Why Crop Insurance?
Crop insurance is the best risk management approach for growers, government policy and taxpayers.
Growers: A Crop insurance is the superior risk management tool for growers because it responds and protects against individual losses or disasters. The coverage is flexible, as each grower decides the amount of protection they need and the deductible that best fits their economic situation. The premium costs can be included in the crop input financing.
Government Policy: Crop insurance is the best public policy for disaster and risk management assistance. When an individual grower makes advanced decisions of needed protection, it responds automatically rather than requiring legislation or the bureaucracy to make benefits available. Providing a premium subsidy is an incentive for growers to adequately protect themselves with better coverage that is cost effective for both taxpayers and growers.
The crop insurance program fits well into a downsized government philosophy because it permits broad utilization of the private insurance industry and growers pay much of the cost. Government is gradually moving towards the role of a reinsurer and regulator which minimizes its need to be proactive.
Who is Eligible to Purchase Crop Insurance?
Growers who have an ownership share in a crop (that meets the requirements of the actuarial table) may insure. The enrollment must be done prior to the calendar deadline which generally is well before planting for annual crops and before the risk period begins for perennial crops.
For more information, see USDA Risk Management Agency.
Yield Protection (YP)
YP provides protection against a loss in yield due to unavoidable, naturally occurring events. For most crops, that includes adverse weather, fire, insects, plant disease, wildlife, earthquake, volcanic eruption, and failure of the irrigation water supply due to a naturally occurring event. Like the APH plan of insurance, VP guarantees a production yield based on the individual producers APH. Unlike the APH plan of insurance, a price for VP is established according to the crops applicable commodity board of trade/exchange as defined in the Commodity Exchange Price Provisions (CEPP). The projected price is used to determine the yield protection guarantee, premium, any replant payment or prevented planting payment, and to value the production to count. The coverage and exclusions of VP are similar to those for the APH plan of insurance. An indemnity is due when the value of the production to count is less than the yield protection guarantee. Crops covered under this plan include barley (includes malting type), canola/rapeseed, corn, cotton, grain sorghum, rice, soybeans, sunflowers and wheat.
Revenue Protection (RP)
Revenue protection provides protection against a loss of revenue caused by price increase or decrease, low yields or a combination of both (for corn silage and rapeseed, protection is only provided for production losses). This coverage guarantees an amount based on the individual producers APH and the greater of the projected price or harvest price. Both the projected price and harvest price are established according to the crops applicable commodity board of trade/exchange as defined in the Commodity Exchange Price Provisions (CEPP). While the revenue protection guarantee may increase, the premium will not. The projected price is used to calculate the premium and replant payment or prevented planting payment. An indemnity is due when the calculated revenue (production to count x harvest price) is less than the revenue protection guarantee for the crop acreage. Crops covered under this plan include barley (includes malting type), canola/rapeseed, corn, cotton, grain sorghum, rice, soybeans, sunflowers and wheat. (Please note the Maximum Price Movement for rapeseed and corn silage.)
Actual Production History (APH)
APH is the oldest insurance product listed on this comparison. The APH plan of insurance provides protection against a loss in yield due to nearly all natural disasters. For most crops, that includes drought, excess moisture, cold and frost, wind, flood and unavoidable damage from insects and disease. Like YP, the APH plan of insurance guarantees a yield based on the individual producers actual production history. Unlike YP, the available price elections are established by the Risk Management Agency. An indemnity is due when the value of the production to count is less than the liability. Of the small grain crops, only oats, rye, flax, and buckwheat remain covered under the APH plan of insurance for the 2011 crop year. Potatoes and Sugar Beets have APH coverage only
Crop Hail Insurance Products
Crop-Hail coverage provides protection against physical damage from hail and/or fire. Other coverage’s provided include fire department service charges, transit coverage to the first place of storage, catastrophe loss award (most coverage’s) and replanting coverage (most crops). Options exist in some areas for other perils, such as wind and theft.
Crop-Hail can be used along with MPCI or other comprehensive coverages to offset the MPCI deductible and provide protection up to the actual cash value of the crop. Coverage is provided on an acre-by-acre basis, so damage that occurs on only part of a farm may be eligible for payment when the rest of the unit remains unaffected.
If a grower has coverage and bumper crop yields or higher prices become apparent, coverage can be increased during the growing season to cover the value of the crop.
