Updated October 3, 2019 . AmFam Team
If you own a farm, you know just how much work goes into every day and you want to protect that hard work for years, maybe even generations, to come. You also know how expensive it is to keep your farm running and maintained — costs you want whoever inherits your farm to be able to afford.
That’s where life insurance can help.
As part of your farm succession planning, life insurance can help protect your farm by helping to keep it in the family by providing your loved ones with money they can use to pay for the many expenses farms can incur, from livestock to crops to new facilities. While life insurance won’t be able to pay for everything, it can help your heirs get a handle on running the farm without being overwhelmed by the initial costs.
The types of things to keep in mind when considering the amount of life insurance you chose can vary from farm to farm, so here are a few common factors to think about.
All the farming equipment you need to smoothly operate your farm should be valued by an accountant familiar with farming, as well as annual maintenance costs. If your heir suddenly needs to repair or replace a piece of equipment, or even if they just want to upgrade later, having a fund set up from your life insurance’s death benefit can help them pay for the expense. Take inventory of all your equipment and regularly update it to stay on top of your life insurance needs.
Assessing the operation and maintenance costs of buildings and facilities you use on your farm can help you decide how much life insurance to purchase. While the amount of life insurance you chose likely won’t cover these costs forever, it can help your heir stay afloat when they start managing the farm.
The cost of crops, planting them and their maintenance over the growing season could factor into your life insurance policy amount. If you raise livestock, you could also add up the costs of purchasing new livestock, feeding the ones you have and their annual maintenance, transport and processing fees.
If you pass away with outstanding debts, the payment for those will come due and be taken from your estate before any of that estate gets passed on to your heirs. These debts can include your mortgage, if the house is being passed down to your heir, and any loans on farm equipment or buildings. Life insurance can help curb the expense of outstanding loans and may be able to keep the estate from having to liquidate any assets to pay off those debts.
Aside from the farm itself, there’s the matter of final expenses to consider. In order to keep things organized, you might want to take out a second, smaller policy for yourself that covers the costs of potential medical expenses and the cost of a funeral. If taking out a second policy seems overwhelming, just factor your final expenses into the policy meant to financially protect your farm.
Life insurance can also help you protect your farm financially while you’re still alive. If you have a cash value policy like a DreamSecure Whole Life policy or DreamSecure Flexible Life Insurance policy, you can typically take out loans* against its cash value, using that money to help pay for things like unexpected medical expenses. There are other living benefits of life insurance to consider, including living benefit riders, that can make your life insurance policy work for you before you pass away.
Protecting what matters most means preparing for the future. Connect with your American Family Insurance agent (Opens in a new tab) to discuss your life insurance options.
Policy Forms: ICC17-225 WL, L-225 (ND) WL, L-225 WL, ICC17-227 WL, L-227 (ND) WL, L-227 WL, ICC21 L141 MS 01 22, L141 ND 02 22, L141 SD 02 22.
*Any loans you take out against a policy will accrue interest, and any outstanding loan balance — which equals the loan’s value plus the interest — will be deducted from the death benefit at the time of claim or from the cash value at the time of surrender. If the loan balance grows too large for the cash value to support it, the policy could terminate.