Farm Insurance: Coverage, Types, and Liability

One key responsibility of owning land is to protect that asset against unpredictable risks, usually through insurance. Yet when owners partner with tenant farmers, lines of responsibility tend to get blurred. 

So when you’re sitting down to draft your rental agreement, insurance should be a key part of the conversation. This is a key step to protecting yourself, your asset, and your relationship with the farmer. 

Why farmers and landowners need insurance

The key benefit of insurance is to provide financial protection and peace of mind.  This allows both farmers and landowners to focus on running their businesses without worrying about unexpected financial losses. 

For landowners, farmland insurance protects agricultural land and the buildings on it from loss or damage. For farmers, crop or livestock insurance can help to protect against losses resulting from natural disasters, disease, and other risks inherent in farming. 

Who’s responsible for insuring the farmland?

In a landowner partnership, the property owner and the tenant farmer have specific responsibilities regarding purchasing liability and property insurance. Therefore, it is crucial for both parties to review their insurance needs carefully. An experienced insurance professional can help ensure that they have the right coverage in place.

However, because the landowner is the one who stands to suffer the most financial loss if the property is damaged or destroyed, the primary responsibility for purchasing farmland insurance lies with them. For example, suppose a tenant farmer is using the land to grow crops, and the property is damaged. In that case, the owner may still be responsible for covering the costs of repairing the damage and replacing any lost crops.

Let’s take a closer look at the responsibilities of both parties in a typical rental agreement. 

Landowner insurance responsibilities

One of the critical responsibilities of the landowner in a tenant partnership is to obtain appropriate insurance coverage for the property. That responsibility typically lies with the landowner. 

This is important for several reasons. First, the land can be susceptible to damage from natural disasters like floods, storms, and earthquakes. Insurance coverage can help protect the landowner from financial losses if the property is damaged. Another reason why landowners need insurance in this type of partnership is to protect themselves against liability. 

If, for example, a person is injured on the property, the landowner could be held liable for any resulting damage. Having liability insurance can help protect the landowner from financial losses in these situations. It's also crucial for landowners to have insurance coverage for any buildings or structures on the property, such as barns or sheds. This can help protect against damage or loss of these items, which can be a significant financial investment.

Farmer insurance responsibilities

In a landowner partnership, the property owner and the tenant farmer have essential responsibilities regarding purchasing liability and property insurance. The tenant farmer may need the responsibility of providing liability insurance to protect against claims of negligence or wrongdoing. The farmer is also responsible for obtaining crops and personal property insurance to protect against financial losses. 

Having the right insurance in place can help protect the farmer from financial losses if their crops are damaged or destroyed and can protect against liability in case of accidents on the property. It's also essential for farmers to have insurance coverage for their personal property, such as farm equipment and machinery. This can help protect against damage or loss of these items, which can be a significant financial investment. 

Why types of farm insurance do you need?

Overall, the specific types of insurance that a farmer needs will depend on the nature of their operations, risks, and circumstances. Both farmers and landowners must work with an experienced insurance professional to determine the proper coverage. Here are some types of farmer insurance options:

Dwelling or home protection

Dwelling protection is an essential consideration for farmers and other landowners, as the structures on their agricultural property can represent a significant financial investment. This can include the primary residence and other structures.

The purpose of dwelling protection is to provide financial compensation to the landowner if the structures on their property are damaged or destroyed. Protect against losses caused by natural disasters, fire, vandalism, and other types of damage.

In many cases, the buildings on a piece of agricultural land are not just used for housing or storage, including the primary residence, outbuildings, and other structures, but also for critical operations such as raising livestock or processing crops. As a result, the loss of these structures can significantly impact the landowner's ability to continue their operations. 

Farm Liability Protection

Agriculture production is not immune to lawsuits, and if someone is injured on your property, you could be liable for their injuries. However, this insurance protects landowners from financial liability if someone is injured on their farm or if their farming activities cause damage to someone else's property. 

For farmers, this can be important in cases where someone is injured while working for them or if their or hired hands' actions cause damage to the landowners’ property. Liability insurance can protect both parties from these types of lawsuits, providing financial protection in case of a claim.

Crop insurance

As the name suggests, crop insurance is designed to protect crops from damage or destruction. This can be an essential consideration for farmers who rely on their crops for income as it provides coverage for crops that are lost or damaged due to disease or pests that can affect the growth and yield of crops. 

But additionally, for landowners, crop insurance provides coverage for crops lost or damaged due to natural disasters, such as drought, frost, and hail.

Livestock insurance

Livestock insurance provides coverage for losses due to illness, injury, or death of farm animals. This can be particularly important for farmers who raise livestock, as losing even a single animal can have a significant financial impact. 

Livestock insurance covers animals lost or injured due to natural disasters, disease, or theft. It can also offer a range for lost income if your animals cannot be sold or used for breeding.

Machinery & Equipment Insurance

Farming equipment is a significant investment, and if something happens to it, the costs of repairing or replacing it can be staggering. However, equipment insurance can provide coverage for farming equipment, protecting it from damage, theft, or other losses. This covers losses due to damage or theft of farm machinery and equipment. This can be an essential consideration for farmers, as the cost of replacing damaged or stolen equipment can be high. 

Final thoughts on farmland insurance responsibilities

Overall, it's crucial for both parties in a landowner-farmer tenant partnership to have appropriate insurance coverage to protect the property, themselves, and any structures on the land. This can help ensure the success and sustainability of the partnership. 

By working together and having the proper insurance, the landowner and tenant farmer can focus on running their business without worrying about unexpected financial losses. 

Ready to get started with your own cash rental agreement? Get started with us today.