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Dairy Farm Equipment Insurance 101

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From planting and growing crops to ensuring your herd produces enough milk every season, the responsibilities of being a dairy farmer never cease. But staying on top of a busy operation is only half the battle when it comes to making a living in the business of dairy farming.

As the ability to stay efficient and profitable has become increasingly reliant on modern technologies, it's more important than ever to protect yourself and your assets. Whether you've invested in robotic milking machines or other types of dairy farm equipment, getting the right farm equipment insurance coverage can keep your farm operating safely and smoothly, while mitigating the risks of major financial losses, bankruptcy and even the wrath of Mother Nature.

Why you should insure dairy farm equipment

In general, investing in dairy farm insurance can give you peace of mind by protecting you from unexpected events such as physical damage and destruction, theft and loss of income. Farm equipment insurance is an especially important part of your policy if your dairy farm equipment breaks down and brings your operations to a halt. That's when adequate coverage is essential to cover the cost of repairs or replacement as well as lost income.

In addition to minimizing downtime and lost income, farm equipment insurance can help you focus on the things that matter: boosting the efficiency and cleanliness of your operations, enhancing the health of your herd, and securing your livelihood.

What is farm equipment insurance?

Although much of your equipment probably comes with a warranty for a period of time, that doesn't mean additional insurance coverage isn't necessary. Quite the opposite. Farm equipment insurance is much more comprehensive than a warranty, which only applies to a specific piece of equipment, may not always cover the costs of replacing items and doesn't compensate for lost income.

What farm equipment insurance covers

If you have farm equipment insurance, it can cover losses or damage related to items in your barns and other structures, including:

  • electrical equipment and electricity generators
  • boilers, sterilizers, air tanks and other types of pressure vessels
  • automated milk collection equipment
  • pasteurizers
  • manure pumps
  • mechanical systems
  • computerized and robotic equipment such as milkers and feeding apparatuses
  • alarm systems
  • conveyors
  • ventilation systems

Secure your financial future

Perhaps the most obvious benefit of insuring your dairy farm equipment is to protect your financial investment as well as the potential it represents for the next generation.

“Family-owned farms often serve as both the sole source of household income and the future retirement fund," says dairy farmer Tim Haynes, the fourth-generation owner of Superior Dairy in Garrett, Indiana.

Haynes is among a growing number of dairy producers who are installing milking robots on their farms in the hopes of improving their lifestyles, lowering operating costs and expanding without paying for additional labor. He estimates the value of his investment in his family-owned robotic dairy farm and smart barn to be between $1.5 to $2 million.

“A lot of family farms don't have much in the way of 401Ks or savings," he says. “Their plan might be to sell their assets off in retirement and live off the proceeds."

Save on cost of human labor

By removing or minimizing the need for human labor to milk cows, the time and manpower saved can be put towards other activities, such as improving animal health and reproduction.

Robotic systems powered by artificial intelligence can also mitigate the impact of rising costs of labor, says Haynes.

“For us, we were looking at our robotic system as an investment in the next generation for an industry that was already struggling with labor shortages before the Covid-19 pandemic," he says.

Compliance with lender requirements

If you had to take out a loan or sign a lease agreement to obtain your farm equipment, one of the conditions set by your lender is probably that you obtain insurance for it. Because the lender has a financial stake in your machinery, they will want to ensure their investment is protected in case something happens. Otherwise, you could be on the hook for a large bill that you might not be able to pay.

Compliance with legal requirements

The law requires that certain types of dairy farm equipment is insured. For instance, if you use an autonomous (self-driving) tractor or harvester on the farm, it is covered under the Motor Vehicles Act and must be insured accordingly. These regulations are typically in place for safety reasons, as some machinery or equipment could be dangerous if not regularly inspected and properly maintained.

Protection from cyberattacks

As automated technologies and sensitive electronic equipment on farms become more commonplace, you could also become a more attractive target for cyberattacks. Without insurance to cover camera and communications systems, robots controlled by smartphone apps and other equipment relying on WiFi to operate, you could face devastating losses if you get hacked.

“We've been milking with robots for the past two years and if our system got hacked, it would be a huge operational issue," says dairy farmer Hank Doelman, owner of James Road Dairy LLC in Rochester, Washington.

“I've heard of cases on robotic dairy farms that were completely held hostage by hackers," he says. "All the cows are inputted into the system; if something isn't quite correct, if only one number is off in the database, the robot won't milk the cow. It would be be a big job to get it restored, so getting insurance for cyberattacks absolutely does have value."

It's important to remember every farm property is different and every state has its own regulations. Selecting the right insurance coverage for your dairy farm can require professional assistance. For the most cost-effective solutions, consider getting the help of an independent insurance agent to walk through your farm with you and discuss specific incidents you should protect yourself against. Connect with us to build a plan that would work best for you.