What Kind of Insurance Do You Need for a Dairy Farm

A dairy farm can result in a lot of damage or injuries; that's why insurance is so important.

Depending on the size of the farm and the type of operations run there, a dairy farm will need general liability insurance, worker's compensation insurance, product liability insurance, commercial property insurance, business owner's insurance, commercial auto insurance, and possibly others.

So what does your farm need? Here's a list to explain the different coverages and what kind of damage each policy covers.

You should cover all your bases when it comes to insurance!

Coverage Available for Dairy Farms

Dairy farmers come across risks and dangerous exposures on a daily basis. These can cause a lot of liability on the farmer's part, which is why insurance is so necessary.

Even the simplest accidents can lead to big problems. You'd be in trouble if a storm or other natural disaster damages your buildings and herd, or if a thief steals some expensive equipment, or if someone files a lawsuit against you and your products.

In any of these cases, you'll need insurance to prevent you from suffering a serious financial loss.

But what kind of insurance do you need? There's a different kind of coverage for each of these scenarios, and the right one can save you from financial ruin.

In some states, different insurance policies are required by law. But even if they aren't, it's usually a good idea to invest in the policies anyway.

Here are a few policies you should look into:

Of course, the coverage you need with these policies and others depends on a variety of factors, such as the size of your herd and the acreage of your farm, the equipment you use, how many employees you hire, and your farm's own unique needs.

For a good, broad agricultural insurance provider, see Cover Corps here.

Liability Insurances

"Liability" refers to an insurance product that provides the insured party with protection against claims from injuries and damage to other people or property. Liability insurance covers any legal cost or payout you'll have to give if you are found to be legally liable for a problem.

There are several different types of liability insurance available for dairy farmers. Let's look at each of them below.

Premises Liability 

Every dairy farm has moderate exposure to premises liabilities. FDA inspectors, veterinarians, and any kind of visitor to your farm have the potential to get injured. 

Dairy farms aren't the safest places because they are full of uneven walking surfaces, dangerous equipment, and large animals that pose a threat due to their size alone.

To prevent injuries or accidents, visitors should always be accompanied by an employee. High-danger areas should be restricted and secure to keep visitors from wandering where they're not meant to be. 

Keep your fences and barns well maintained to prevent your herd from straying and causing property damage.

If you're running a retail dairy farm, you should hire some form of housekeeping to clean the premises and maintain the property, so you can keep everything in proper shape and prevent possible accidents.

All exits should be visibly marked; all alarms and safety equipment should be up to regulation and checked regularly

A dairy farm may attract trespassers, thieves, and vandals-- take the necessary precautions by installing security measures, such as security cameras and locks. Electronic locks are also suggested, as these locks are impossible to pick or break open.

Product Liability 

All raw milk should be tested before it is delivered to milk processors. The dairy workplace must meet all FDA specifications, and procedures must be in place to ensure sanitary working and processing conditions. To prevent contamination, foreign substances should never enter the processing area. To ensure quality control, and on-site testing laboratory should perform tests before the product is ever shipped out.

Transportation tanks should be cleaned continuously, and the cleaning should be fully documented. Ensure that products do not come into contact with chemicals such as insecticides and pesticides, as this will contaminate the products. Date and rotate your product stock-- this is a crucial factor in preventing a product risk.

In the case of product liability, the most crucial factor will be an effective working recall program. Establish a recall program that can be activated and enacted immediately. This will prevent contaminated products from being put into rotation and shipped out.

Environmental Impairment Liability 

Dairy Farmers cannot control mother nature, so it is of moderate importance that you have insurance coverage for natural disasters, as well as coverage for air, land, or water pollution.

This pollution can be caused by applying chemicals and pesticides, inappropriate disposal of animal waste, and fuel storage tanks for motor vehicles.

Larger dairy farms, or those raising animals in confined areas, may have on-site manure lagoons that produce ammonia, carbon dioxide, hydrogen sulfide, and methane. All of these chemicals are hazardous to humans and animals alike. If you ship out your herd's manure, a spill or accident in shipping may result in off-premises pollution. If you use underground storage tanks, a UST insurance policy will be required.

Any drugs, needles, or syringes used to medicate or artificially inseminate your animals are considered to be biohazard waste and require proper disposal. If biohazard safety measures are not followed, there is a high risk of product contamination and other potential dangers.

Risk & Exposure Insurance

When considering insurance, "exposure" means an individual or business' susceptibility to loss or risks encountered in daily life or the ordinary course of business. In clearer terms, it means the potential for accidents or other losses.

When one accident can create a series of large losses, it is important to be properly insured. Learn more about the different forms of risk and exposure insurance policies for dairy farms in the following sections.

Dairy Revenue Protection

Part of the risk of owning a dairy farm is the drop in milk prices. Jessica from Cover Corps explained that with Dairy Revenue Protection, if the price of milk declines, you will not experience a loss in revenue.

Dairy Revenue Protection is a crucial form of insurance when running a dairy farm. Most insurance companies will charge quarterly. To get an estimate for your Dairy Revenue Protection insurance, check out the United States Department of Agricultures' Risk Management Agency's Cost Estimator!

This cost estimator can also be used to calculate other insurance costs around the farm.

Property Exposures 

These risks are high, and insurance coverage for the possible damage is absolutely vital. A dairy farm can easily go up in flames due to heating equipment, motor vehicle oils and fuels, electrical fixtures, and milking equipment that may be housed next to hay, straw, and animal feed.

