; Robert Faubel, independent insurance agent, Danner's Insurance; and Maggie Garcia-Taylor, insurance agent, Garcia-Taylor Insurance Agency.
This document is based on work supported by USDA, Risk Management Agency, 2014 Risk Management Education Partnerships Program, Agreement Number 14-IE-53102-036.