Resources to Help You Develop an Insurance Risk Management Plan for Your Farm | Agriculture Business & Agritourism News

Now is the time to develop an insurance risk management plan.

Let’s be honest, some business managers have pondered the question “Why bother with insurance?” at some point in their career.

Possibly it was when they were starting a business, shopping for a new insurance quote, looking for ways to reduce overhead costs, or making a premium payment. Knowing how to use insurance properly can be confusing.

Extension educators Lynn Kime and Linda Falcone explain insurance is a form of risk management that shifts some of the risk of operating the business to the insurance carrier.

Insurance was designed to cover pure risks — the uncertainty or chance of a loss from a situation or event that could occur.

With the high risk exposure in agribusiness, insurance policy options should be carefully considered for proper coverage.

Before exploring insurance options, it is important to review your understanding of risk on your specific operation. If you’re not sure where to start, here are some helpful tools adapted from an Exploring a Small Farm Dream course to guide an internal assessment:

First, prepare a SWOT analysis. A SWOT analysis (strengths, weaknesses, opportunities, and threats) is a process that can provide insights into the past and think of solutions to existing or potential issues for your business. Learn more about how to conduct a SWOT analysis with your planning team here.

Next complete the USDA Risk Management Checklist. After you identify the business vision, goals and objectives, do a risk management inventory. The USDA Risk Management Checklist and User’s Guide covers production, marketing, financial, legal, general, food safety and electronic components.

The questions will prompt you to consider risk in each of these areas and identify where to get additional information. The material is available here.

Next review production and financial projections. Consider reviewing cash flows, balance sheets, and income statements. Sign up for the FarmSense online course that explores these topics in depth.

It is important to understand your levels of risk. There are varying levels of risk associated with people entering your property. Learn more about these levels of risk here.

The next step is to speak with a licensed insurance agent or broker. Do your research to find an agency or brokerage that meets your business needs and service expectations. Talking to your neighboring farmers is a good place to begin.

Most agencies or brokerages offer some form of business or agribusiness insurance, but a single company may not have all the policies you need. Depending on your business type, it may be common to have multiple insurers.

As you begin to request insurance quotes, be prepared to provide certain business information. This will save time in the long run and improve the accuracy of your quoted premium. You must be honest as leaving things out can lead to unwanted risk exposure.

The information needed includes employer identification number, year the business was established, a detailed description of business operations, and a detailed description of buildings and structures, including construction type, year built, and square footage.

You will also need employees’ names and drivers’ license numbers, if applicable with business vehicles; vehicle identification numbers for business vehicles and equipment, including tractors, ATVs and trailers; gross annual income and gross annual sales; the value of assets, including specific figures for large items; the dollar amount of liability protection you are considering; and a description of any past losses you have experienced in the business.

Once you have a few quotes, ask plenty of questions for a clear understanding of what is included within each quote. Have an agent sit down with you and discuss what each coverage means. Do not sign anything until you fully understand and have reviewed all details of the documents.

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