5 crop insurance myths that farmers should know about
Crop insurance is always changing. There’s a lot to keep track of year to year and, with all those changes, plenty of misinformation and misconceptions cloud farmers’ and landowners’ understanding of types of crop insurance available and what coverage they might need.
Don’t let a myth about crop insurance keep you from getting the coverage you need – or lead you toward getting coverage you do not need. To help, we have put together a quick list and breakdown of some of the most common myths farmers and landowners may encounter when looking for crop insurance.
Hopefully this clears up some of the misinformation out there that may be affecting very important decisions.
The basics of crop insurance
First, let’s cover the basics of crop insurance.
Crop insurance is sold to farmers, ranchers and landowners to protect their crops from natural disasters, disease, insects and declines in price. There are two basic types of insurance: crop-hail, which covers farmers for damages due to hail storms, and multiple peril crop insurance (MPCI), which covers natural disaster events. Some MPCI policies also provide price protection for farmers.
One key difference between crop-hail and MPCI coverage is that the latter falls under the Federal Crop Insurance Program, while the former does not.
In 2019, there were over 370 million acres of farmland covered by crop insurance in the United States through the Federal Crop Insurance Program. Through a public-private partnership, 14 private companies provided this coverage through 1.1 million issued policies in 2019.
Myth 1: Farmers with crop insurance don’t follow market signals.
Farmers with crop insurance had better follow the signals the market sends because crop insurance fluctuates depending on market behavior.
Crop insurance uses real-time tools (PDF) to find current market prices. These tools then determine coverage, losses, indemnities and premiums.
Myth 2: It costs too much and doesn’t pay.
Some producers may seem to think that the various forms of crop insurance are too pricey – so much so that it’s not worth having. Others don’t believe it actually pays, or at least does not pay enough.
That is just not true. Insurance providers dole out large sums of money to make sure a producer's losses are sufficiently covered, helping farmers stay afloat in situations that otherwise may sink an operation. The producers’ premium payments are also low enough that these payments are more than worth the premiums.
The government actually subsidizes certain percentages of liability, too, allowing premiums to remain low. This ranges from 55% to 100% of liability. Imagine having to insure with other commercial insurance options. The costs would be much, much higher.
Myth 3: Crop insurance has a minimal effect on farming operations.
Crop insurance’s effect on farming operations can be significant in years when it is needed. This is particularly true in recent years, when average farm household incomes have been decreasing.
It’s during these hard times that crop insurance is more important than ever in keeping farmers in business. For some farmers, having crop insurance is the difference-maker that keeps their farms alive for the next year.
Crop insurance also can often provide producers with capital when seeking loans. This keeps operations flowing and growing. It’s a tool for managing risk that helps them survive – and possibly invest enough to set themselves up to thrive in good years. This simply would not be possible if farmers had to seek out other ways of insuring their business, such as self-insuring.
Myth 4: Farmers need to have a total loss to qualify for payments.
Farmers do not need to have a total loss from crop damage in order to qualify for crop insurance coverage. In fact, qualified losses ranged from 35% to 50%, according to MyAgDaga. This is all based on the farmer’s level of coverage that they selected to protect their farming operation.
Some farms can even be broken up into units that can be insured separately. This is definitely something to talk about with your insurance provider.
Farmers do have to have a loss that is confirmed by an adjuster (PDF) to qualify for assistance payments, though. These payments are also subject to audit, protecting against fraud.
Myth 5: Crop insurance is only for large farming operations.
There is absolutely no truth to the myth that only farmers with large operations (PDF) need or can get crop insurance. A related myth that seems to be prevalent is that crop insurance is only for large corn, soybean, wheat and cotton farmers. Of course, this is not true either.
Farmers with operations of any size in all 50 states can get crop insurance for more than 120 different types of crops.
In fact, the number of acres covered by crop insurance here in the United States for specialty crops has increased in recent years. Take 2009 to 2015, for example. In this stretch, the number of acres for fruit, vegetables and other specialty crops covered by crop insurance increased from 7.7 million acres to 8.3 million acres.
Prices for coverage of specialty crop insurance are also similar to the more popular row crops, too.
We provide crop insurance that fits your needs
Midwest Land Management and Real Estate offers all of our clients one-on-one crop insurance to landowners and farmers in our coverage territory. Our team works with insurance providers so that we are able to provide accurate and current coverage that fits each client’s individual needs.
We are able to offer a range of insurance that ranges from multi-peril to rain and hail. No matter what type of coverage you are looking for, we will help you find what you need to rest easy knowing that you are protected from any events out of your control that are thrown your way.
Contact our experienced team by emailing us or calling us at (712) 262-3110 or toll free at (800) 952-2974 for more information about how Midwest Land Management and Real Estate can get your farm operation covered with the right crop insurance.