Farm Insurance 101: Farm Extra Expense

Farm Extra Expense coverage is a component of a farmowners insurance policy designed to help a farm continue operations after a covered loss. Here’s a detailed explanation of what it does:

Purpose

The primary goal of Farm Extra Expense coverage is to ensure that a farm can maintain its normal operations after a loss by covering the additional costs that arise from the loss.

Coverage Inclusions

Farm Extra Expense coverage typically includes:

1. Extra Operating Costs: These are additional expenses incurred to continue operations after a covered loss. For instance, if a barn is damaged and the farmer needs to rent temporary storage or facilities to keep livestock or equipment, those costs would be covered.
2. Temporary Relocation Costs: If the farm operations need to be temporarily relocated to another site due to the damage, the expenses associated with the move and the setup at the new location would be covered.
3. Extra Labor Costs: Sometimes, additional labor may be required to manage the operations after a loss. This could include hiring temporary workers or paying overtime to existing employees.
4. Equipment Rentals: If specialized equipment is damaged and needs to be rented while repairs or replacements are being made, these rental costs can be covered.
5. Utilities and Services: Any additional utility or service costs required to maintain operations, such as extra fuel, electricity, or water, might also be covered under this provision.

Benefits

• Business Continuity: The primary benefit is to ensure that the farm can continue its operations with minimal disruption, thereby maintaining revenue flow and preventing long-term financial damage.
• Financial Protection: It provides financial support for unforeseen expenses that could otherwise strain the farm’s finances.

Limits and Exclusions

• Coverage Limits: There will be a specified limit on how much the insurance company will pay under this coverage. It’s important for the policyholder to understand these limits to ensure they have adequate coverage.
• Exclusions: Not all expenses may be covered. For example, the cost of permanent improvements or upgrades would not typically be covered. The policy will outline specific exclusions.

Example

Imagine a scenario where a severe storm damages a barn that houses dairy cows. The barn is uninhabitable, and the farmer needs to rent a nearby facility to house the cows temporarily. The cost of renting the facility, transporting the cows, and any additional labor required to manage the cows at the new location would be covered under the Farm Extra Expense coverage.

In summary, Farm Extra Expense coverage is a critical component of a farmowners insurance policy, providing the necessary financial support to manage extra costs and maintain operations after a covered loss.

Happy farming!

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To learn more about the insurance products available for farm risk management, reach out to Chelsea Heatherington at Kingsgate Insurance.

Chelsea Heatherington, Farm & Ag Specialist

Call or Text: 515-302-8400

Email: chelsea@kingsgateins.com