You have a farm policy insuring your farm machinery, you happen to have a little extra time and you seize an opportunity, you go out and do some custom work. Great idea, is it?
There are three coverage issues that need to be dealt with before you go ahead and do this, machinery floater, machinery loss of use and legal liability.
You have a loss and put in a claim. The insurance company adjuster recites the following from your policy, “Farm Machinery Floater, property not insured: Property used for custom farming or while in transit in connection with custom farming, unless permission for custom farming is granted.” This is when you say, What?
Your farm policy is for covering your own farming activities only. Any machinery used for commercial use or custom-farming use is not covered unless you talk to your broker first. However if you are swapping machinery time with a neighbour that is not considered custom work.
The same goes for loss of use coverage, there is no coverage under the loss of use coverage for custom use machinery unless this is discussed and taken care of by your broker.
From a legal liability point of view most insurance companies build into their policies the allowance of doing a minimal amount of custom work, up to say $5,000 worth of work per year. Every company varies and the type of custom work allowed varies.
You will pay more for custom use coverage and the reason for that is that custom operators tend to put more hours on their equipment and travel more than farmers do. You also are not working for yourself so there is now the exposure of lawsuits therefore, higher risk = higher premium to be paid.
Be sure to seek advice and purchase insurance from those who understand your business!