2Bits: Tips for wholesale farmers–The big “I”! Insurance for…
Insurance is always a part of conversations 2BuyAg has with wholesale food buyers.
All wholesale buyers have specific insurance guidelines food producers must meet before they can purchase from them. Often the lack of insurance is a road block for producers and wholesale food buyers to sell and buy from each other.
For this reason, we asked 2BuyAg’s insurance agent, Bill Plank, of Naught Naught Insurance, to share with you why insurance is important for food producers.
Bill Plank on insurance!
A common comment I hear in the insurance field goes something like this, “I want to contract with Company X and they have these insurance requirements. How much will that cost?”
Many food producers create a fantastic product. They are proud of the quality of their work. My dad will argue all day that his beef is the best you can get. A good friend of mine wants to be the best turnip farmer in the county. We all have goals, right?!
So, why do these companies require farmers to purchase insurance? Don’t they trust you? Even if they don’t require the producer to have insurance, why should a farmer consider incurring this extra expense?
Let us start by clarifying the purpose of insurance. Risk exists in the world. There are three ways we can handle risk. Think FAT – Finance, Avoid, Transfer.
Financing risk is simply taking full responsibility for what may happen. Financially speaking, this means paying whatever amount it takes to fix a situation. I have a three-year-old daughter and accept that every time we stop for gas I might also be paying for a bag of gummy worms.
Avoiding risk is exactly what it sounds like – not doing it. You may have a great idea that could land you on the TV show Shark Tank. You may not pursue it because there is significant financial risk.
Transferring risk is shifting it to someone else; usually by purchasing insurance. Most of us have auto insurance. We pay the auto insurance company a relatively small amount of money, so they will assume a lot of risk every time each of us gets behind the wheel.
Think of insurance not just as an expense. It’s an investment to protect your future livelihood and avoid “betting the farm” on something you can’t control.
Why would a wholesale food buyer require food producers to carry minimum limits? Two reasons really. We’ll use a local school district as an example.
First, the school district food purchasing agent is creating a barrier to entry. This enables them to focus their sourcing efforts on producers that understand and appreciate the risk the school district has feeding adults and children.
Second, they’re transferring risk back to the producer as a cost for the opportunity to sell food to the school district. When you think about it, that makes a lot of sense. If a student or staff member gets sick (or even worse dies) from the food prepared and served at a school, the district and their lawyers must find someone to cover the costs of the incident. Someone or entity must foot the bill.
Most wholesalers require food producers to carry general liability and sometimes auto liability insurance.
In the world of insurance, most folks see insurance in three buckets: health, stuff / material goods, and injuries / lawsuits. Liability is the injuries and lawsuits kind. General liability covers the largest variety of perils that may lead to you being sued – think slips, trips, and falls.
Auto liability will cover the bodily injury and property damage you do while operating a vehicle in the course of running your business. This is important–almost every personal insurance carrier will have commercial use exclusion. That means if my friend that grows turnips has an accident while taking his turnips to the farmers market, his personal carrier will likely deny coverage.
Keep in mind everyone’s insurance picture is unique, so consider your potential risks and how to finance, avoid, or transfer them. Naught-Naught Insurance covers everything from backyard gardens to large commercial operations. We’re happy to answer any questions you might have. E-mail me at firstname.lastname@example.org, call (573) 634-2727, or check out our website at www.naught-naught.com.