Do you need farm insurance?

Farmland is a valuable asset. But its value also makes it a liability if you don’t have the right insurance protection in place. 

There are many types of farmland owners. Some inherit land and see it as a line item on a list of assets. Others may have retired from actively farming but want to stay involved as landowners partnering with renting farmers. No matter how close your ties to the active operation of a farm, one thing is true in every farmland ownership scenario. The right farm insurance coverage is a must.

“The growth in absentee land ownership and scenarios in which the owner doesn’t necessarily have ties to the farm are good reminders of the importance of farmland insurance,” said Nationwide Risk Management Director Doug Becker. “Without the right farm insurance policies and endorsements in place, you could be exposed to major financial risk.”

Specific risks inherent to owned farmland

A basic homeowner’s policy does not offer sufficient coverage for farmland owners. The potential risks of owning farmland extend well beyond those such policies cover. It’s best to consult a farm insurance agent or on ag risk management specialist to get a feel for the risks inherent to owning your specific farmland. Those potential risks to consider include:

• Land use beyond production agriculture. This includes alternate ag uses like haying and grazing, and even extends to non-ag uses like hunting.
• Structures on the property. Some land may have barns or grain storage buildings related to ag production. This also might include non-ag structures like farm houses and storage buildings.
• Other ag assets on the land. Things like operating farm machinery and grazing livestock can present landowners with unique risks.
• Anything that attracts visitors to the land. Agritourism activities and secondary farm businesses like produce stands can create new revenue on a piece of farmland. But they can also increase the landowner’s risk, especially if visitors are on the land.

“A farmland risk management specialist or farm insurance agent can help you review your potential risks on any farmland you own,” said Becker. “In almost all cases, those risks extend well beyond what a standard homeowner’s policy covers. You can make sure you’re prepared and covered for these and other risks by having this conversation.”

“This conversation is even more important,” Becker said, “when you’re leveraging farmland assets as part of a larger retirement or multigenerational transfer plan. Failing to address the risks inherent to owned farmland can put those assets at risk."

Protecting your farmland begins with answering these seven questions

In meeting with your team of trusted advisers, answering a few key questions can help you zero in on the right insurance coverage for your farmland.

1. What is your main goal in owning farmland? Your insurance needs will differ whether you’re actively farming your land or considering it an asset for yourself or as part of a larger asset succession plan.
2. How do you own your farmland? The ownership structure — sole ownership, co-ownership or as an enterprise like an LLC or corporation — often has a lot to do with your risk liability. A risk management specialist can flesh out these differences.
3. What’s the land’s primary purpose? Sometimes how working land is used and what it grows — crops or livestock — influences your insurance policy options. Knowing what you’ll raise on your land will help clarify the right policies for you.
4. How are you involved on your land? Some owners have a more active role in operations on their farmland. Just how much you work in the farm’s day-to-day operations is a factor to consider in selecting the right insurance policy.
5. What are farmland prices like in your area? Things like buildings, fencing and even natural features like shelter belts, trees or ponds can affect the value of farmland. And this translates directly to the right coverage for you and its costs. Take an audit of anything on your land that may affect its value as you determine the right insurance policy options.
6. What non-farm activities happen on your land? In some cases, agritourism or hunting may be part of the revenue equation for your farmland. Consider any such activities and the liabilities they may create in making smart, informed insurance decisions.

Look local and work with the right team

Securing the right farm insurance protection is an important early step in protecting your farmland and your financial future. And it’s not a decision to be made alone. In working through the questions above, be sure to consult with your team of trusted advisers that should include your farm insurance agent, attorney, accountant and farm management specialist.