Aviva warns farmers of the risks when diversifying

Diversification brings with it multiple risks as asset-rich farmers seek to enhance their income by making use of dormant outbuildings, says Aviva.

More than half (51%) of farmers diversified activities last year with income from diversification totalling £400 million.

Renting out buildings for non-farming use is the most common diversified activity, with 36% of farmers letting out buildings generating 68% of diversified income.

Graeme Gibson, senior agricultural underwriter at Aviva, said: "Farmers are becoming more entrepreneurial by making alternative use of dormant outbuildings. However, there are a great number of risks associated with this type of diversification.

"It might seem straightforward and simple enough to house a farm-shop in an outbuilding, but if a building is in poor condition or is badly converted, it could pose a serious safety risk to visitors.

"We have seen an increasing number of farmers converting such buildings into leisure facilities, for example, by creating indoor play areas, or utilising their land for leisure purposes by creating golf driving ranges or camping sites, as well as establishing coffee shops for visitors.

"The risks associated with these types of diversification are complex. Where farmers are seeking an alternative source of income, they must have the appropriate expertise and specialisation to protect themselves and their assets.

"Aviva can provide the additional insurance cover necessary to protect farmers in the event of a claim. If you are considering ways to expand your business speak to your broker as they will be able to help to identify any risks before diversifying."

All of the sections of Aviva's combined agriculture product can be used for diversification enterprises. However, in the main it is normally the following sections that are used:

Property Damage
Provides cover for fire and specified perils on the buildings and their contents.

Business Interruption
Provides cover for loss of income from the diversified activities due to fire and specified perils and extensions to the basic cover such as public utilities cover and denial of access.

Liabilities
Provides cover on employers, public and product liability on diversified activities, for example, from a cafe or shop through to bed and breakfast accommodation.

Supplementary All Risks
Provides cover for accidental damage on equipment, for example, cash registers or weighing machines.

Frozen Foods
Provides cover on the contents of freezers.