Farms And Incidental Business

Incidental farm businesses may include but are not limited to daycare, petting zoos, horse rides, gift shops, produces stands, repair shops and more.

Other than agribusiness ventures, farms are unusual because smaller operations tend to face a mixed bag of loss exposures. Some exposures are common to businesses while others are exposures that are often faced by homeowners. This hybrid combination of exposures is due to the fact that smaller farms are usually run by families that also live on the farm premises. However, often only some of the family members are devoted full-time to their own farm’s operation.

As has always been the case, securing significant, steady income and profits from farming is very difficult. Therefore, the farm family may choose to supplement its main farm activity by operating other projects on their premises. Some may be related to their farming such as:

·         Running a petting zoo area with some of the farm’s livestock

·         Offering horse rides

·         Operating a gift shop or produce stand

·         Performing canning operations for other parties’ produce

·         Operating a repair shop for small farm equipment

In many cases, farmers can insure incidental business operations under their farm insurance policy.

A farm may also involve other, non-farm projects, such as:

·         Operating a daycare service

·         Fee-assisted aid to other farmers on applying for grants and loans

·         Operating a small accounting service

·         Hosting a subscription newsletter service

·         Operating a pottery studio in a converted farm barn

In most instances, the farm owner may be able to arrange for additional coverage to be added to the farm policy in order to handle losses connected to the given business operation. Typically, a precise description of the business such as: “Johnson Family Produce Cleaning and Canning Operation” is necessary. For an additional charge to the policy, the farm owner can be protected against loss to property that is used in the described business, such as a fire in a separate, converted barn that houses an accounting service run by the farmer’s spouse. It may also offer liability coverage. Consider the following:

Example: Sara “Granny” Smith owns a large apple orchard. She used to make cider and fruit juice manufacturing company. Since she still owns the building and equipment she used to make her own product, Sara begins a small operation (called “Granny’s Pressings”) to process the apples grown by several neighboring apple farmers. This “side juice from her own crop but she now has an agreement to sell all her apples to the region’s largest business” brings in about $7,000 a year, compared to the nearly $76,000 she takes in from selling her apple crop to the juice manufacturer. Sara’s cousin and insurance agent tell her that she won’t be covered for any damages resulting from “Granny’s Pressings” unless she adds additional coverage for this side-business. He convinces Sara by pointing out claim situations such as:

·         a neighbor who slips on apple remnants while carrying a bushel of apples onto Sara’s property to be pressed into cider;

·         child from a nearby town who becomes ill after drinking cider pressed at Granny’s that were contaminated with oil used to lubricate the manufacturing machinery;

·         Sara packages a truckload of cider for a neighbor but the neighbor is unable to sell it to any stores because the inferior plastic bottles developed hairline cracks.

If you happen to run a farm that also contains other business activities, it’s important that you discuss the situation with your agent and find the best option for covering the additional source of loss.

COPYRIGHT: Insurance Publishing Plus, Inc. 2017
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Farm and Ranch Coverage

Unique farm risk require specialized insurance policies.  Complicating things even further is that many farmers have have a very limited  number of insurance options.

Farms and ranches differ from other business operations since, at least with small to medium operations, the owner both conducts his business and lives with his entire family on the same premises. Therefore, a farm or ranch has a combination of commercial and personal loss exposures that must be properly insured.

One coverage method might be to use commercial policies to handle the business needs and personal (auto, home, recreational vehicle, etc.) policies to tackle the personal needs. However, such a combination of policies would be awkward and expensive. Further, the method would allow a large number of coverage gaps and overlaps. A much better approach would be to use a product that satisfies all potential coverage needs in a single policy.

The differences among various farm and ranch operations certainly complicate the task of finding proper coverage. Successful farmers and ranchers tend to be specialists, yet are flexible in order to run efficient operations. Fortunately, farms and ranches have a number of elements that are common to all operations, so products have been developed for this challenging market.

One standard farm program uses a cafeteria approach to offer coverage. The owner of a farm or ranch operation may choose to have only Farm Property and Farm Inland Marine Forms to address the property coverages, but use the Commercial General Liability Forms for the liability coverage exposures. They may choose to use the Farm Umbrella or a Commercial Umbrella with a Farm Endorsement. A Homeowners policy may be used on the dwelling but a Farm property coverage form on everything else.

Options are an important feature of a good farm program. The following, basic coverages are widely available:

  •    The Farm Property Policy – covers farm-related buildings (residence, barns, sheds, silos, etc.)
  •    The Farm Inland Marine Policy – covers farm-related machinery and equipment
  •   The Farm Liability Policy – protects against damage or injury caused by farming/ranching activities
  •  The Farm Umbrella Policy – provides a higher level of liability protection
  • The Farm Combination Policy– offers a way to bundle stand-alone farm/ranch coverages into a single package

The more flexibility offered by a program, the greater the chance that an insurance professional can assist a farmer or rancher with developing an effective insurance plan.

COPYRIGHT: Insurance Publishing Plus, Inc. 2014

All rights reserved. Production or distribution, whether in whole
or in part, in any form of media or language; and no matter what country, state
or territory, is expressly forbidden without written consent of Insurance
Publishing Plus, Inc