Learn when to recommend a commercial farm policy and when a homeowners policy with a farming endorsement will suffice.
Homeowners have small farms and farm animals for various reasons. From wanting easy access to fresh vegetables and animal products to improving their physical and mental health or even earning a little side income at a farmers markets.
These homeowners may think of themselves as hobbyists, but at what point do their hobbies present risks that only a commercial farm policy can cover?
Ask clients with farms the following five questions so you can steer them toward the right coverage—whether it's a homeowners policy with an incidental farming endorsement or a commercial farm policy.
1) Do you have more than 10 acres? Some people own homes situated on 10, 50 or even 100 acres simply because they don't want close neighbors. These homes are usually eligible for a homeowners policy, subject to acreage guidelines. However, if the owner uses that acreage for farming and related business activities that entail additional liability, they should consider a commercial farm policy.
2) Do you have a hobby farm? Speaking of hobby farms, if a homeowner has one, you should take a close look at what it entails in terms of size, owned equipment, outbuildings and earned revenue, if any. Does the owner use pesticides extensively? Hire temporary workers to harvest crops or repair farm equipment? Any farm activity that generates significant secondary income or exposes the homeowner to a liability that falls outside the coverages of a homeowners policy needs commercial farm coverage.
3) Do you have any animals other than house pets? Animals can be tricky. It's not just a matter of whether someone has horses, cows, chickens or other farm animals, but how many and what they do with them. Carriers usually set a limit on the number of animals homeowners can include on a homeowners policy—and a homeowners policy wouldn't cover their use for commercial activities. Horses are particularly difficult to cover with a homeowners policy. Even if their horses aren't used commercially, make sure you ask how many the client has, who rides them and how often.
4) Do you have any large equipment or additional structures? Large equipment and additional structures—think tractors and barns—can be tough to cover under a homeowners policy, especially if they are high in value. For example, Safeco's incidental farming endorsement for home policies provides up to $10,000 for farm personal property, but even a small lawn tractor's value can exceed that amount. Make sure you create an inventory of all a client's farm personal property and evaluate its eligibility for coverage under carriers' homeowners products. Also, keep in mind that reconstruction estimates for farm structures differ from those for houses, so the customer may need to arrange a separate evaluation of farm structures if they decide to cover them under a homeowners policy.
5) Do you hire anyone to help with farm work? While every carrier has different restrictions, covering workers, even temporary help, is typically challenging under a personal lines policy. Some carriers will allow hired help provided they do not live on the premises. Make sure you understand if and how the homeowner uses workers to determine if that arrangement is covered under a carrier's eligibility guidelines.