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Crop Insurance

Crop Insurance

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Crop insurance is coverage for a farmer or rancher to protect the price and yield risk associated with farming. It is essential, for the safety and stability of the food produced in this country, and a successful component of the United States economy. In 2020, more than one million policies were issued and almost 400 million acres of cropland were insured, totaling 90% of all eligible acres in the nation. 

How Does crop insurance work?

Crop Insurance Crop insurance is purchased by agricultural producers and also subsidized by the federal government. This means that the government does not provide insurance directly, but has entered into a partnership with private providers.

The agricultural producer will therefore apply for insurance from one of the private providers. These crop insurance providers work on an equal opportunity basis with agricultural producers nationwide. A list of providers and agents is available at the USDA Risk Management Agency’s website.

Is there any policy that protects my lost revenue?

great american crop insuranceWhole Farm Revenue Protection is an umbrella policy that protects against the loss of revenue from all crops and animal products you produce. If you raise less than three commodities, you can insure from 50 – 75 percent of your approved revenue. If you raise more than three or more commodities, you can insure up to 85 percent. Approved revenue is the lower of (1) your average gross crop/animal sales in the entity’s last five years of Schedule F tax return, or (2) intended crop year gross revenue from crops and animal products expected to be produced. Losses occur when your actual revenue from crops and animal products produced falls below their guaranteed revenue, which is the approved revenue, multiplied by the coverage level.

What are the two types of crop insurance products?

MPCI and Crop-Hail.You have the option of two types of crop insurance products: Multiple Peril Crop Insurance (MPCI) and Crop-Hail.

Multiple Peril Crop Insurance

MPCI policies must be purchased prior to planting and cover loss of crop yields from all types of natural causes including drought, excessive moisture, freeze and disease. Newer coverage options combine yield protection and price protection to guard farmers against potential loss in revenue, whether due to low yields or changes in market price. 

Under the Federal Crop Insurance Program’s unique public-private partnership, the USDA Risk Management Agency (RMA) authorizes the private companies writing MPCI policies. The private companies maintain the service side of the program – writing and reinsuring policies, marketing, adjusting and processing claims, etc. The RMA sets the rates that can be charged and determines which crops can be insured in different parts of the country.

Crop-Hail Insurance

Crop-Hail policies are not part of the Federal Crop Insurance Program and are provided directly to farmers by private insurers. Many farmers purchase Crop-Hail coverage because hail has the unique ability to totally destroy a significant part of a planted field while leaving the rest undamaged. In areas of the country where hail is a frequent event, farmers often purchase a Crop-Hail policy to protect high-yielding crops.

Additionally, Crop-Hail protects you against yield loss caused by fire, lightning and vandalism while the crop is in the field or harvester. It also extends to protect some crops during transit or storage. Hail insurance is very reasonably priced and makes a great addition to your risk management package and can be purchased at any time during the growing season.

Are there policies that cover hail?

federal insurance priceTwo types of hail policies:

  • Auto-hail:  Hail policy tied to your Multi-Peril Crop Insurance policy. You choose the coverage level you want per crop, practice and county. It is applied to all crops covered on your MPCI policy. Policies must be renewed by June 1.
  • Stand-alone hail:  Written only on specific crops and fields you want to insure for hail coverage. Keep in mind, hail insurance must be purchased before damage occurs.
What protects me against a drought?

types of crop insuranceDesigned to provide insurance coverage on your pasture, rangeland, or forage acres, and is based on precipitation known as the Rainfall Index. It gives you the ability to buy insurance protection for losses of forage produced for grazing or harvested for hay, which result in increased costs for feed, destocking, depopulating, or other actions. Like other forms of insurance, premium levels will depend on the likelihood of a claim and the level of deductible you choose.

Do I need to worry about dates and crop day while buying insurance?

Yes, Crop and crop dates are significant while buying insurance:

 Important Crop Insurance Dates

 

SPRING CROPS 

FALL CROPS 

CATEGORY C CROPS 

MPCI Sales Closing Date 

 March 15

Sept. 30 

Nov. 20

Production Deadline

 April 29

Nov. 14

Jan. 15

Acreage Report Date

 July 15

See below

Jan. 15

MPCI Premium Billing Date

 Aug. 15

July 1

Aug. 15

MPCI Premium Due Date

 Oct. 1

Aug. 1

Sept. 15

 

Spring Crops – Barley, Corn, Corn Silage, Dry Beans, Forage Seedling, Oats, Soybeans, Sugar Beets

 Fall Crops – Forage Production: Oct. 15, Wheat: Nov. 15

Category C – Apples, Blueberries, Cherries, Grapes, Peaches

 

*Early/Final/Late Planting Dates & Insurance Periods: Varies by crop, by county

What Does Crop Revenue Insurance Cover?

crop insurance agentAnother type of crop insurance is called crop revenue insurance. This policy helps to protect farmers during the years when their crops have a low yield or when the price of their crop is low. This type of coverage helps to ensure that the farmer’s revenues are protected against dramatic swings in crop prices.

What are the cash crop risk and exposures?

cash crop riskProperty exposures depend on the size of the operation, type of grain stored, and the number and types of buildings. Primary ignition sources include the automated conveyance equipment, static electricity built up within grain storage areas, faulty wiring, fuel, heaters, and smoking. Explosion can arise when grain dust and vapors from certain chemicals, fertilizers, and fuels are combined with stored grain or hay.

