Transcript CSA School: By Farmers, For Farmers

Farm Risk Management
Joseph Bonelli
Department of Extension
College of Agriculture and Natural Resources
University Of Connecticut
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Successful Business Owners
• Have vision
• Have excellent people skills
• Consider the options and risks
• Understand the importance of alliances and
networks
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Successful Business Owners
• Have superior financial, production and time
management systems in place
• Have a complementary advisor team
• Have balanced management skills
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Risk Management
Why Manage Risk?
• Farming is a high-risk venture that brings with
it many uncertainties
• Farm profitability is directly related to how
well your business can handle these risks
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What Risks Need to be Managed
• Production
• Marketing
• Financial
• Legal
• Human Resource
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Options Available to Manage Risk
• Avoid Risk – Example: Grow an alternative crop
• Transfer Risk – Example: Purchase crop insurance
• Reduce the Risk – Example: Crop Diversification
• Retain the Risk – Example: Positive connection
between risk and net return
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Risk Management Strategies
The key is to select strategies that meet the
goals of your farm. A few, but certainly not all,
are:
• Purchase Crop Insurance
• Develop Business Plans
• Consider Enterprise Diversification
• Develop an Estate Plan
• Seek Professional Assistance
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Insurance Options
Buying business insurance is among the best ways
to prepare for the unexpected
Consider the following questions:
1. Could my farm continue if a disaster hit my
farm?
2. Could my farm withstand a liability claim?
3. Could my farm continue if my crops failed?
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More Questions
4. Could my farm continue if a key person in the
business died or became disabled?
5. If an employee is hurt on the farm, do I have
proper worker’s compensation insurance?
6. Have a considered someone hacking into my
farm’s social media presence?
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Other Considerations
1. Talk to a licensed insurance agent
2. Talk with your attorney about your risk
concerns
3. Make sure your agent always knows what
you are doing and how you are operating
your farm
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Other Considerations
4. You do not want to hear “That is not covered”
when you file a claim
5. Do not assume your homeowners insurance
policy will cover any aspect of your business
6. Shop and compare price, policies and service,
but remember, the least expensive policy
might not be the best when you file a claim
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Crop Insurance
• USDA RMA offers a federally subsidized crop
insurance program through private insurance
carriers
• Crop Insurance covers disasters such as
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Drought
Hail
Frost/freeze
Excessive moisture
Fire
Hurricanes
Insect & plant disease
Wildlife damage
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Crop Insurance
• Eligible crops in Connecticut include fresh
market sweet corn, corn, peaches, apples,
tobacco, nursery crops and potatoes
• Other crops may be eligible for coverage
through a written agreement
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Crop Insurance
• Revenue plans such as AGR and AGR-Lite are
also available
• The Non-insured Crop Assistance Program
(NAP) available from FSA
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Business Liability Insurance
• A farmer is liable if their action or inaction results
in personal injury to another person or another’s
property
• Many businesses buy general liability insurance
to cover claims of negligence
• Make sure your agent knows:
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What you are selling
What you are doing (such as delivering shares off site)
What shareholders are doing such as u-pick
The extent that shareholders visit and/or take part in farm
activities
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Property Insurance
• Property covers losses due to fire and other
perils
• Perils covered and exclusions may differ
between policies and carriers
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Health Insurance
• Health insurance covers expenses the result
from illness, accidents or injuries that occur
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Worker’s Compensation Insurance
• Connecticut requires employers to obtain worker’s
compensation insurance
• This type of insurance provides wage replacement
benefits and medical treatment for employees who
have been injured or who have become ill due to work
related injury or illness
• The amount of coverage and the employees that must
be covered must be discussed with your insurance
agent
• Make sure to discuss employer obligations if you have
interns, volunteers or students working on the farm
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Disability Insurance
• Disability insurance provides income to you or
your employee if you or they can not work
due to a covered event, including illness or
injury
• This is not mandatory
• It could be the farmers biggest risk
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Life Insurance
• Use as part of continuation, estate and/or
succession plan
• Consider the following questions:
» What are you trying to accomplish with life insurance?
» Could the same thing be accomplished by other means?
» Will my family be burdened financially by my death?
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Your Current Risk Management
Plan ?
Is the plan adequate to manage the increased risk exposures of the current
year?
Are you prepared to live-with the business plan interruptions that would
occur if a sizable loss/disaster occurred?
What is the deadline for making the needed changes to it?
What Action do you plan to take and when?
Remember it’s your responsibility to develop the plan…and to live with the
consequences of the plan
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Thank You
Questions?
[email protected]
“This institution is an equal opportunity provider.”
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