Everything You Need to Know About Crop Insurance
Agriculture is one of the driving forces of our economy, contributing well over $992 billion each year.
Though it's a huge industry, farming is not without its risk. Crops can be damaged quickly, ruining a farmer's chance of making ends meet that year.
Everything from disease to changing weather patterns can threaten a farm's entire harvest in a matter of weeks.
That's where crop insurance can help.
If you're looking for a way to protect your farm, these policies can help reduce your risk and protect your income during those lean years.
In this guide, we'll take a look at the basics of crop insurance so you can decide if it's a good investment for your operation.
What Is Crop Insurance?
Crop insurance is a type of insurance policy available to farmers and ranchers that produce crops for purchase. It's available for operations that grow at least one of 120 different crops.
It is not a substitute for traditional business insurance and only covers the damage to the crops themselves, not your property.
How Does Crop Insurance Work?
There are different types of policies designed to protect your crops from the most common threats in your area. If a qualifying event destroys your crops, you can file a claim on your insurance policy.
If the amount destroyed covers the deductible on the policy, any remaining loss will be paid for by the insurance company.
The Different Types of Policies Explained
The type of coverage you choose will determine what types of damage the policy protects against.
Hail-specific insurance policies protect your farm from loss due to hail damage. If a storm destroys your crops anytime during the growing season, your insurance policy will pay for the loss.
Hail isn't the only concern facing farmers these days. Changing weather patterns are impacting the way certain crops perform, putting harvest estimates at risk.
Worse, they're making conditions like blight, insect infestations, and drought more of a risk.
Multi-risk policies protect your crops from damage relating to everything other than hail. Though you can purchase one or the other, it's best to purchase both.
What It Covers
As stated above, crop insurance protects you from loss due to natural disasters and events. But that's not all it does.
The coverage also protects against falling prices or dramatic changes in the market that keep you from earning what you would in other years. This helps keep your farm operating at full capacity, protecting both your investment and your employees' incomes in the process.
What It Doesn't Cover
No crop insurance policy will protect against simple negligence. If the crops were due to a neglected irrigation system repaired or willfully destroyed a section of your field, the insurance won't kick in.
Those accidents may be covered by a separate business insurance policy.
Think of crop insurance as a supplemental business insurance policy. It won't take the place of workers' compensation coverage and it won't help you rebuild grain silos if they're destroyed in a fire. It will, however, cover the cost of the crops lost in disasters.
You'll still need a good umbrella insurance policy to protect the rest of your operation.
Is Crop Insurance Worth the Investment?
The simple answer is, yes. The insurance protects your farm from the prospect of financial ruin. However, it does come at a price: monthly premium payments.
As with any insurance policy, crop coverage requires that you pay a monthly premium for the policy. Over the course of the year, this can add up to thousands of dollars depending on the size and scale of your farm.
Though the premiums can be expensive, it's rare for farmers not to need to file a claim throughout the year.
The amount crop insurance companies pay each year typically exceeds the amount farmers spend in premiums. Even if you're paying premiums each month, there's a good chance you'll make up the cost over the course of the year.
Insurance Is Not the Only Risk Management Method
If you've been in the commercial farming industry for any length of time, you know that there are steps you can take to better protect your yield.
These include measures like crop rotation and diversifying your income sources. For most farmers, these measures are just part of the business.
If you're new to the industry, it's important to know that crop insurance is not a substitute for good farming practices. Instead, it's a supplement designed to help reduce your risk of loss due to circumstances completely out of your control.
The industry is carefully monitored and anytime you file a claim, the loss must be evaluated by insurance adjusters before you receive any payout.
How Much Coverage Do You Need?
When deciding how much coverage to purchase, it's important to look at your average yield for the past year or two.
Ideally, the policy will be large enough to cover 100 percent of the crops' estimated value at the time of harvest. This will help you hedge against possible loss should the entire field be damaged or destroyed.
If you're unsure of how large of a policy you need, speak with your insurance agent. They'll be able to look at the size of your farm and the estimated return on your crops to determine your actual coverage needs.
As the farm grows and the size of your harvest changes, you may need to reevaluate your coverage. Crop insurance can be evaluated every year.
How We Can Help
At Midwest Land Management, we understand that farmers have different insurance needs, especially compared to other businesses in the area.
You have to be prepared for every possible risk and the threat of severe weather means more than an inconvenience-it could spell disaster for your crops and your business!
Our experienced agents will work with you to find the right crop insurance for your operation. We're here for you whether your needs stay the same year to year or you need a new evaluation every six months.
Contact us today to schedule a free no-obligation quote with our team and see the difference that a great policy can make for your farm and your business.