Rachel Armstrong Introduction. Farm Commons and me Disclaimer Questions and personal perspective welcome

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1 Insurance for the Farm: Policies and Principles to Efficiently Manage Risk Rachel Armstrong Farm Commons provides the proactive legal resources sustainable farmers need to be the stable, resilient foundation of a community- based food system. Introduction Farm Commons and me Disclaimer Questions and personal perspective welcome Copyright 2013 Farm Commons, Inc. 1

3 Let s talk: Property damage Injuries to people: Customers or guests Employees Introduction Injuries to the farmer(s) Crop damage and livestock loss Introduction Insurance basics: It s a contract, not a charity There are trends across different contracts, but also much variation, too As with all contracts, documentation and evidence are very important Copyright 2013 Farm Commons, Inc. 3

4 Introduction How (most) insurance works: You enter into an agreement, for covered risks, covered property, and a specific coverage limit. When covered risks materialize to covered people/property, you make a claim, the insurance company handles it and makes any covered payments, up to the policy limit. Property Penny s barn burns down, packing shed destroyed by tornado Property damage, generally Insurance can provide money to repair, rebuild, replace buildings, equipment Copyright 2013 Farm Commons, Inc. 4

5 Property If you own: You generally get a basic farm policy, called farm property and casualty, farm liability etc. Covers your property up to limits when listed noting exceptions Property Not that simple? Equipment stored on others property? Buildings built on others property? Ask: Might need renters, commercial, or other farm liability policy, etc Copyright 2013 Farm Commons, Inc. 5

6 Property How it works: List covered items on declarations page If something bad happens, file a claim: Insurance company then verifies damage resulted from covered risk to covered property Then pays out on policy up to covered value Property Penny: Are the barn and pack shed both listed on the declarations page? Are their covered values up- to- date? Fire from a covered risk? Copyright 2013 Farm Commons, Inc. 6

7 Injuries to Farm Customers/Guests Customer injured while purchasing lamb at the farm. Injury to guests on the farm, from farm- related purposes. Insurance can pay for the person s injuries. Injuries to Farm Customers/Guests Which policy provides this? Generally the same as for property Property and casualty, farm liability, etc policy Copyright 2013 Farm Commons, Inc. 7

8 Injuries to Farm Customers/Guests How it works Customer goes to hospital Injuries to Farm Customers/Guests If your insurance company requests you fix something or refuses to renew It means you re taking too much risk for them. Copyright 2013 Farm Commons, Inc. 8

9 Non- farm Injuries Penny hosts canning classes, guest is injured. Penny opens a corn maze, guest is injured Insurance can cover person s injuries Don t assume the farm policy covers these! Ask. Non- farm Injuries Venture not related to production and marketing of crops or livestock? Options may include: Event endorsement Incidental business endorsement Commercial line Copyright 2013 Farm Commons, Inc. 9

10 Off- farm Injuries Penny s customer trips at her farmers market stand. Or CSA drop site. Don t assume the farm policy covers these either! Ask. Off- farm Injuries I see some farm liability policies that cover FM, others that don t without an endorsement. CSA drop sites can be difficult to cover Ask, ask, ask, and ask for the source in the policy. Copyright 2013 Farm Commons, Inc. 10

Quick Poll Which of these reflects your thoughts now, although you ll get exact information from your own agent soon (right?)? I do occasional off- farm or non- farm activities.

11 Quick Poll Which of these reflects your thoughts now, although you ll get exact information from your own agent soon (right?)? I do occasional off- farm or non- farm activities. I ll ask if an endorsement is available or another lower cost option. I see myself really diversifying into events, education, and commercial production. I ll ask about a commercial line that might give me some flexibility. Neither. I don t do off farm or non farm things. Umbrella Policies Penny has an umbrella policy, so she doesn t need any of these endorsements or extra policies, right? Not necessarily. Copyright 2013 Farm Commons, Inc. 11

Property and Liability Penny s Conclusion: Starts with farm policy Checks that her farmers market sales (and other off- farm activities) are covered Asks about non- farm activities, too: lambing

12 Property and Liability Penny s Conclusion: Starts with farm policy Checks that her farmers market sales (and other off- farm activities) are covered Asks about non- farm activities, too: lambing event, herbalist classes. Insurance agent may recommend endorsements, commercial policy, etc Katie grows worried but keeps in mind that efficiency may be getting the most for you money, not necessarily spending the least. Let s talk about what else we might want covered to get more for our money Employee Injury Penny s employee injured while harvesting Copyright 2013 Farm Commons, Inc. 12

