Farm Building Insurance
Elite Agri Solutions Inc. strives to provide background information on topics which are hard to research. In cases where no reputable print resources were available for us to reference, we interviewed industry experts, so it is inevitable that the contents of this document will contain inaccuracies and bias. Use this as a resource to help you ask the right questions, not as a source of definitive answers. Elite Agri Solutions Inc. and its employee’s will not be responsible for the consequences of any decision made based on this guide. Where text or data has been copied directly, the sources have been noted, otherwise it can be assumed that all the information in this guide has only been curated by Elite Agri Solutions Inc. and is not our original property.
Covers the liability of everyone who steps foot on the site.
Covers third parties who suffer loss on the building site or because of the building process.
If a worker’s compensation policy is in effect the law says that injured workers may recover fixed insurance benefits but may not sue their employers. If you are the owner and builder, you may be considered the employer.
Check to ensure that your contractors have proof of liability insurance for themselves.
Builder Risk Insurance
Most financial institutions require proof of a builder’s risk policy before they will release funds.
Limited form policy typically covers loses from worker liability, fire, lightening, impact from land or air vehicle. Typically damage from wind or hail is not covered until the building is completely closed in and the wind opens the building envelope. The best insurance policy to protect exposed framing against blow downs is extra bracing. Insurance will cover the cost of value of building materials, cost of debris removal, physical damage or loss to property, soft costs such as legal fees or architectural costs.
An increased liability policy is also typically taken during the construction on top of the farm’s basic liability coverage. This acknowledges that there is an increased risk associated with construction activities and more people on the property.
Premiums are based on a year and are typically paid for up front. If the building is quicker than a year, then the policy will be switched off builder’s risk and the insurance company will adjust credit as necessary. If the Project takes longer than a year, a second year of builder’s risk must be paid for and the difference will be credited once the project is complete.
In the builder’s risk policy, tradespeople do not need to be named on the policy, however it is best practice to only hire sub-contractors that have their own insurance policy. If the sub-contractors are insured, any material theft, equipment theft or liability should be covered by their policy.
A prudent farmer will ensure that all sub-contractors have a certificate of liability proving that they personally have coverage for them and their employees.
Typically, a farmer’s builder’s risk policy will have a minimum deductible amount of $1,000.
Usually covers all contractors and subcontractors that supply labour or materials.
Contractor’s equipment and tools are not covered.
Construction must be in progress for coverage to exist.
Usually purchased by property owner or contractor.
Typically, additional insurance is needed for liability while workers are on site.
Typically, must cover 100 percent of the value of the home or construction line of credit.
All parties that have insurable interest in the project should be named in the insurance policy. This typically includes the owner, financers and occasionally engineers or general contractors. Sub-contractors are not included as these could change daily.
Ensure that you have open communication with your insurance company, notify them when work begins and when the building is nearing completion notify them that the policy will soon need to be switched over to normal property insurance.
If there is a need to make a claim during the build, your insurance company’s in-house adjuster will come to the site to make an initial evaluation of the project within a few days. From there they may call in experts to confirm the exact value of the project. It may be useful to have your contractors on the site when the insurance adjusters are inspecting.
If a building is destroyed, most companies require that a replacement structure must be re-built within a certain distance of the old building, sometimes on the exact same foundation. Generally, buildings are classified as ‘farm’ buildings without regard to their specific use. This means that if your cattle barn burns down, you could use the insurance payout to build a drive shed, however you couldn’t use it to build a new house.
Typically, there are clauses that will give you a portion of the funds up-front and then specify the amount of time you must complete the replacement structure.
The agreement to maintain coverage up to a stated percentage of the rebuilding or replacement value of the property being insured. Typical minimum co-insure is 80% or 90%. During the building process, co-insurance is typically not used. The building should be insured for 100% of what the completed value of the building will be.
A farmer is not doing themselves any favours if they value their property at a rate much lower than the actual cost to build.
It is best practice to take pictures of the building as it progresses through each critical stage. These can assist you if you need to make a claim and can be used to hold contractors accountable to their work.
The insurance company may visit the site multiple times as well to check on the progress of the build and are likely to take pictures and measurements as these will be needed to switch the policy from a builder’s risk to a long-term property insurance policy.
For some structures there may be a severe economic penalty if the build takes longer than was planned. There is no policy that directly addresses this risk, so it is advisable to have a robust contract in place that outlines specific penalties for the contractors if hard deadlines are not adhered to.
Often insurance is one of the last pieces to be organised when considering a new build, and usually an insurance company can turn around a policy within a week or so, however the more notice that is given the better served you will be. If you plan to have your builder’s risk policy with the same company that you have your property and liability insurance with, it may be wise to make them aware of your long-term building goals.
Fire Prevention Measures
Barn fires are commonplace in Ontario, once ignited fires spread quickly due to the nature of our flammable construction methods and ventilation fans supply oxygen. A well-built fire wall system in the attic is required by code and will help to limit the fire’s access to the flammable truss system. If possible, smoke or heat detector’s located in mechanical rooms should be interlocked with the barn’s ventilation controller and programmed to stop fans, close air inlets and notify the farmer in case of a fire. A system like this will not prevent fire but is well worth the cost if it keeps the fire from spreading and destroying the entire building. Some insurance companies may already recognize certain fire protection measures, and indications are that these technologies will become commonplace.
Fire suppression systems are available but are very expensive upfront. Without incentives from government or a significant insurance discount, these systems have not become common place.