Understanding umbrella: What's the difference between farm and personal umbrella insurance?

May 28, 2024

Learn about farm umbrella insurance, personal umbrella insurance, and how they differ from one another.

A couple discussing the difference between farm and personal umbrella insurance

When it comes to insurance coverage for liability, it is crucial to find the appropriate policy. However, this task is not always simple as everyone has unique requirements and faces different risks. To meet these diverse needs, insurance providers offer a range of options, including farm, personal, umbrella, and even farm umbrella liability policies.

Having multiple options is beneficial, but understanding the distinctions between them can be difficult when trying to select the right coverage for your specific needs. Therefore, in this discussion, we will explore the dissimilarities between farm umbrella insurance, personal umbrella insurance, and the underlying coverages they provide. 

Understanding the underlying liability policies

Umbrella insurance serves as an extra layer of liability protection beyond your existing coverages. To understand what farm and personal umbrella policies are, what they cover, and how they might differ from one another, we must first look at the underlying farm and personal liability coverages. 

What is a personal liability policy?

A personal liability policy, or PLP, is designed to offer an individual protection from a variety of scenarios and risks that could result in a lawsuit or litigation. 

For some insurance companies, personal liability is often included within a homeowners insurance policy along with property insurance, or part of a renters insurance policy in addition to unscheduled personal property coverage

However, for some companies, such as farm mutual insurance companies, personal liability must be offered as a separate product from the property insurance portion. This has the benefit of giving policyholders options when it comes to selecting coverage and allows them to further customize coverage based on their needs. 

Whether you have a separate PLP or have liability coverage as part of homeowners, it often serves as the requisite underlying insurance for an umbrella insurance policy. It's important to note that a PLP is tailored to risk profiles where farming and ranch activities, if present, are incidental to the primary purpose of the property. This is because a PLP is meant to cover individuals rather than professional entities or business ventures; they can cover you, the insured, but are not meant to cover something like a Limited Liability Corporation (LLC).

What is a farm liability policy?

As the name suggests, a farm liability policy (FLP) is designed to provide protections against risks that are common to the operation of a farm as a business. Unlike a personal liability policy, an FLP can apply to entities, such as a sole proprietorship or an LLC. In this way, an FLP more closely resembles a general commercial liability policy, although there are key differences. 

These policies still have exclusions for many business activities but have exceptions around farm-related business activities; it would not cover something like an ecommerce business but would cover activities like growing crops or raising livestock beyond an incidental capacity.   

How do they compare? Exclusions and endorsements

When comparing FLP and PLP, the differences mostly reside in the policy language surrounding exclusions and endorsements. 

Exclusions refer to certain risks or scenarios that a liability policy does not cover. On the other hand, an endorsement is a type of add-on which modifies the terms of the policy it is attached to. Endorsements can expand coverage but can also add exclusions to coverage. For example, if the liability policy provides coverage for XYZ, but you don't have XYZ, you may be able to add an endorsement which excludes that item. In a later section, we'll discuss why you might choose to add exclusions to your policy through an endorsement. 

Although coverage limits, deductibles, and premiums can vary between an FLP and PLP, the list of excluded coverages and the available optional add-ons account for many of the differences between the two. 

Farm liability policy exclusions and endorsements

In general, the endorsements and exclusions you'll find for an FLP are centered around farm operations and are designed to help you customize the policy to fit the needs of your farm or ranch. The following are some of the exclusions and endorsements that could be available for an FLP.

Optional Exclusions for Farming and Business. While a farm may be diverse in the various crops it grows and livestock it raises, it is certainly possible that an FLP has coverages that don't apply to your farm. That's why a FLP will offer a variety of exclusions to help you customize your policy to fit your needs. For example, a basic FLP might provide coverage for livestock. If you don't raise animals on your property, you could potentially add an exclusion to remove that coverage. 

Business Activity Endorsement. Although an FLP provides exceptions to the business exclusion, it is only centered around farm-related business pursuits. This means that other types of businesses, like crafts or ecommerce, aren't likely to be covered. However, adding a Business Activity Endorsement can expand the other types of businesses that are covered.

Animal Contests. For many people in the world of farming and ranching, livestock shows are an important part of life, especially if you have children who participate in organizations such as 4-H. Endorsements such as these extend coverage and allow bodily injury liability, property damage liability, and medical payments coverage to apply to certain events, shows, and state fairs that involve the use of livestock or animals. However, it's important to note that these endorsements aren't meant to cover professional contests or rodeos.

Extend Coverage to Farm Employees. Running a farm or ranch is a lot of work, and often requires the help of employees. This endorsement allows a farm employer to extend coverage to the insured's farm employees.

Agritainment. Owning a farm or ranch often provides opportunities beyond growing crops and raising livestock. Property owners will often open their land for a variety of outdoor entertainment activities, such as hunting, fishing, fruit and vegetable picking, camping, hiking - the list goes on. This endorsement provides coverage for bodily injury, property damage liability, along with medical payments coverage arising from the leasing or rental or holding for leasing or rental of an insured location to others for agritainment purposes.

Custom Farming. Custom Farming is an endorsement meant to cover farming operations that you might perform at a location that does not meet the definition of “insured location.” For example, this would apply if you plant or harvest crops at another person's farm, and you do so at the direction of that person and are paid for the work.

