StatCan reports that 97% of Canada’s farms are owned and operated by families. While many are small, they’re still businesses that need property and liability insurance. Insurance can also help keep the farm in the family long after the current owner is gone.

The successful transfer of family farms from one generation to the next takes planning and the right insurance for property and crops. We can help you evaluate the coverage you need to sustain your family farm for generations.

Start by protecting your farm from financial loss

Insurers often cover a family farm’s home, outbuildings, machinery and liability risks related to operations. Coverage should protect you from financial losses due to physical property damage. It should also cover you if someone is injured or sustains property damage on your premises. Finally, it should address risks that might disrupt your ability to earn an income.

Farm insurance can cover losses due to fires, lightning, theft, vandalism, burst pipes, hail, wind, and other perils named in the policy. As us what your policy does and doesn’t cover. Coverage can differ by insurance company.

Depending on where your farm is located, you may need to purchase an add-on, or “endorsement,” to your insurance contract or a separate policy to cover flooding, earthquakes and other natural disasters. Some perils have to be covered separately, and others are uninsurable.

You’ll likely need an appraisal or a recent estimate of your farm’s value, including the buildings and equipment you own or lease. These figures will determine how much insurance you should purchase. Although some degree of risk is inevitable, this requires evaluation and a balanced approach. You need enough coverage to pay for a loss and rebuild your farm if it’s completely destroyed, but you also need to factor in the cost of those policies.

The premium you pay will be based on your chosen levels of coverage, also known as the “limits” of what the insurance company will pay you after a loss. You can adjust your deductible amounts to arrive at a premium you’re comfortable carrying.

Most physical property on the farm, including your residence and vital machinery, is insured to its “replacement cost.” The replacement cost is the amount needed to repair or replace it using the same kind and quality of materials.

However, you may prefer to select “actual cash value” coverage, which is less expensive. Actual cash value is the replacement cost minus depreciation. Actual cash value coverage might make more sense for barns, older buildings or structures that aren’t in active use, as their loss may not impact your day-to-day operations.

Types of property coverage

Beyond buildings, there are other types of property you need to insure. This includes owned and leased farm equipment and machinery, irrigation systems, driveways, and fences. In some cases, “blanket coverage” can protect all of this property collectively. In other cases, “scheduled coverage” may be more appropriate.

Scheduled coverage lets you choose which items to cover and for how much. This helps you protect your most important property while potentially saving money by lowering or eliminating coverage for less valuable property. You also need to consider risks that fall outside a standard farm policy, including equipment breakdowns and lost revenue.

Whether you produce dairy, grow crops or raise livestock, you should have insurance that covers those assets. Remember to talk to us about blight, disease, drought, theft and other causes of loss.

In addition, if you own commercial vehicles used outside your farm property, you’ll need commercial auto coverage. You’ll want liability and collision protection.

Cover your farm’s liability exposure

Your farm insurance policy should also include commercial general liability. This will protect you against claims of bodily injury and resulting medical expenses, property damage, lost wages, and personal injury, including pain and suffering.

Commercial general liability insurance helps pay for accidents that occur due to your operations, both on and off the farm. As an example, one of your tractors could damage another vehicle on a public road. Or an animal could get spooked and injure someone visiting your farm. Someone might even claim that your comments at the local grain elevator harmed their business’s reputation or led to a loss of opportunity.

Liability insurance will pay for your legal defense and settlements or court judgments against you, up to your policy’s limit. However, policies commonly exclude farmers markets, agritourism, chemical spray drift and the use of aircraft. You can insure these activities separately.

Product liability and pollution liability are also typically excluded. Product liability claims may be an issue for your farm if you sell or sample eggs, milk, fruits, vegetables, jams, or other food products. Pollution liability could include chemical and pesticide injuries and health complications from things like burning pastures or livestock manure.

If your operations create these kinds of exposures, you can either add an endorsement to your main farm policy or purchase a separate policy for protection. The solution depends on how your insurance company writes the coverage.

Finally, be aware that liability insurance doesn’t apply to farm employees. Workers’ compensation pays for lost wages and medical expenses if an employee gets sick or injured on the job. It even includes family members you employ. It’s an important safeguard for you and your employees; agriculture is among the most hazardous industries.

Succession planning is critical

Don’t leave the transfer of your farm to chance. Certain insurance policies can ensure the smooth transition of your farm to a family member or valued employee. These financial instruments provide a way to pass on your farm without leaving the new owner with debilitating debt.

We can help you select the right policy for your business. The most crucial one is a key-person life insurance policy that pays death or disability benefits to a beneficiary. This could be a partner, a family member or another individual. Your beneficiary must use the proceeds to sustain the farm after your death. Life insurance can also fund a buy-sell agreement to provide liquidity for a buyout if needed.

You can purchase these life insurance policies in addition to other term or whole life insurance you may have for protecting your family or heirs financially. Those policies aren’t tied to farm finances after your death.

Like any commercial business, family farms need insurance to protect farm property, equipment, livestock, crops and the survival of the business. We can help you keep your land and preserve your family’s legacy.