What kind of insurance do you need for your farm?
Insuring your Upstart Farm is an important step when starting the business.Upstart Farms should carry a general liability or umbrella policy on their farm.
You want to have insurance that protects:
- the product liability of your produce and food items
- your farm assets
Product liability insurance protects your farm if, for example, someone gets sick from eating your food.
Just like you protect your home and personal assets with homeowners insurance, you want to do the same with your farm assets. In the event of natural disaster, theft, or similar adverse events, make sure your greenhouse, other structures, equipment, and any associated loss of farm income are covered.
Additionally, your may need other kinds of insurance, like auto insurance for farm vehicles (think about what car/truck you use to transport your towers live to market).
Check with your insurance agent or broker. We'll focus on liability insurance for this discussion.
Usually, it's beneficial to you to insure as much as possible under one insurance policy. Not only does this help reduce costs, but it may make it easier for Upstart Farmers to obtain food asset insurance in the first place - which isn't always easy.
Use an insurance broker
Getting insurance can be a major hurdle for small farmers. Some insurance companies don't want to work with small farmers, because - as a group - they tend to present a large risk for little reward. Because insurance companies operate on industry average data, whether or not your particular farm has minimized risk through your system and practices doesn't make much difference.
When searching for insurance for your farm, it helps to use an insurance broker. A broker will go out and get quotes from dozens of insurers, coming back to you with the best policy.
Your insurance broker should obtain at least 3 to 6 quotes for you, but you'll want to get as many as possible. Make your broker work for you!
These quotes will show you what the range for reasonable premiums are. (Unfortunately, we can't offer a general premium range, because they vary by area and farm details.)
Here at Bright Agrotech, we use Wyoming Financial Services, but you can probably find a great broker in your own area.
Because food assets are a high risk area of insurance, it might help a farm obtain insurance if they use the same company for other, lower risk coverages. Discuss this possibility with your broker and insurer. If you switch coverage for other assets, they might be more willing to work with you on food assets.
Get plenty of coverage
The amount of coverage that you obtain depends entirely on your farm. At the bare minimum (and seriously - this is the absolute minimum), a farm will want at least $50,000 of insurance coverage.
Consider what kind of business your farm is doing. If you expect to do $200,000 in sales this year, have your insurance cover $200,000 to $400,000. Your broker and agent may be able to offer a specific recommendation for your farm - use their advice!
Depending on your markets' requirements, you may need much more insurance than this.
It is definitely worth the slightly higher premiums to have conservative coverage amounts. Always err on the side of caution.
Who requires insurance?
If you plan to sell to grocery markets, your farm will need to comply with additional insurance regulations. Grocery stores will want to be listed as coinsured on your policy. Whole Foods, as one example, requires farms to list them as coinsured on a policy providing at least $2 million in liability insurance.
Need more information on compliance? Take a look at our Grocery Grower's Compliance and Negotiation Packet.
There's also some farmers' markets that require farmers and vendors to coinsure the market before they can sell.Check with your market managers for their rules and coinsurance coverage amounts.
While this practice isn't common yet, we see it becoming widespread in the future, especially among large, highly organized farmers' markets.
Outside of these two markets, our farmers haven't yet had to provide proof of insurance for other sales.
So, then, why have insurance?
Even if you're selling solely to markets that don't require proof of insurance, you still need to cover your farm's liability.
Just because you're selling to a market that didn't require proof of insurance doesn't mean that you can't be sued.
"It's a wise business decision," Dr. Nate emphasizes. "It's just good business practice to have insurance on what you're doing.
"It's being responsible to your business your employees, and your consumers. We need to be prepared to fix problems."
Help with more business decisions
Our Upstart Farmers Community and the Bright Team provide unparalleled support for small farmers.
Leave a comment below with your questions, concerns or your own experiences.
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