The age, condition and construction of buildings and structures must be considered. All machinery should be grounded to prevent static buildup and discharge and inspected and maintained regularly to avoid wear and tear or overheating losses. Wiring must be up to date, of sufficient capacity, and with explosion-proof fixtures. Moisture and temperature levels must be continuously controlled. Lightning may strike buildings unprotected by rods and Ground Fault Interrupters (GFIs), grain dryers can overheat or become jammed, decaying organic material may spontaneously combust, burning operations may spread, and severe winds and tornados may destroy property in certain geographical areas.

Buildings may collapse under the weight of stored grain. Farms are in rural areas where fire response time may be slow and a water supply to douse a fire may be undependable. Smoking should be prohibited. The business income exposure can be high as some processing equipment may be difficult to repair or replace quickly.

Equipment breakdown exposure is high due to the extensive use of machinery and equipment for planting, harvesting, and storage. All machinery and equipment must be regularly inspected and maintained.

Crop exposures are high because growing crops are in the open and are susceptible to damage by animals, bacteria, drought, flooding, frost, fungi, hail, insects, lightning, snow, viruses, weeds, wildfire, wind, and winterkill. While some of these can be mitigated by proper farming practices or chemical applications, others are random acts that may or may not be covered by insurance.

Crime exposures are minimal. Most equipment and inventory are large, heavy, and difficult to remove undetected. Cash exposures are usually small. Employee dishonesty exposures are minor in family-owned and run operations. Pre-employment background checks should be done on all outside employees having access to cash, checks, safes, and equipment.

Inland marine exposures include accounts receivable if customers are billed, computers, goods in transit, mobile equipment, and valuable papers and records for customer, regulatory, and supplier information. Grain farms require a lot of agricultural machinery including combines, irrigation systems, and tractors. Farm equipment stored in buildings can be damaged or stolen. Grain in transit to offsite storage facilities or to customers can be damaged by overturn or collision, which may result in a total loss due to the possibility of food contamination.

Premises liability exposures are generally low. The operation of farming equipment and ATVs not subject to motor vehicle registration falls under premises liability, not automobile liability, even when being used on public roads. Poor rural road conditions combined with heavy or awkward equipment and occasional operation by underage drivers can result in accidents. Group tours and frequent visits by agriculture agents, chemical applicators, mechanics, and inspectors increase the exposure.

Visitors may be injured due to uneven walking surfaces, inadequate housekeeping, farm machinery, and confined or closed spaces in bins, tanks, and silos. Dust explosions and fires may affect neighboring properties. If third parties use the land for recreational purposes, such as hunting, fishing, or camping, the exposure increases as there may be remote areas that are difficult to patrol and control.

What are Good farming practices? 

The production methods used to produce the insured crop and allow it to make normal progress toward maturity and produce at least the yield used to determine the production guarantee or amount of insurance, including any adjustments for late planted acreage, which are: 1) for conventional or sustainable farming practices, those generally recognized by agricultural experts for the area; or 2) for organic farming practices, those generally recognized by the organic agricultural industry for the area or contained in the organic plan. Either the insured or the insurer may contact the FCIC to determine whether or not production methods will be considered “good farming practices.”

What Crops Are Covered by multiple peril insurance?

Only certain crops are covered by multiple peril insurance (the program doesn’t cover every crop). The Risk Management Agency decides which crops will be insured in each county. It makes this decision annually based on the demand for coverage in the county and the risk of losses.

The crops most frequently insured under the federal program include:

Corn, Cotton, Soybeans, Wheat

Less commonly produced crops may also be insurable in their key growing areas. Examples are:

Dry peas, Blueberries, Citrus, Pumpkins, Walnuts

If coverage for a certain crop is not available, farmers may ask the Risk Management Agency to expand the program to include that crop in their county.

WHAT ARE EXAMPLES OF NATURAL DISASTERS?multiple peril insurance

MPCI will cover crop losses (and lower yields) caused by natural events like:

Destructive weather (hail, frost, damaging wind)

Disease, Drought, Fire, Flooding, Insect damage

What is a plan of insurance?

cornA plan of insurance is a specific type of insurance that is offered.

Often, a crop may be insured by only one plan at a time. If multiple plans are available, then the producer must review the coverage details within each plan and decide which one fits his/her farming operation and risk management needs.

How much does crop insurance cost?

For Multiple Peril Crop Insurance policies, the Federal Crop Insurance Corporation (FCIC) establishes premium rates and insurance terms and conditions for the products it develops. It’s government-subsidized, so both farmer-paid premiums and operating costs for private insurance companies are reduced!

This means that the price of insurance is consistent throughout the industry.

So, regardless of the crop insurance company or agency, the cost will be the same for the agricultural producer.

Knowing this, you may wonder how companies and agencies compete with one another. Often, knowledge, customer service, and related insurance products are determining factors for why individuals choose one agency over the other.

What are area plans?

This protects you in the event that there is a countywide problem with a particular crop. Your protection is based on the percentage of the expected yield. If the county yield doesn’t meet the expected numbers, you can receive compensation

crop insurance coverage

Conclusion

For farmers, crop insurance acts as an irreplaceable safety net. Even a small farming operation requires an enormous financial expenditure and many long hours of labor. Each farm is heavily dependent on weather conditions and the price received for their crops, both of which are beyond the policyholder’s control, to deliver a return. A storm, a drought, or a flood can wipe out a farmer’s entire investment, sometimes in a single day.
No farm can shoulder such a risk alone over time; crop insurance makes it possible. CompareAquote policyholders rest easy knowing that an unexpected weather event will not destroy a year or lifetime’s worth of financial security. This peace of mind grants them the freedom to market their crops with confidence, to spend the money required for best farming practices, and to expand their businesses.

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