PrintCurious about insurance for horse owners? Check out this three-part series that covers horse insurance, liability insurance and farm insurance. Sponsored by Taylor Harris Insurance Services.
Homeowner’s insurance is pretty much standard when you purchase a house. But what if the house has a 10-stall barn, riding ring and machine shed housing a tractor behind it?
Then you’re looking at farm insurance.
Keep in mind that farm insurance is separate from any liability insurance you might hold on a property. Farm insurance covers the physical attributes of the farm—buildings and vehicles, etc.—while liability insurance protects you against any lawsuits or claims made arising from whatever equine activities take place on the property. Farm insurance helps protect you from financial loss if something unexpected—such as fire, windstorm or other covered loss—happens.
E. Sue Bopp, of the EMO Insurance Agency, recommends thinking about insurance while you’re farm shopping. “If you’re buying a farm, ask who insures it now,” she said. “The real estate agent would be your resource for estimating the costs for that. Especially if you’re buying outside your current state, you’d want to know what company they use and how much the insurance costs them every year.”
It might also be helpful to start with the existing insurance company for a quote, since they know the property.
How Does Farm Insurance Work?
While an appraiser sets the value of your home during the purchase process, an insurance adjustor assesses the value of your property’s other buildings.
“They measure the buildings, and they do cost estimators—it goes into a computer program and comes out with a value. It’s straightforward,” Bopp said.
There are three basic levels of coverage in a typical homeowner’s policy.
- Replacement Cost: This coverage pays the full amount of assessed value to repair or replace the damaged area of the home without regard to depreciation. You must insure your home for at least 80 percent of the replacement cost, and replacement cost must be indicated in your policy.
- Guaranteed Replacement Cost: This policy pays up to 125 percent of the amount of insurance you have on your home if you need to repair or replace it. This coverage helps when a storm does widespread damage and pushes the cost of labor and materials above the amount it would normally cost to replace your home.
- Actual Cash Value: This basic home insurance reimburses you for covered losses to your home up to current value; the age, condition and worth of your home are taken into account when settling losses.
“Most people insure for replacement cost, but keep in mind you have to insure for 80 percent of the value to get full replacement cost,” Bopp said. “For example, if you had a $100,000 house, you’d have to insure it for 80,000 to get replacement cost. If it burns to the ground, you’d get $100,000, not $80,000.”
The cost of your policy will depend on the value of your property, your location (state and county) and your deductible.
Especially on large farms, it may be a good idea to have separate policies on the home and the farm buildings.
