Why does farm insurance cost more than home insurance?
Does farm insurance cost more than home insurance?
I recently had a call from a client who was purchasing a farm. He was concerned because the quotes he was getting for his farm insurance were more than he thought they would be.
Farm insurance is a unique policy. It is a combination of homeowner’s exposures and commercial exposures together on one insurance policy.
There are many types of farms, for example:
- Vegetable farms
- Cattle farms
- Horse farms (Including hobby horse farms and hoarse boarding farms)
- Any combination of the above
A farm can also have all types of outbuildings:
- Grain feeders
- Chicken coops
When looking to insure a farm, each outbuilding needs to be rated separately. The values are based on the features of each building. The total value of the farm buildings often times is more than the value of the main farm house. This differs from home insurance. With home insurance, the other structured coverage is valued as a percentage of the insured home value. The standard value for other structures coverage on a homeowners insurance policy is 10%.
In addition to the property values, a farm insurance policy can include coverages for loss of income and business interruptions.
A farm might be where you live, but the farm is also a source of income. And depending on the activities of the farm, the farm activities can affect the cost of the farm insurance.
Other farm insurance considerations:
- Do you have employees?
- Do you have pick your own operations?
- Are there corn mazes
- Do you have a tree farm?
The farm activities and farm revenue will all affect the cost of the farm insurance.
Farm policies are generally less strict when it comes to the condition of the outbuildings. Better carried for and maintained buildings get better rates and better coverage options.
Since each outbuilding is rated separately you can choose to not insure a certain building(s). But you must remember that there is no automatic coverage for outbuildings on a farm insurance policy. So regardless of the size or the value of the building, in order to be insured it must be specifically listed on the policy. So if you put up a new building, you need to contact your insurance agent to list it in order to have insurance coverage.
Why would you need a farm insurance policy if you are not running a farming business?
Some accounts are rated as a farm even if there is no business activity. This could be because of the amount of acreage or the number of animals owned by the insured. In these cases it is called a gentleman’s farm. Some homeowner’s insurance carriers, will allow for certain types of gentleman’s farms or hobby farms. Other carriers will require this exposure to be written on a farm policy.
On a farm insurance policy there is usually a limit based off the building value for the personal belongings. But there is no automatic coverage for the equipment used in the business. So everything from farm tools to large equipment must be scheduled on the farm insurance policy. All of the mobile equipment, tractors and accessories must be scheduled on the policy.
The underwriting of a farm insurance policy is much more intense than that for a homeowners’ insurance policy. Since each exposure is rated separately, they all need to be rated and insured individually.
Generally, photos of all outbuilding, income information, a map of the location of the buildings on the property and all exposures are rated separately.
If you have a farm regardless of size, working with an agent that has experience in farms is important to be sure that you have the coverage you need.
Contact Huff Insurance Today To Insure your Farm
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