Without regular policy checks, farm liability insurance might be like a hospital gown – not enough coverage where you need it most.
Thoroughly read your policy regularly and check for gaps and needed updates says University of Missouri Extension economist Ray Massey. “Planning is important, but even the best plans do not always succeed in managing risk,” he says.
Massey and Barry Langford, a law instructor in MU’s Division of Applied Social Sciences, recently updated MU Extension’s Farm Liability Insurance Guide, available for free download at this link.
Most farmers purchase farm liability insurance to cover expenses from farm accidents – the kind that they lie awake at night worrying about: a cow that jumps a fence and gets hit by a car on the road or a visitor who trips and breaks an arm. Other “acts of God” policy clauses for unintended consequences are trickier.
Types of farm liability insurance
There are three common types of farm insurance: property insurance, general liability insurance, and workers compensation.
It is important to know what your policy covers, but it’s just as important to know what it does not cover, says Massey. “Understanding exclusions in general farm liability insurance can prevent the insured from potentially disastrous surprises,” he says.
Common exclusions include farmers market sales, agritourism, boarding dogs or horses, non-farm activities such as snow removal or landscaping, custom farm work, and spraying chemicals on your own farm or under contract for others.
Few policies cover new technologies that create risk, Massey says. “Consider drones, for example,” he says. “Are they an aircraft, or does an aircraft require an onboard human pilot?” Another is pollution. Pollutants may not be covered, but the definition of a pollutant is a broad subject to discuss with the insurance agent.
There is renewed interest in liability insurance due to damages caused by the off-target movement of dicamba. It is critical to understand these insurance exclusions related to chemicals, says Massey.
Purchase endorsements, additions, or riders to policies for special circumstances to cover exclusions as needed, says Massey. Umbrella policies also provide additional liability protection.
Farmers also must know rules about negligence, which can void liability insurance claims. Negligence includes illegal activities, fraud, and intentional damage. Honesty remains the best policy when filing claims and in other activities, says Massey, so avoid misrepresenting or omitting facts on the application and claims.
Who is covered?
Always confirm who the policy covers. The policyholder is always included but ask about legal business entities operating as the business of the policyholder and relatives.
Most policies cover employees but verify coverage for seasonal and short-term employees. Know if and how your policy covers independent contractors such as custom farmers or sprayers, as this is a complicated area.
On and off the farm
Know if your policy covers accidents on the road. This includes equipment as well as trucks or automobiles used as part of the farm business.
Review and update often
Make it a practice to annually review policies and advise your insurer of changes in operations and the number of employees. Review premium and coverage amounts and consider the current economy and protection needs for the stage of your life. Failure to purchase sufficient coverage for business size and activities can have severe consequences for the financial health of the farm.
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