A dollar amount of coverage per acre is selected by the grower. Options with different deductibles may be selected to permit a grower to partially self-insure for reduced premium costs.
To calculate a payable loss, multiply the amount of coverage per acre applying on the date of loss by the damaged acreage and the percentage of loss, less any deductibles.
How it Works:
Coverage Details Loss Payment
$250 of coverage per acre Dollar Guarantee ……………………………(20 A. x $250/A.) = $5,000
No-deductible policy Percentage of Loss………………………………………………………. 40%
20 acres of damaged corn Loss Payment …………………………………. ($5,000 x 40%) = $2,000
Hail caused 40% damage
- Protects profits
- Fosters greater grower confidence to do pre-harvest crop sales
- Protects crops up to the full value
- Acre-by-acre coverage provides protection from isolated damage
- May be used as loan collateral
- Rewards the more businesslike grower
- Discover how our North Dakota crop insurance can provide worry-free protection for the tough times
Crop-Hail coverage is available in all states in the United States, and in Alberta, Manitoba and Saskatchewan in Canada. Coverages and options vary by geographical area and crop.
Pasture, Rangeland, Forage – Rainfall Index
The Rainfall Index is an area-based plan of insurance, that is based on a National Oceanic and Atmospheric Administration Climate Prediction Center (NOAA CPC) interpolated rainfall data set and uses an approximate 17-mile square grid.
Producers must select at least two, two-month time periods called index intervals in which precipitation is important for the growth and production of the forage species.
Insurance payments to a producer are calculated based on the deviation from normal precipitation interpolated to the grid and index interval(s) selected.
Coverage is based on the experience of a grid rather than individual farms. Coverage under the Pasture, Rangeland, Forage (PRF) program is available for two crop types: Grazing and Haying.
Losses are paid when the grid’s accumulated index, known as the final grid index, falls below the insured’s trigger grid index.
Lack of precipitation is the only cause of loss covered by Rainfall Index (RI). CAT is not available. Coverage levels are available from 70%-90%, in 5% increments.
Whole-Farm Revenue Protection
Whole-Farm Revenue Protection (WFRP) provides a risk management safety net for all commodities on the farm under one insurance policy. It provides protection against loss of revenue that you expect to earn from commodities you produce during the insurance period.
This insurance plan is tailored for any farm with up to $8.5 million in insured revenue, including farms with specialty or organic commodities (both crops and livestock), or those marketing to local, regional, specialty or direct markets.
WFRP provides protection against the loss of insured revenue due to an unavoidable natural cause of loss, that occurs during the insurance period and will also provide carryover loss coverage if you are insured the following year.
You can buy WFRP alone or with other Federal crop insurance policies. When you buy WFRP with another policy, the WFRP premium is reduced due to the coverage provided by the other policy.
Coverage levels range from 50%-85%. Catastrophic Coverage levels will not qualify for WFRP, nor will they qualify as a companion Federal crop insurance policy.
Forage Production is insurable under the APH plan at coverage levels from 50%-85% (check your county actuarial for availability of 80% and 85% levels), with up to 100% of the price election. CAT coverage is also available at the 50% level and 55% of the price election.
Forage coverage is available for several different types of Alfalfa and some planted grasses. Losses are paid when the production to count is less than the guarantee. Production from all cuttings is used to calculate the production to count.
Federal Livestock Program
The Livestock program includes three separate plans.
Livestock Risk Protection (LRP): insures against a decline in price during the insurance period. Coverage prices range from 70%-100% of daily livestock prices for swine, fed cattle and feeder cattle and 80%-95% for lambs. LRP is priced and available for sale continuously throughout the year.
Livestock Gross Margin (LGM): insures against a loss of gross margin, or the value of the livestock/milk minus the cost of feed/feeders. It provides protection for cattle, dairy cattle and hogs.
Dairy Revenue Protection (Dairy-RP): insures against unexpected declines in quarterly milk sales due to a decline in either milk prices, production, or both. This policy is based on futures prices for milk as well as other dairy commodities and milk production in a state or region as the basis for your revenue guarantee.
There Are Other Policies Available Such As:
Forage Production – Annual Forage – Revenue Protection with Harvest Price Exclusion (RPHPE) – Nursery Protection – Margin Protection