Understanding Farm Property Insurance for Massachusetts Farms

Farms in Massachusetts are often diverse and complex with many different crops and/or livestock grown, and a variety of market channels being employed. This diversity and complexity can introduce a range of business risks for the farmers to contend with. Having the right insurance can help to manage that risk.

There are several types of insurance that can be important, or even critical, to farms. Some can even be required. Farm insurance policies can include coverage for various types of liability, workers’ compensation, crop loss due to declared disasters, healthcare, vehicles, etc. One of the most important types of coverage is farm property insurance, which covers the physical assets of your farm, like your buildings and other structures, equipment, implements, vehicles, and other tools of the trade. Let’s break down what farm property insurance is, why you need it, and what to look for when choosing a policy in Massachusetts.

What is Farm Property Insurance?

Farm Property Insurance is a type of coverage designed specifically for farms. It helps protect the structures, equipment, and other property that are used in your farming operations. Examples of farm property can include:

Farm Buildings: Your barn, silos, storage facilities, greenhouses, and other structures.
Farm Equipment: Tractors, combines, plows, and other machinery essential for daily operations.
Farm Supplies: Fertilizer, pesticides, potting soil, seeds, stored feed, stacked hay, crates, bins, pulp containers, seeding trays, crates, etc.
Livestock: Insurance can cover animals that are part of your farm operations, like cows, pigs, and chickens.
Stored Crops: Such as apples, potatoes, cabbage, carrots, or any other crop that is damaged or lost while stored between harvest and distribution.
Stored Systems: Irrigation pipes, sugaring buckets or pipeline, electric fencing materials, etc.
Tools: Hand tools, power tools, automotive/tractor repair tools, welding equipment, power saws, etc.
And more…

TIP: Farm property can be grouped into categories or listed individually in a policy.

Without farm property insurance, a major loss (like fire or storm damage) could leave you with a financial burden for replacing or rebuilding lost or damaged property that is hard or impossible to recover from.

Why Do Massachusetts Farms Need Farm Property Insurance?

Farming in Massachusetts comes with many challenges and risks. Let’s look at a few of the threats that farm property insurance may be able to help protect against:

Severe Weather: Massachusetts can experience extreme weather, including snowstorms, high winds, severe lightning storms, and hail[KW1.1]. These events can cause significant damage to buildings, equipment, and other property. Insurance can help cover some of the cost of repairs or replacements.
High Equipment Costs: Farm machinery can be expensive to replace or repair. Farm property insurance can help you avoid a major financial setback if something happens to your equipment.
High Construction Costs: Repairing or rebuilding farm structures that have been damaged or destroyed can be extremely expensive. Materials and labor costs have increased significantly in recent years and can make a repair or rebuild prohibitively expensive.
Fire and Theft: Fires, which can be triggered by everything from faulty wiring to dry conditions, can quickly destroy barns, storage facilities, and equipment. Theft can also be a concern, especially if you store expensive equipment or goods at your farm.

What are Some Farm Property Coverage Types?

Property can be listed in farm policies in a variety of ways depending on the categories or ‘buckets’ that will make the most sense given the types of property covered, anticipated perils and the implications of these things on premium costs. Two main coverage types are Blanket Coverage and Scheduled Coverage.

Blanket coverage is designed to cover a group of items for a pooled value. This can be good for things like tools where individual items are numerous and of lower value, but the group, as a whole, is valuable or for covering the contents of a structure where the items, again, are numerous but varied. Blanket coverage provides a total limit of the combined value of everything under the blanket. This does require some level of inventory and valuation of the items covered but it’s not as rigorous as itemizing things for scheduled coverage. It is possible to explicitly exclude certain items from a blanketed group. One might do this for an item that will drive premium cost up and where the farmer is willing to take the risk of loss rather than transfer that risk to the insurer.

Scheduled coverage is designed for property where listing individual items separately is recommended. This is usually for higher valued items such as structures, tractors, and implements or items that are unique for another reason and don’t fit under blanket coverage.

Note: You can combine blanket and scheduled coverage in the same policy.

What Kind of Losses will Farm Property Insurance Cover?

Events that trigger a response from farm property insurance are referred to as ‘covered perils’. Covered Perils are events considered to be beyond the farmer’s control, also known as ‘acts of God’. Below is a list of perils that lead to property losses that can be covered in a farm property policy:

Fire & Lightning
Snow load (leading to collapse(
Windstorm – hurricane, tornado, microburst, etc.
Explosion
Riot or Civil Commotion
Aircraft
Vehicle
Smoke
Vandalism
Water (other than flood)
Hail (for other than crop damage)
Theft

You will be asked to ‘name’ the perils to be covered by your policy. Often insurers will offer packages for selecting coverage such as:

Basic – Fire and lightning only
Broad – Defined perils
Special – All perils except those that are excluded (i.e., you name the exclusions)

As a rule, the premium costs go up as you go from a broad to a special policy, but the protections offered by the plan also increase.

Caution – Make sure you are aware of any conditional exclusions defined by the insurance company. For example, there may be a requirement that you keep access roads passable for emergency vehicles for a policy to be in effect. If you have a fire in the winter and the farm road out to the tobacco barn hasn’t been plowed, the company may deny a claim for losses due the fire.

