#36 Risk Management and Insurance
Risk Management for Farmers
The primary goal of risk management and insurance is to protect your assets from claims and lawsuits that may result from injury to persons or damage to property from accidents that are associated with your business. Effective risk management depends on combined efforts and close communication between yourself and your insurance company. Look for an agent with whom you are comfortable, who is well known and respected, who understands agriculture and businesses, and who will work with you to reduce your potential for risk.
When considering your risks, be sure to review the list below and describe your risks completely to your agent. You will not need all of the types of protection listed below, but it is important to know your options when shopping for insurance. Match your coverage to your needs for risk management.
Potential Coverage to Consider for Your Operation
- General Liability Insurance: Covers injuries to people and property for which your farm is judged liable and mitigates your losses from lawsuits.
- Automobile Insurance: Covers vehicle damage while in your vehicle or to another vehicle while traveling.
- Home Owners Insurance: Typically covers fire, theft, personal property, lightning, riot, aircraft, explosion, vandalism, smoke, theft, windstorm or hail, falling objects, volcanic eruption, snow, sleet, and weight of ice. Usually flood and earthquake need to be purchased separately.
- Farm Insurance: Covers barns, rental housing, equipment, animals, and other farm assets.
- Workers’ Compensation Insurance: Required if you have employees or interns.
- Product Liability Insurance: For damages that may arise from the consumption, handling, use of or condition of products manufactured, sold, handled, or distributed by your business.
- Contract Liability Insurance: Covers the assumption of the liability of another party through a contract or facility use agreement. For example, you may be required to provide a certificate of insurance to buyers that includes $1 million in product liability and additional insurance.
- Environmental Pollution Insurance: Covers clean-up of manure or pesticide spills.
- Crop Insurance: For weather, market, fire, pests, and other disasters. Options include: Multiple Peril Crop Insurance (50% yield loss), Adjusted Gross Revenue (50% income loss), or Non-Insured Crop Disaster Assistance.
- Life Insurance: To help your family in case something happens to the bread winner.
- Health Insurance: For yourself and family in case you are hurt and need medical care.
- Business Interruption Insurance: Will provide living expenses if you are hurt and cannot work.
- Vendor’s Insurance: Will cover your liabilities if you are selling at a farmers’ market or trade show.
- Umbrella Liability Coverage: A liability insurance policy. It provides extra insurance protection over and above your existing policies and typically carries a high deductible.
Urban-Specific Risk Management and Insurance Information
For urban-specific risk management and insurance information, visit the Urban Agricultural Legal Resource Library, a project of the Sustainable Economies Law Center, at http://www.urbanaglaw.org/. This website provides information on liability, risk, and insurance as they pertain to urban farmers, such as coverage to consider when farming on government property or farming in private backyards and information on employment law regarding volunteers and interns.
The Urban Agricultural Legal Resource Library also provides information on how urban farmers can reduce the cost of insurance, such as by associating with or becoming a member of a land trust.
Ways to Reduce Your Liability
Some ways that you can reduce your liability include:
- Keep your property in good repair, especially if you have people coming to your farm.
- Minimize or eliminate dangerous situations. These might include aggressive animals, uncovered holes in the ground, moving vehicles or equipment parts, sharp tools, etc. Fence off hazards wherever possible.
- When selling or serving foods, make sure all regulations from the Health Department and Ag and Markets are met and carry product liability insurance.
- All workers on your farm are required to be covered by Workers’ Compensation, even if they work for free. So if you have volunteers, interns, or employees, you are required to carry insurance for them (the only exception is if your farm is set up as a 501(c)3 non-profit). Requiring all farm staff, interns and volunteers to sign a release waiver is a good precautionary measure. However, if an injury were to occur, these waivers don’t often hold up in court.
- Test your water supply annually if your water is being used for washing produce, processing or drinking.
- Negligence is when you fail to take normal steps to eliminate hazards or you create a hazardous situation and fail to address it.
- Avoid making false statements or publishing incorrect information that may damage a person’s reputation as this can result in libel suits. Be careful of advertising claims or comparing your operation to others in a negative way.
- Manage your production techniques according to recommended best management practices.