Insuring your indoor farm can be tough to navigate. There are so many options that it can be hard to know what is best for you and your business. Last year, regional insurance broker InterWest Insurance joined with our sibling company Contain Inc to host a webinar on insurance options from indoor farms, and the outcomes from that work are below. For reference, Newbean Capital – which owns Indoor Ag-Con – isn’t an insurance broker or provider, and so is not giving advice on insurance in this document and recommends that you instead consult a professional local insurance broker (someone who can help you when it comes to your car insurance, the insurance on your machinery and other such things to do with your farm).
What’s the State of the Insurance Industry for Indoor Farming?
There are both benefits and downsides to insuring an indoor farm vs. an outdoor one. One benefit is that indoor farms generally provide better working conditions for employees. This can make it easier to be in compliance with OSHA. Indoor farming also offers less seasonal work, which can lead to a more stable workforce and less turnover. In addition, less use of pesticides could help indoor farmers to avoid lawsuits.
There are, however, a few downsides. The first, is that insuring additional structures can give you higher insurance costs. The second, and perhaps most challenging downside, is that the insurance industry is mostly unaware of indoor farming and adapts slowly to new approaches. The third is that there is a greater potential for uncovered total crop loss, where, for instance, an indoor farms loses power overnight.
How Does Your Structure Impact Your Coverage?
The type of structure of your indoor farm can have a big impact on premiums. For example, a warehouse is typically a sturdier type of structure than a greenhouse. If you are operating a greenhouse, the type of material can make a difference. Whether you are using plastic sheeting, plexi-glass or regular glass can make a big difference in whether or not an insurance company is even willing to offer you coverage and at what cost. Differences in your frame, from metal, to wood, or PVC piping can also make a difference to costs.
What Coverage is Required?
Worker’s Compensation – In almost all cases, if you have just one employee, worker’s compensation is required. The only possible exception is that in some states, if you have only family members working for you, it may be possible to not have this coverage.
Liability – Liability insurance protects you if someone wants to sue you. This could be for many reasons. For instance, if someone gets sick from your food, or trips and falls on your property.
Property – For wholly-owned farms, property insurance is not required. However, most landlords and lenders will require property insurance to protect all of your business property.
What Coverage is Not Required But Important to Have?
Crop Insurance – Crop insurance is useful if you can find it. There can be many reasons for losing crops that are covered by crop insurance, such as temperature, vandalism and theft.
Stock Throughput – A stock throughput insurance may only be practical for larger operations as it typically has a $5,000 annual minimum premium. This option covers everything and will replace crops lost at any stage that you would have received at the market sale price.
Boiler & Machinery – Boiler & Machinery insurance covers your equipment, whether it be a breakdown of the equipment, fire or loss of power.
Business Interruption – Business Interruption covers lost profits and ongoing expenses if you have a loss. For example, if you have a fire, you may still be required to pay rent, pay employees and want to recover lost profits.
Umbrella – Umbrella coverage is essentially excess liability. Some contracts may require you to have a certain level of liability and umbrella coverage can help meet those requirements.
Business Auto – You are only required to have business auto if you have a company vehicle. Keep in mind, there are very specific insurance rules that that you will need to be aware of when considering whether or not to carry this type of coverage.
Hired Auto Liability – This covers you and your company when renting a vehicle temporarily, such as when you are traveling for a trade show.
Non-Owned Auto Liability – If a vehicle is driven on behalf of your business, such as an employee running an errand or getting lunch for your business, you should consider non-owned auto liability.
Other Optional Coverage
Health & Employee Benefits – If your business has 50 or more employees, you are required to offer health and employee benefits, or you are subjected to a fine.
Directors & Officers Coverage – This covers disputes between business partners. If you have a business partner, this can cover you if your partner decides to sue you.
Employee Practices Liability Insurance (EPCI) – This covers you in wrongful termination, sexual harassment and discrimination lawsuits.
Credit Insurance – If you are a larger operation and have one to two key customers, credit insurance could be a good option. This will cover you if one of your customers is unable to pay you.
Patent & Trademark Insurance – This option offers you coverage for your special or unique products and processes. It also helps protect you from someone claiming you are stealing their unique intellectual property.
Key Person Life & Disability – If you have a key employee that would really set you back if you lost, this can help cover your loss if they were to pass away or become disabled.
What Don’t You Have to Buy?
Small Deductibles – If you rely on your insurance to cover catastrophic only events, you can save on premiums.
Property Insurance for Small Value Items – If you do not insure small value items like hand tools, you can save additional money on your premiums.
Vehicles that Never Leave a Farm – These vehicles can typically be covered by your farm liability coverage.
Too Many Millions in Coverage – If you are a small operation, it can be unnecessary to carry a large amount of coverage.
Overestimates in Sales – When you are estimating your sales, be realistic. If you overestimate your sales, you can be insuring for more than you need.
Want to know more?
Don’t miss the 6th Annual Indoor Ag Con May 2nd and 3rd at the Las Vegas Convention Center. Make sure to catch the session “What Insurance Should We Carry for Our Indoor Farm?” with speakers Tony Bruscia, Vice President and Dante Bellino, Vice President of Risk Management Service with InterWest Insurance Services. You can find the complete speaking agenda here. Want to attend? You can register here. Want to join our amazing variety of exhibitors? You can register to exhibit here.
Join Us at the 6th Annual Indoor Ag-Con on May 2-3, 2018
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