Insurance coverage: How much do you really need?

Reid Henderson


  • Purchase workers’ compensation when possible.
  • Insurance can help pay defence costs even if you’re not found liable.
  • Look for gaps in your coverage, especially on outbuildings and tools.

Do you recommend producers have their employees under workers’ compensation as well as having liability insurance, or is it enough to have just one?

I would say, first and foremost, if you’re eligible, purchase workers’ compensation. It’s different in every province. Some allow family members to be on workers’ compensation. Second, carry liability insurance. Everyone asks, “How much liability insurance should I buy?” and I always say, “As much as you can,” because you don’t know what claim might occur.

What about contract workers on the farm?

If you have a contractor coming onto your property, whether it’s an electrician, a plumber, or even a custom farming operation doing some combining or spraying, ask for written confirmation of workers’ compensation coverage and commercial general liability coverage. By law, if that person is on your property working for you and they fail to have workers’ compensation and general liability, you then become the employer and are liable and responsible for that person whether they hurt themselves or injure someone else.

Buy as much liability coverage as you can, because you don’t know what claim might occur.

Are producers liable even if they’ve taken all due care and attention, or only in cases where things haven’t been done properly?

In both cases, you could be drawn in. Nothing prevents someone from attempting to sue you. Even though you may be found not liable in our court system, you still have defence costs and that could be in the tens, twenties or even hundreds of thousands of dollars depending on the complexity of the case.

With general insurance, do you find that producers have adequate coverage or are there gaps?

There are two big shortfalls I often find when I do a review of insurance. One is coverage on the farm buildings. Many times we have buildings that were built 20 or 30 years ago with a work crew, bringing in some neighbours to help out, and they put up a building fairly inexpensively. Unfortunately, in that 20 or 30 years’ time, all the constructions costs have increased exponentially.

The second huge gap we see is tool coverage. When you have a farm that is multi-generational, you have a multi-generational accumulation of tools and equipment. You can walk into a farm shop and some of them are fantastic. There are hundreds of thousands of dollars’ worth of tools on more and more farms. All of a sudden when it comes time to claim, they’ve never updated their list and walked through that shop with their insurance provider to create a replacement cost evaluation.

Can a producer get replacement value on a building when the depreciated value of that building on paper might not be anywhere near replacement value?

Where we see a little bit of confusion is when there might be an asset on the farm that’s been depreciated, but it’s a great building – it’s solid, has good bones, and there’s upkeep and maintenance. If we have a building at 25 years old, but there’s full upkeep and maintenance – it’s in great shape, the shingles aren’t curling, the electrical is all updated – there is the opportunity for a full replacement cost as long as we have insured a value.

What about business interruption insurance? Why is it important?

Business interruption is a huge issue, not only in agriculture but in any other industry buying insurance. The statistics say that 50 per cent of businesses never re-open after a major loss because of lack of, or inadequate, business interruption insurance. Essentially, business interruption insurance is income replacement. Let’s say we have a dairy barn operation that burns to the ground. That farmer is going to have ongoing expenses and costs to be paid, but he’s not getting a monthly milk cheque because he’s not producing anything.

For grain operations, it’s not so much a business interruption exposure, but a loss of use exposure.

The combine always burns on September 5, it’s never in May. So it’s the middle of harvest, the combine burns, you should have enough loss of use coverage in that policy to go out and rent another combine.

Should producers expect their insurance broker to actually come out to the farm and look at things?

Absolutely. Insist on what I call the “kitchen table meeting” or “in-farm office sit down.” It’s over that cup of coffee that a lot of things will be picked up – risks and exposures that you as a farmer may not have realized, or your agent or broker may not have known about.

Repurposed from a May/June 2015 AgriSuccess article.

Reid Henderson is leader of risk management and insurance for Agri-Trend Business Management.
Raised on a mixed farm near Minitonas, Man., Reid has over 20 years of insurance experience and expertise.

VIDEO: Watch the full interview with Reid.