13 Employee Injury Workers Compensation May be required by state law More efficient than liability insurance Employee Injury Commercial Policy May cover seasonal, temporary employees Farm liability? Copyright 2013 Farm Commons, Inc. 13

14 Employee Injury Penny s Decision: She doesn t have to buy WC in her state A commercial policy will cover her one employee Looks like a good deal as it also covers herbalist classes, CSA drop site, and lambing festival, offers flexibility for future. Penny s Injury Penny throws out her back in the field. Can t work, can t keep income coming in. Insurance can cover injury and provide for lost income Copyright 2013 Farm Commons, Inc. 14

15 Penny s Injury Options: Personal health insurance Disability Workers Comp Penny s Injury Personal Health Insurance Required under ACA May NOT cover farm- related injuries Copyright 2013 Farm Commons, Inc. 15

16 Penny s Injury Workers Comp: Business owners may elect to cover themselves Coverage for lost income, permanent disability, or even death Disability insurance might be more cost- competitive, especially as Katie doesn t have to cover employees yet. May be limited coverage in existing farm liability policy. ASK for your options. Penny s Injury Penny Decides: Workers comp not needed yet This year, she could choose a commercial policy to cover her employees, and a personal policy to cover herself at work. Consider a disability policy. Copyright 2013 Farm Commons, Inc. 16

17 Crop and Livestock An early summer storm strikes. Penny loses lambs and veggies destroyed. Insurance could provide for lost revenue from lamb and veggie sales Quick Poll Do you currently carry any crop or livestock revenue insurance? Yes No Not sure Copyright 2013 Farm Commons, Inc. 17

18 Crop and Livestock Whole Farm Revenue Protection (WFRP): What? Get up to 85% of insured revenue, up to $8.5 Mil Includes crops, livestock, greenhouse production Crop and Livestock WFRP: How? Give notice of a loss within 72 hours of discovery Submit a claim within 60 days of filing your taxes Submit paperwork evidencing expenses, which may scale payment downward. Copyright 2013 Farm Commons, Inc. 18

19 Crop and Livestock WFRP: Who can buy it? Diversified farms: Must grow 2 or more crops. 3 or more, and you re eligible for 85% coverage. Farmers with 5 or more years of experience Now available in all states Crop and Livestock WFRP: Is it affordable? Premium is subsidized by federal government Copyright 2013 Farm Commons, Inc. 19

20 Crop and Livestock WFRP: Example Penny s revenue is $50,000. She earns 20K from veggies, 15K each from herbs and lamb. Penny s premium estimate: $2,057 annually. (Federal government pays additional $2,618) Crop and Livestock WFRP: How to buy? Find an agent at: www3.rma.usda.gov/apps/agents/ Submit paperwork: Application (Deadline passed.) Whole farm history report Farm operation report Revised farm operation report Copyright 2013 Farm Commons, Inc. 20

21 Crop and Livestock WFRP: Complications for CSA Farms Each crop s volume Each crop s value Are you even at risk? Crop and Livestock For more on WFRP, see RMA website. Other crop/livestock policies? Copyright 2013 Farm Commons, Inc. 21

22 Crop and Livestock Multi- peril crop insurance available in limited areas, per commodity Examples: pumpkins for 11 IL counties Livestock Gross Margin and Livestock Risk Protection policies Protect against price declines. Crop and Livestock Noninsured Crop Disaster Assistance Program (NAP) Loss must exceed 50% Covers 55% of average market price Apply through Farm Services Agency (not RMA). Copyright 2013 Farm Commons, Inc. 22

23 Crop and Livestock Penny s Conclusion Doesn t have 5 years of experience for WFRP. Needs better paperwork, too. Will take NAP for this year, apply for waiver Food Safety Injuries? See our food safety webinar Copyright 2013 Farm Commons, Inc. 23

Managing the Sustainable Farm s Risks with Insurance: Navigating Common Options

Managing the Sustainable Farm s Risks with Insurance: Navigating Common Options LAST UPDATED: June 26, 2015 FIRST PUBLISHED: June 26, 2015 By: Rachel Armstrong and Laura Fisher info@farmcommons.org www.farmcommons.org