Business Continuity: Farming is a business, and if you face a major loss, it can disrupt your income. Business continuity coverage can help keep things running smoothly by providing financial support for ongoing bills like payroll, utilities, etc. while you rebuild or replace damaged property.

What Doesn’t Farm Property Insurance Cover?

While farm property insurance provides broad protection, there are certain things it may not cover, such as:

Flooding: Many standard policies do not include flood coverage. If you’re in an area prone to flooding, you might need additional coverage.
Earthquakes: Damage from earthquakes is typically excluded from farm property policies.
Production losses: If your crops or animals are damaged by pests, diseases, or other factors, the resulting losses would not typically be covered by a property insurance policy. There may be other policy options that address these perils (e.g., crop insurance).
Asbestos and PFAS Contamination: Check with your agent or broker to determine limitations for contamination coverage if you are concerned about it.
Maintenance Failures: If the damage is the result of a failure to keep up with maintenance (e.g., electrical or mechanical), you may be unable to collect on a policy claim. To get clarification on details of this requirement, ask your agent or broker.

How is the Value of Farm Property Coverage Determined?

When listing farm property to be covered either under blanket or scheduled coverage you must decide whether to elect coverage for replacement value or actual value.

Replacement Value – This is the cost to replace the lost item with a new one; no depreciation considered. This is sometimes called ‘new for old’ coverage. It will be the more expensive option.

Actual Value – This is the cost to replace the lost item with a ‘used’ one of similar value; depreciation is considered. This is sometimes called ‘old for old’ coverage. It will be the less expensive option.

In addition to choosing which value to choose for your coverage, you will also choose the percent of that value that you will receive for a claim. This is called the Coverage Level. Many insurers require coverage of at least 80% of the value (replacement or actual) of the property. If you choose to insure less than the minimum required amount, you may incur a co-insurance penalty.

Co-insurance Penalty – This is a very confusing element of farm property insurance. Underinsuring property can be a tempting way to lower premiums. However, doing so is seen by the insurer as presenting an inaccurate representation of the risk being transferred to the insurance company. In a claim situation, they may apply this clause to the pay-out of the policy. To calculate a co-insurance penalty, a formula is applied that compares the amount of coverage actually carried to the required amount and then applies that ratio to the claim amount.

Example: If your property is valued at $500,000 and your policy has an 80% co-insurance clause, you must insure your property for at least $400,000. If you only insure it for $250,000 you are underinsured by 30%. If you then have an event that causes $100,000 of damage, you may only receive a portion of that claim amount due to the co-insurance penalty. The payout will be based on $70,000 (30% less than $100,000). So, you will receive 80% of $70,000 ($56,000 minus deductible) and not the expected $80,000.

How Much Does Farm Property Insurance Cost?

The cost of farm property insurance in Massachusetts depends on a variety of factors, including:

Farm Size: Larger farms with more equipment and property to protect will generally have higher premiums.
Location: Farms in areas more likely to experience extreme weather (like coastal areas or regions prone to high winds might pay more.
Farm Type: Whether you run a dairy or other livestock farm, crop farm, or mixed operation will impact your policy needs.
Coverage Amount: The more coverage you need—whether for buildings, equipment, or livestock—the more expensive the policy will be.

Insurance companies will assess these factors to determine your premium. It’s a good idea to get quotes from multiple insurers to find a policy that fits your needs and budget.

How to Choose the Right Farm Property Insurance Policy in Massachusetts

When choosing farm property insurance, keep these tips in mind:

Assess Your Risks: Understand what risks are most common on your farm. For example, if you’re located in an area prone to high winds, make sure your policy covers wind damage.
Check for Special Coverages: Some policies offer additional options, like crop insurance, coverage for machinery breakdowns, liability insurance, or homeowner’s insurance if your home is also located on the same property. Make sure to ask about add-ons that could benefit your farm.
Review Deductibles and Limits: Make sure you’re comfortable with the deductible (the amount you pay out of pocket before insurance kicks in) and coverage limits (the maximum amount your insurer will pay).
Talk to an Agent or Broker: A local insurance agent or broker with experience in farm property insurance can help guide you through the process. They’ll be familiar with the specific needs of Massachusetts farms and can help you find the right policy. Agents typically work for one insurance company and a broker will be independent and can compare different companies to find the best fit for your situation.
Consider Long-Term Stability: Make sure your insurance company has a good reputation for paying claims and providing support in times of need. This is especially important for farm operations that rely on seasonal cycles and need quick recovery from losses.
Public Adjusters: If you have a qualifying event that triggers the need to make a claim, consider engaging an independent, or public adjuster if you’re not sure the insurer’s adjuster has calculated your claim amount correctly. This may cost extra but can result in a net gain if they uncover a discrepancy. However, make sure the adjuster is licensed in Massachusetts here.

Conclusion

Farm property insurance is an essential investment for Massachusetts farmers, offering protection against a wide range of risks that can threaten farm viability. Whether dealing with harsh weather, equipment breakdowns, or the day-to-day risks of running a farm, the right insurance policy can help protect assets and keep a farm business going following a disaster.
When shopping for insurance, consider the specific needs of your farm, speak with an experienced agent or broker, and make sure you’re getting comprehensive coverage for all your farm property.