You planted two acres of vegetables, and the crop is looking good. The laying hens you purchased last spring are putting out twice as many eggs as you can use. Maybe you can sell extra vegetables and eggs to cover your expenses and even turn a tidy profit. Next year, why not put your own little stand out by the highway and turn this sideline into a real working business? But what happens when a customer gets injured at your place, or your cow escapes its pasture and causes an accident on the highway? Do you have the right kind of insurance to protect yourself from the liability exposures associated with your version of the country lifestyle? If your insurance consists of a conventional homeowner’s policy, it is definitely time to talk to your agent.
Homeowner’s policies are as varied as the companies that write them, but many people just don’t realize that when it comes to insuring rural property, most policies exclude coverage for added risks involved with agricultural operations. Sure, they might cover you if the house burns down, hail damages your roof or a neighbor trips on your stairs and breaks a bone, but they might not be much use if a fire takes out 2,000 feet of fencing or you back into the neighbor’s truck with your tractor.
Specialized farm policies written for rural property owners are readily available and can be tailored to cover the exact needs of each individual applicant. Whether you raise livestock, board horses, grow fruits or vegetables, or even if you have a pumpkin patch and give hayrides, an insurance policy can be designed specifically for you – and it can cover your home and vehicles, too.
Categories of coverage
According to the “Consumer’s Guide to Farm Insurance” by the Maryland Insurance Agency, a state agency responsible for regulating insurance in the state of Maryland, there are five key areas to address when purchasing a farm policy:
• Property damage coverage protects your farmhouse, outbuildings and household belongings if they are damaged or destroyed by fire, lightning, hail or tornado.
• Liability coverage protects you when you unintentionally cause another person to be injured or another person’s property to be damaged or destroyed.
• Medical payments coverage pays up to a specified amount for medical expenses incurred by persons injured in an accident on your farm regardless of whether you were at fault for the injury.
• Endorsements are additional areas of coverage written specifically for the policy holder at an additional cost. Some items covered under an endorsement might include expanding basic coverage – such as changing from cash value to replacement value – or covering items excluded by your base policy – such as particular animals, outbuildings, farm equipment, etc.
• Farm-based businesses – petting zoos, pick-your-owns, corn mazes, haunted barns, pumpkin patches, farm stands or hayrides – might require a business policy instead of or in addition to your farm policy. Selling food products might also require additional specified liability coverage.
Several companies offer insurance coverage for all aspects of your operation without the need to specify individual endorsements. AgMax, an insurance program available through Farm Bureau Financial Services in Des Moines, Iowa, is an example of a product designed to appeal to the diverse needs of rural property owners. Although AgMax is only sold in nine Midwestern states, many companies offer similar products across the country.
According to Lloyd Sandbulte, product director of AgMax, understanding when a typical homeowner’s policy will cover a customer’s needs is company specific, so you shouldn’t make any assumptions.
“Every company has a different set of standards to determine when a basic homeowner’s policy will cover a business,” Sandbulte says. “We will cover a business under homeowner’s if it earns less than $1,000 a year. If income from that business is over $1,000, then they would need our AgMax policy or their homeowner’s and a commercial policy. Other risk factors help determine product need, but one of the main considerations is the amount of contact with people on the farm. The more people coming to the farm, the greater the risk that people will fall and get hurt, get bitten or kicked – things like that.”
Sandbulte goes on to say that more and more landowners are developing different ways to increase their income on the farm. “Agri-tainment and agri-tourism are becoming more and more prevalent today as farmers diversify. It can be anything from farmer’s markets, corn mazes, pumpkin patches, to people who raise goats for cheese, milk and meat, to horse boarding and training. All of these areas fall under the AgMax coverage. Of all the operations we cover under the AgMax product, equine is probably the largest, but we also see a lot of farmers raising dogs, providing guided hunts and opening hunting preserves.”
Because most rural people are hunter friendly, I asked Sandbulte about the risks of allowing hunters on their property. “Again, this is kind of a state-by-state issue. In some states that we provide coverage in, if someone comes onto your property and gets hurt, as long as you are not charging them access or you are not particularly negligent, there are statutes designed to protect you from a lawsuit. However, once you start charging for access, then your homeowner’s or farm policy is going to say that you have a business, and you won’t be covered. You really have to look into your respective state policy to find out your risk of liability.”
Understand your umbrella
In recent years, the so-called umbrella policy has become a popular form of added coverage. The umbrella was originally designed to give you additional “catch all” liability coverage in the event that something happened that was not covered under the regular policy. Now most companies offer an “excess coverage” umbrella that only picks up liability in “excess” of that covered by the homeowner’s policy. In this case, if a claim is business related, the umbrella probably won’t cover it – unless it’s written on top of a comprehensive business or farm policy.
Keep your insurance agent informed
Whether you produce all or part of your income from your farm, or you simply enjoy living the rural lifestyle, take the time to review your current insurance coverage. Keep in touch with your insurance agent, and keep her or him informed of any changes to your operation. Don’t let an unforeseen accident or situation turn your country dream into a legal nightmare. Don’t assume that the homeowner’s policy you put in place when you first moved to the country has you covered today.
Tim Nephew is a freelance writer living in Northwestern Minnesota where he and his wife manage their 80 acres of wildlife habitat, with a few acres set aside for growing grapes.