Farm Equipment Insurance: Coverage and Costs

Farm equipment insurance is a specialized insurance policy that protects agricultural machinery — like tractors, combine harvesters, sprayers, and irrigation systems — from damage, theft, and unexpected breakdowns. Without this coverage, a single equipment failure or storm could cost you hundreds of thousands of dollars and jeopardize your entire operation.

Modern farm machinery represents one of your biggest investments: A new combine harvester alone can cost between $100,000 and upwards of $1 million.

Here’s what farm owners need to know about what farm equipment insurance covers, typical costs, common exclusions, and how to choose the right policy for your operation.

What is farm equipment insurance?

Farm equipment insurance is a type of agricultural insurance that protects the machinery and tools essential to farming operations. This coverage includes tractors, combine harvesters, irrigation systems, planters, sprayers, and other specialized equipment used in daily farm activities.

Insurance companies typically offer farm equipment insurance as a stand-alone policy or bundled with a farmowners insurance policy — similar to how a business owners policy works.^[1] This specialized coverage differs from crop insurance, which protects against harvest losses, and livestock insurance, which covers farm animals.^[2]

Farm equipment policies come in two forms:

• Scheduled coverage: Each piece of machinery is listed individually with its own value.

• Blanket coverage: All equipment is covered up to a total designated amount.

What farm equipment insurance covers

Farm equipment insurance policies provide comprehensive property protection against various risks that farmers face daily. The available coverage options typically include the following:

• Theft and vandalism: This coverage activates when another party steals or intentionally damages machinery or equipment parts.

• Fire and storm damage: Insurance covers losses from fire, lightning, hail, wind, and other weather events. This protection is particularly important given the frequent exposure of farm vehicles and equipment to outdoor conditions.

• Collision coverage: If a collision damages equipment, this coverage helps pay for repair costs. This includes accidents involving other vehicles or objects.

• Equipment breakdown: This covers sudden mechanical failures not caused by normal wear and tear, along with related costs.

• Replacement cost coverage: Rather than receiving actual cash value (which factors in depreciation), this option pays to replace damaged equipment with new machinery of a similar type and quality.

What farm equipment insurance doesn’t cover

Understanding exclusions is just as important as knowing what’s covered. Standard farm equipment insurance policies typically exclude:

• Wear and tear: Policies don’t cover normal deterioration from regular use. Insurance protects against unexpected accidents, not the gradual aging of machinery over time.

• Poor maintenance: If equipment fails due to inadequate upkeep or neglect, an insurer may deny your claim. Keeping regular maintenance records can help demonstrate proper care.

• Gradual mechanical breakdown: Unlike sudden equipment breakdowns, standard farm machinery insurance policies typically don’t cover gradual deterioration from age or continuous use.

• Pre-existing damage: Any damage that existed before the insurance policy started won’t be covered. Insurers may require equipment inspections before issuing coverage.

• Commercial use outside of farming: Using farm equipment for non-agricultural purposes, such as leasing tractors to third parties for construction work, typically falls outside policy coverage limits.

• Overloaded or improperly modified equipment: Operating machinery beyond manufacturer specifications or making unauthorized modifications can void coverage for resulting damages.

How much does farm equipment insurance cost?

In general, you’ll pay anywhere from $3 to $15 per $1,000 in value for your farm machinery and other equipment per year.

The cost of farm equipment insurance varies based on equipment value, type, age, usage, storage conditions, and geographic location.

How to choose the right farm equipment insurance

Selecting appropriate coverage requires careful evaluation of your farm operation’s specific needs. Follow these steps to help determine the right amount of farm equipment insurance:

1. Inventory your machinery and list values. Create a comprehensive list of all equipment, including purchase dates, current values, and replacement costs. Document serial numbers, conditions, and any modifications. This inventory forms the foundation for determining adequate coverage limits.^[3]

2. Decide on replacement cost versus actual cash value. Replacement cost coverage pays to replace damaged equipment without depreciation deductions, but it costs more. Actual cash value coverage subtracts depreciation, resulting in lower claim payouts but also lower premiums.

3. Compare quotes from farm insurance specialists. Work with insurance companies or agents who specialize in agricultural coverage rather than general property insurers. Farm specialists understand unique equipment risks and can recommend appropriate coverage options and endorsements specific to your operations.

4. Review liability add-ons if the equipment is driven on public roads. Standard farm equipment coverage may not include liability protection when operating machinery off your property. If you transport equipment on highways or perform custom work for other farmers, liability coverage becomes essential.

5. Ask about discounts. Many insurers offer savings for bundling farm property and liability coverage into a farm package policy. You can also ask about other discount opportunities to maximize your savings.

Farm equipment insurance FAQs