Check Out Your Farm Liability Insurance Coverage

If your farm business has evolved to cover tourism or include non-traditional activities, it may be time to contact your insurance company

Published on: Jul 15, 2013

Due to rising farm values and increasing values of farm assets, farm owners should give their liability insurance coverage options a second look, one extension specialist advises.

"While many farmers’ asset values have increased, fewer farmers have taken the time to review their liability coverage to ensure that they are adequately protected," Whitney Wiegel, University of Missouri specialist says.

Wiegel explains that liability insurance protects farm owners from claims arising from unintentional injuries or damage to other people or property.

"Many commercial farms have an umbrella insurance policy that provides liability coverage up to a certain threshold," he says. But for a farmer that has $1 million in liability coverage, he or she is protected for liability claims of not more than $1 million for the number of occurrences and coverage period specified in the insurance policy.

If your liability coverage isnt sufficient to cover your farms assets in case of accident or damage, it could be time to reconsider, one extension specialist advises.
If your liability coverage isn't sufficient to cover your farm's assets in case of accident or damage, it could be time to reconsider, one extension specialist advises.

"While a $500,000 or $1 million policy may have been adequate for many farms 10 years ago, changes in farm profitability and asset values have altered many farmers’ insurance needs," Wiegel says.

Along with farm values and farm asset values, if your farm business has evolved to include nontraditional activities such as agritourism or direct sales to consumers, additional coverage may be necessary, he adds.

To reduce exposure to loss, Wiegel advises farmers to regularly examine their balance sheets and coverage limits and ask themselves, "Is my liability coverage limit anywhere near the total value of my farm? If an accident were to occur, would my current insurance policy protect me from exorbitant losses?"

If the answer to either of these questions is "no" or "I don’t know," it is probably time to talk with your insurance agent, he says.

Source: University of Missouri

For more on taxes, financials, land transitions and legacy planning issues, check out Darren Frye's blog Finance First.