Crop Insurance Basics

Published on: 10:08AM Feb 16, 2010
Anything can be insured today; let it be a cat, car, or crop. Crop insurance has been in existence since the early 1930s. Federal crop insurance was established to combat the effects of the Great Depression and the Dust Bowl. If a farmer were to pick out crop insurance today, they would have many different options to choose from.
Crop insurance provides a safety net for farmers by reimbursing them due to revenue or yield diminishing problems for their crops.
The two categories of crop insurance are yield-based and revenue. These are a few examples of yield-based insurance policies according to the Risk Management Agency (RMA) of the USDA.
Actual Production History
This type of policy protects farmers against natural causes for poor crops including drought, moisture, wind, and hail. The farmer will insure the crop for a specific yield and at the end of the year, if the actual yield is below the insured amount, the insurance will compensate the farmer for the difference.

Group Risk Plan
In this policy, a county index is used for determining crop loss. When the National Agricultural Statistics Service changes the index, and it falls below a farmer’s insured point, then the farmer will be eligible for payment.
Rainfall Index
The country is split into six regions based on amounts of rainfall. Farmers can choose to insure water dependent crops based on the Rainfall Index supplied by the National Oceanic and Atmospheric Administration.
Revenue insurance policies protect against a crop’s market. These are a few of the revenue policies according to the RMA.
Adjusted Gross Revenue
Farmers can insure their entire farm revenue by utilizing an adjusted gross revenue policy. The insurance guarantees a percentage of gross revenue from the entire farm based off of the farmer’s Schedule F tax form.
Crop Revenue Coverage
Farmers will provide price and yield expectations for the policy, and the policy will pay for losses below either the harvest or early-season crop price.
Group Risk Income Protection
Farmers receive payment when a county’s revenue for an insured crop drops below the point where the farmer chooses coverage.
Revenue Assurance
A farmer choose a target revenue and the policy would pay a percentage of the expected revenue if actual revenue is less.
There are a few specific dates that producers must be aware of throughout the year, according to the RMA:
·         Sales closing date - last day to apply for coverage.
·         Final planting date - last day to plant unless insured for late planting.
·         Acreage reporting date - last day to report the acreage planted. If not reported, insurance will not be in effect.
·         Date to file notice of crop damage - after damage; the date the producer decides to discontinue caring for the crop; prior to the beginning of harvest; immediately, if farmer determines that the crop is damaged after harvest begins; or the end of the insurance period, whichever is earlier.
·         End of insurance period - latest date of insurance coverage.
·         Payment due date - last day to pay the premium without being charged interest.
·         Cancellation date - last day to request cancellation of policy for the next year.
·         Production reporting date - last day to report production for Actual Production History (APH).
·         Debt termination date - date insurance company will terminate policy for nonpayment.
A lot of the policy decisions are made based on insurance assessments. Assessors determine if an insurance claim is necessary and often what percentage is paid out.
Since the past two harvests have been considerably wet across the Midwest, crop insurance companies have been busy. A winter with a lot of snow, like this current winter, can lead to a wet spring with late plantings. Crop insurance will be in the news if farmers are unable to meet certain insurance deadlines in spring. Crop insurance is a complex aspect of farming, but without it, many farmers would not be able to survive.

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