Home Farming 101 Why do I need farm insurance?
Farming is a risky business. From the ups and downs of the market to the potential for disease and natural disasters, farmers have to have some risk management tools to protect their investments. Insurance is one of the most common risk management tools farmers and agriculture business owners take advantage of.
Insurance protects the farmer or agricultural business owner from claims and lawsuits resulting from personal injury or property damages due to accidents related to your farm business. Insurance also helps cover unexpected losses of crops or livestock in extreme weather situations, disease and pest pressures, fires or other disasters.
Insurance companies collect premiums contributed by individuals and invest these funds. The proceeds from these invested funds are then used to pay for losses experienced by anyone covered by one of their insurance policies. In this manner, large amounts of money can be available to any one person in the group that experiences a loss covered by the insurance policy.
Each policy owner has a unique risk potential, which is reflected in premium pricing. The higher the potential for loss, the higher the premium. Insurance companies must also factor in their cost of business and overhead expenses.
“Insurance is not a tool to make money, rather it is a tool to help compensate an individual or business for losses that might otherwise cause a financial disaster,” according to a Cornell University Study.
It’s important to find an agent you are comfortable working with, who understands agriculture and business, and can help you reduce your potential for risk. Ask your neighbors who they recommend and don’t be afraid to shop around. Get quotes from three or four (or more) potential agents and ask lots of questions if you don’t understand how something works.
Sources: Cornell University College of Agriculture and Life Sciences.
Next week: Farm and Dairy will highlight different insurance options for farmers throughout December with liability insurance up next.
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I didn’t realize that farm insurance protects unexpected losses of crops or livestock. My brother-in-law and I have been talking about starting a small corn farm. We have been looking into everything we might need. However, I don’t think I have come across this before. I’ll have to point this out to him the next time I see him.