Machinery and equipment must be regularly inspected and maintained to avoid wear and tear because old equipment leads to overheating and an added potential for fire damage. Any electrical wiring must be up to date and run at a sufficient capacity.

All machinery should be grounded to prevent static buildup. Electrical fixtures should be dust and moisture-proof and be regularly cleaned.

Dairy farms are required to meet extremely high sterility requirements. This environment control prevents most fire exposures.

However, even a small fire can cause total loss of product, as state, local, and federal regulations require the disposal of any stock and materials that have been exposed to excessive heat, smoke, fire, water, or any chemicals.

In rural areas, firefighter response time may be slow, and an adequate water supply to douse a fire may not be readily available.

Do your best to prevent the risk of starting a fire-- keep accelerants away from electrical sources, and keep fire hydrants easily accessible and up to date. Ammonia is highly combustible and found in abundance on a dairy farm, whether from chemicals or manure. Install an ammonia detection system.

Fire-fighting procedures should also be put in place, including protocols for the safe evacuation of the animals. Fire detection systems and smoke detectors are required in dairy farms. Smoking should be prohibited on the premises to reduce the risk as well.

Fire is not the only danger your property may face. Lightning may strike unprotected buildings, and severe winds and tornados can destroy property. If refrigeration and cooling equipment malfunctions or loses power, the product will spoil, and you may face severe losses. Controls and alarms should be put into place to warn if the power goes out or if the temperature in coolers and freezers starts to rise.

Workers Compensation Exposures 

Dairy farm employees are at high risk for potential injury. Between running machinery and interacting with animals that can be unpredictable (possibly biting, kicking, or trampling employees), it can be a risky job. Employees can also pick up diseases from working with animals and can be easily injured when handling the animals in any way.

Tripping, falling, burns from overheated machinery, injuries and muscle strain from heavy lifting, and vision and hearing impairment are all common injuries for dairy farm workers. Other risks include exposure to chemicals, odors from animal waste, and organic dust. All these can lead to respiratory issues. Workers can even suffocate in confined spaces like grain bins, silos, or shipping tanks.

To reduce these risks, and prevent serious injury, thorough training, careful supervision, and clear communication are important to maintaining a safe work environment. Safety equipment should be supplied and required, and equipment should be regularly checked and maintained.

However, not all injuries and accidents can be prevented. So when one of your employees is hurt on the job, you'll want to have insurance coverage for worker's compensation.

Crime Exposure 

Whether it's employee dishonesty or theft, crime on a dairy farm is relatively low. Milking equipment and the animals aren't usually prime targets for thieves, but the prescription medication for your animals may be worth the trouble for some people.

Background checks should be conducted on all potential employees before they are hired. Inventory should be recorded, and access should be tightly controlled. If any money is handled, the responsibility should be separated; no employee should handle both receiving and disbursing payments. If there are retail operations on-premises or if products are delivered to customers, money, and securities insurance coverage should be considered.

Coverage for product liability is mandatory in most states, and rightfully so. Because you are making and selling a product for consumption, you must have insurance coverage in case of contamination or spoilage.

Equipment Breakdown Exposure

Just like they can't control mother nature, farmers can't predict when their equipment will fail. Breakdown exposure is high, and you'll most likely need insurance coverage, just in case your milking and processing equipment malfunctions or breaks down.

Inland Marine Exposures

These exposures include accounts receivable if your dairy bills customers, any computers (which can include controls for automated milking equipment), livestock, equipment, and valuable papers and records.

Mobile equipment, commonly used for cleaning barns and moving animals, is covered under this insurance. If your farm grows its own feed, a wide range of farm equipment will be needed.

Valuable papers include pedigree information, veterinarian records, any FDA Grade A requirement records, and any product information that may be needed in case of a product recall.

Livestock is highly valued on a dairy farm and can be covered by animal mortality insurance. This way, if one of your animals dies unexpectedly, you will be reimbursed for their monetary worth.

If you are shipping your products, transit coverage will also be needed. Bulk milk must be transported in tankers used only for milk; each tanker must be sanitized after each use. Milk tankers are bulky and can easily overturn; overturning when in transit will result in a total loss of the transported product. Refrigerated trucks used to transport dairy products can malfunction as well, which will result in spoiled milk. Transit coverage will cover these losses, so you will not be financially ruined by a simple accident.

Business Automobile Exposures

Automobile exposure can be limited if hired processors are used to transport the product. However, if your dairy delivers its own product or animals, the risk of exposure increases. To prevent risk and ensure coverage, drivers must have the necessary licenses and acceptable MVR records and must be specifically trained on how to handle dairy transport vehicles and cattle trailers. All vehicles must be well maintained, regularly checked, and have well-kept and thorough records.

Insurance Cost

The average price of a General Liability Insurance policy ranges from $77 to $99 a month, adding up to $1,000 to $2,000 a year. The cost of insurance can vary depending on your location, the size of your farm, how many cows you have, and what kind and how much equipment you use.

In any case, paying for insurance is much cheaper than it will be to pay hundreds of thousands of dollars out of pocket. A simple accident or injury can lead to financial ruin for your dairy farm. Call an insurance agency for a price quote, and search for the best deal.

Conclusion

To find out what types of insurance coverage you should purchase, how much coverage you will need, and the specific cost of both insurance and coverage, you should speak with an insurance broker. A professional insurance broker will be able to give you more specific information and can even offer umbrella policies that will lump several types of coverage together. Deals like this will save you money in the long run and will be well worth it should something happen on your farm.