Business Planning: Risk Management and Insurance

Risk Management

Managing risk involves identifying, evaluating, and prioritizing risks, and then taking actions to reduce those risks or to address your liability. Some of the different risks that farmers may need to address include:  

  • Weather extremes 

  • Crop failure 

  • You or other workers being injured on the job 

  • Your produce or product making someone ill 

  • A person being injured while visiting your farm property 

These are just examples of the types of risks you assume when operating a farm business. You can be held liable, and if taken to court, could be required to pay damages, for some risks, like someone being injured on the farm or someone getting sick from eating your product. This section is not intended to scare you, but to help you begin thinking about the best possible ways to minimize your risk and liability. 

The process of protecting your farm and assets includes several steps: 

1. Identify risk exposure. Where and how can people injure themselves or become ill? Use your imagination and powers of observation to consider all the possibilities. 

2. Analyze exposure. After you determine possible situations that expose you to risk, evaluate which of them are most serious and require your attention. 

3. Control exposures. What are the ways you can minimize the most problematic risks? Put up a fence? Post a sign? Eliminate the possibility altogether? 

4. Reduce financial loss. A financial risk is posed to your business when someone decides to file a lawsuit. Consider how you will pay for the damage. Will you have the cash or capital to assume the full liability? Will you transfer the risk by making insurance policy payments? Will you share the risk by having an insurance deductible? 

5. Implement and monitor. Establish risk management protocols that protect you and your business. In some agricultural tourism situations, you may want to require a “hold harmless” release that customers sign prior to paying or visiting. Retain the proper licenses and permits needed for the business you are operating. Regularly monitor how everything is working and review your policies to make sure you have proper coverage as your business model changes.  

Educating Your Customers  

Any actions you can take to minimize risk and prevent accidents from happening in the first place are going to be helpful. It is also important to educate customers and alert them to possible risks. Here are a few simple ideas: 

  • At your farmers’ market booth, have a sign or remind customers that, while you have washed the produce, it is always best to wash it again before it is eaten.  

  • Before a farm tour, have a brief orientation and point out areas that are off-limits or ways to stay safe on the farm. For example, note sections of the farm where there is uneven ground. Or remind visitors that livestock have teeth and hooves, to stay on the proper side of the fence, and to not handle the animals.  

  • Provide instructions for equipment that people will be using, such as the proper way to manage a bucket when climbing a ladder to pick cherries. 

Many farmers find that adults are more difficult to manage than children during farm activities. It may seem somewhat counterintuitive, but children are used to following directions at school and other activities and are likely to respect the person giving them information. Adults, in contrast, may take more risk since they feel they have the right to make their own decisions. 

If part of your business plan includes inviting the public to your farm to purchase products or participate in activities, learn more about agricultural tourism here. 


Nobody looks forward to paying insurance premiums. However, if you would like to transfer some of the risk, an insurance policy is an effective way to do it. 

Usually when farmers think of protecting their farms, they are thinking about the possibility of buildings burning in fire, loss from theft, or crop failure, and of course there are insurance policies available for these things. The USDA- Risk Management Agency offers certain crop and livestock insurance, for example. General farm and ranch liability umbrella policies covering a certain amount of liability and various activities are also readily available.  

As you look for this type of policy, be completely honest with your insurance agent and let them know exactly what activities or products you plan to offer to customers to be sure that they are covered by the policy. Your goal is to avoid any scenario where someone is injured and afterwards find out that your policy does not include coverage for that situation. Such a discrepancy could be devastating to the financial well-being of your farm business. 

It can be difficult finding an insurance company or agent that understands farm businesses, and that you trust and feel comfortable with. A first step may include finding other farms in your area that are doing similar activities as you and asking them who they are insured with. Also check with your state consumer affairs division or insurance commissioner. They may also be able to give you tips about how to find an agent and other consumer information. 

In addition to having proper insurance coverage, part of your risk management plan should also identify who you will seek legal counsel from, if needed. Some insurance policies cover legal defense if a situation escalates to that but having an established attorney that you work with makes good business sense, as they would be available to review liability waivers, insurance policies, and other important documents.