Farm equipment is a significant investment, even if you purchase used and stick to the bare minimum needed to run your small homestead farm. It's essential to properly insure that equipment in case of an emergency, but insurance is costly as well.
There are some ways you can save money on farm insurance and also make sure you have enough coverage if a catastrophe strikes. The cost of insurance varies by location and the natural disaster risks in your area. For example, in Iowa, the cost to insure farm equipment is between $4 and $6 per $1,000 of value.
Here are some things to consider when choosing insurance for your small farm.
1. Add on to Homeowner's
If you only own one piece of farm equipment, such as a small tractor, you may be able to add a rider onto your current homeowner's insurance. A rider is a provision on your current policy that covers a specific scenario. The cost to add one may be considerably lower than taking out a separate policy. Talk to your insurance agent about the best options.
Ask for a breakdown comparison, so you have a clear picture of what each policy does and doesn't cover, as well as the cost of various policies.
2. Take Out an Umbrella
Many homesteaders make their small farms profitable by hosting groups on their property, teaching classes or selling the products they grow and make. If you participate in any of these activities, talk to your insurance agent about the best way to protect yourself. For example, if someone gets hurt on your property while taking a tour, what does your insurance cover?
You have to make sure you have enough coverage in case of a severe injury as well. An umbrella policy may be your best bet to keep your assets safe and cover medical costs if someone gets hurt. You never know when an accident might happen, even if you take every precaution imaginable. It's unfortunate, but there are also people who will file false claims to get a few bucks.
Experts recommend you have at least $1 million in farm insurance.
3. Reduce Your Coverage
While you want to make sure you have enough to cover you in case someone gets hurt and decides to sue you — even if you didn't permit them to be on your property — you also don't want to overinsure. For example, if you rent your farm equipment, the company you rent from may have some provisions in place to reduce what you'll owe in case of a catastrophe. Ask about their rental protection plans and loss-damage waivers, which help cover the costs of damage to equipment.
You'll still need coverage of your own, but this may reduce the amount you have to get. Also, if your house would only cost $200,000 to rebuild and you have insurance for $500,000 on the structure, you're paying too much. You could easily reduce that by half and still have enough to rebuild, even with rising costs. Of course, you'll want to revisit the amounts every year or two, as the costs of materials and construction tend to increase with inflation.
4. Insure Your Livestock Separately
If you own livestock, you'll need to make sure to get a policy that covers them. If a tornado comes through and sweeps up all your cows, the cost of replacing them isn't minor. Livestock insurance is a bit like crop insurance, and the USDA partially funds it. If your animals are of high value, such as a horse you stud out for high fees, you may want to cover those animals on individual policies. However, you can also lump them into your blanket coverage for the farm as a whole if they are typical value animals.
One of the advantages of insuring animals or even farm equipment individually is that you can set a declared value. Make sure you have enough to cover replacement costs for the equipment if it gets destroyed in a fire, or for animals in case a natural disaster takes their lives.
5. Be Aware of What the Policy Doesn't Include
Insurance doesn't necessarily cover everything on your property. Be aware of this, and question your insurance agent about what your policy will and will not cover.
For example, farm insurance rarely covers fences, so if a tornado takes them out, you won't get replacement costs on them. If your policy doesn't cover fencing and you want it to, ask for a policy extension that takes care of it.
The policy may also not cover outbuildings that aren't explicitly mentioned. There are also standards about access to a water source you'll need to consider. Just because there's a pond on your property doesn't mean fire trucks can readily get to it to put out a fire.
Insurance also doesn't cover malfunctioning equipment, in most cases.
Balance Cost and Risk
Since many homesteaders live on limited budgets, you have to look at the risk of carrying less insurance versus the costs of insurance. Never go without insurance on something you can't afford to lose or don't have the money to replace. Talk to your insurance company about what your options are, and be upfront about your budget. Most companies will be willing to work with you to try to reduce costs without risking your livelihood.