Although this list of exclusions and endorsements is by no means exhaustive, you can see just how customizable a farm liability policy can be. Of course, you'll want to make sure to speak with your insurance agent to address your specific needs. They will be able to walk you through all the necessary exclusions and endorsements to help you design a policy that's right for you.

Personal liability policy exclusions and endorsements

Incidental farming. Although a PLP is not intended for businesses or farms, they can be made to cover small farming operations for personal use. An Incidental Farming endorsement can extend coverage to cover small-scale farming and ranching as long as it isn't intended to be the primary source of income, or no more than 25% of an individual's income.

Home Business. 
As we've discussed, a PLP is not intended to cover professional or business activities and, in fact, most business pursuits are excluded from coverage. However, a Home Business endorsement can expand coverage by extending bodily injury, property damage liability, and medical payments to the insured's named home business.

It's important to note that this is intended for truly small home-based businesses or family businesses. As such, the insured should be the sole owner of the business, or relatives should be members of the insured's household, and the insured location should be the primary business location. This might be right for office, ecommerce, service, and craft-related home businesses, but wouldn't cover higher risk professional services, such as legal, insurance, engineering, or medical-related services.

Liquor Liability Exclusion. 
The Liquor Liability Exclusion is a mandatory endorsement which essentially excludes coverage for business activity that might require a liquor license. This could include the sale of alcohol, or the sale of alcohol for on-site consumption. 

Business Pursuits. 
This extends bodily injury and medical payments to non-farm business pursuits while employed by others. This would be for someone who works from home for a business they do not own. Such occupations might include clerical office employee, salesmen, collector, messenger, and teacher.

Permitted incidental occupancies. 
If you work for an accounting firm that has a downtown office, but you occasionally work from home, this might be an important endorsement. It offers coverage for necessary or incidental use of the residence premises for the described business where the home is not the primary business location.

Personal Injury. 
This endorsement would amend the definition of bodily injury to include personal injury, which covers libel, slander, or defamation of character. 

Shared exclusions and endorsements

Animal Exclusions. Whether you have a personal or farm liability policy, you will find mandatory exclusions that exclude coverage for certain types of animals that are considered to be dangerous. Usually, this includes a variety of dog breeds, but can exclude any animal that is considered to be vicious or potentially dangerous by state statute. Common dog breeds that fall into this category are Akita, Cane Corso, Chow Chow, Doberman, Dogo Argentino, Mastiff, Pit Bull, Presa Canario, Rottweiler, Staffordshire Terrier, Wolf, or Wolf Hybrids. 

Specialty Vehicle Exclusions. Both policies are likely to exclude a variety of specialty vehicles, such as aircraft, certain types of watercrafts, possibly amphibious vehicles. You might find that a policy excludes specific makes and models, too. For example, a policy might cover ATVs generally, but exclude a Polaris XYZ. Additionally, this could exclude drones and other unmanned aerial vehicles, like remote control planes. 

However, you can extend coverage to include some ATVs, watercraft, and golf carts with optional endorsements of the respective type (i.e. a "Golf Cart Endorsement"). 

Home Sharing Endorsements and Exclusions. Both FLP and PLP exclude home sharing by default, but both offer endorsements to include it in the coverage. These endorsements usually have certain requirements regarding length of use, number of simultaneous occupants, and use of a third-party home-sharing network. For example, a policy might limit the number of days to 120, have a maximum occupancy of 15 people, and require you to rent or share your home through AirBnB

Excess Assisted Living Care. You can often find endorsements that extend coverage to family members that are living in an assisted living facility. 

Farm and personal umbrella

Now that we've outlined several differences and similarities between farm and personal liability policies, we have a much better understanding of the difference between their umbrella insurance counterparts. Because umbrella is meant to be an extra layer of liability that sits on top of your underlying liability policies, both farm and personal umbrella generally follow those underlying policies. 

That having been said, there are cases where the underlying coverage may differ from the umbrella policy. While you can certainly have exclusions and endorsements on the underlying policy that aren't covered by the umbrella policy, the opposite won't be true. For example, you could potentially have a Golf Cart Endorsement on your underlying PLP but choose not to add that same endorsement to your personal umbrella policy. However, if you don't have that endorsement on the underlying policy, you won't be able to add it to your umbrella policy. 

Furthermore, any of the mandatory exclusions found in the underlying policies will be mandatory for the umbrella policy, too. For example, the Animal Exclusions Endorsement found in your PLP or FLP will also be required on your farm or personal umbrella policy. 

This is an especially important point to consider if you have an underlying policy with one carrier and umbrella with yet another carrier. Your umbrella insurance carrier isn't likely to extend coverage to a given area if the underlying carrier doesn't cover it.

Which umbrella policy is right for you? 

While it can certainly seem overwhelming, the purpose of all the various coverages, endorsements, and exclusions is to provide you with the ability to customize a policy that's right for you.

Fortunately, you don't have to navigate the process alone. Your insurance agent can sit down and discuss your specific situation to get a better understanding of your needs, and then help you build a policy to address them. 

Still have questions about umbrella insurance? Check out our blog where we answer 15 of the most common umbrella insurance questions!

A red umbrella over crops, representing farm umbrella insurance

For more information on how Germania Insurance can help you with your liability insurance needs, reach out to your local Germania agent! 

by Madalyn Jozwiak

About the Author

Madalyn Jozwiak is a Corporate Communications Specialist at Germania Insurance.

What do you want to read more about? For suggestions, questions, or content-related inquiries, contact us at content@germaniainsurance.com!

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