This is the coverage that applies to any building on your property that is not the home. The following farm buildings fall under this coverage; Barns, Silos, Sheds, Grain Bins, Feed Tanks, Manure Tanks and other farm related structures such as generator buildings.
When determining the coverage limit for a farm building the most important consideration is to know what is included in the rebuilding cost for the building. Generally, items like stabling, heating and ventilation equipment are included whereas electronic equipment or silo unloaders are not. It’s important to work with your broker to clarify what falls part under you Farm Outbuilding Coverage and what needs to be specifically covered. This should include complete rebuilding evaluations using the most up to date programs available to make sure that, should the worst happen, you will be able to get the farm building rebuilt without having to go into your own pocket.
For most farm buildings replacement cost coverage is strongly recommend. This coverage pays up to the limit of coverage listed on the policy without deduction for depreciation. However, there are also actual cash value options available. This is a method of coverage that uses the rebuilding cost of the farm building but is subject to depreciation based on the age of the building. This is useful for coverage on buildings that you still use but would never rebuild in the same way such as older bank barns.
People are often surprised at how much insurance is recommended to cover their outbuildings. The reason is that the rebuilding cost is often higher than what it cost to build the outbuilding in the first place. This is a result of ever-increasing costs for labor and material along with the fact that the barn needs to be re-built right away, not on the builder’s schedule. The reason that you need to have your outbuildings insured to their full rebuilding or replacement value is the Co-insurance clause that is included in all farm insurance policies. Co-insurance is a method that the insurance companies have to limit payment in the event that a farm building is underinsured, and a claim occurs.
Click here for an explanation of co-insurance. In the case of underinsurance on a barn, a small fire could result in you only get paid for part of the cost of repairing the barn. As your broker, it’s our job to make sure that does not happen.
The next concern for farm building insurance is to know what risks you are covered for. Comprehensive coverage ensures that you’re covered for all risks except for the ones that are specifically excluded such as deterioration or flood. The other coverage type is called named perils. It only provides coverage for causes of loss that are specifically listed, such as fire or lightning.
You should also consider other coverages that are available but are not generally covered under most comprehensive or named peril policies. These extended coverages could include flood, earthquake and in some cases power surge or snow load. These coverages may or may not be right for your farm but it’s important to discuss them with your broker to determine which are worth it to you to keep your farm safe as cost and availability for these coverages can vary.
The final consideration for replacement cost coverage is the Rebuilding Clause. Most policies are worded so that they will only pay for the full rebuilding of a destroyed farm building within a certain distance of the damaged building. That means that if a building is destroyed in most cases you will be required to rebuild on or close to the foundation of the destroyed building or settle at a cash value. Your broker should clarify any of these clauses, so you have a clear understanding before you purchase coverage.