The Basics Behind Crop Insurance
Farmers can often lose sleep over many different issues. But good crop insurance hopefully helps take a little bit of weight off their shoulders.
Crop insurance protects farmers and agricultural producers from losses to their crops that are the result of natural causes. The United States Department of Agriculture (USDA) Risk Management Agency (RMA) administers the federal crop insurance program and includes plans that cover crops and livestock, while there are other programs sold by private insurers.
In general, farmers and ranchers are able to qualify for crop insurance benefits. But the programs and policies themselves do, in fact, have many facets and details that are helpful to know beforehand.
Two major types of crop insurance
As far as crop insurance goes, there are two major types. Those are multiple peril crop insurance (MPCI) and crop-hail insurance.
MPCI insurance
MPCI covers a farmer’s crop losses. It’s also the program administered by the USDA, although private crop insurance companies and agents sell and service the program.
MPCI coverage can include lower yields brought on by natural events outside anyone’s control, including the following:
- Destructive weather like hail, frost, damaging wind
- Disease
- Drought
- Fire and flooding
- Damage from insects
The federal government sets deadlines for when MPCI policies must be purchased for every growing season. These deadlines fall before the crop is planted because, if a crop is damaged early in the growing season, then the policy may have incentives for farmers to replant or a penalty for farmers that do not replant.
Crop-hail insurance
This basic insurance type is sold by private insurers and regulated by states. It’s sold in areas where hail is a common threat to a farmer’s crops and is purchased to supplement a MPCI policy.
These policies can come with a low or zero deductible. This is because hail can totally wipe out a portion of crops but spare other crops. That would wind up making the hail claim amount to less than the deductible on a MPCI policy.
Crop-hail insurance can be purchased at any point in the growing season.
Who can be covered by crop insurance?
Some people seem to believe that crop insurance is only for very large farmers who grow major cash crops like corn, soybean, wheat and cotton.
However, according to the Farm Bureau, crop insurance is available for more than 120 crops. You don’t even have to have a large operation to qualify and benefit from having crop insurance. In fact, this protection is available for farmers of all sizes and in all 50 states.
How does the crop insurance program actually work?
There are quite a few entities involved in providing crop insurance to farmers. The RMA administers Federal Crop Insurance Corporation (FCIC) programs. The RMA underwrites the crop insurance policies for crops and livestocks in the US, while the policies themselves are sold and serviced by private insurance companies.
There are local insurance agents in your area that can help give you more information about what services and policies look like where your farm operates. Local agents will have the best idea of what types of coverage your farm operation may need because they are located in your area, understand the unique pressures that may bring and work with other farmers or landowners whose operations are similar to yours.
My farm is covered by crop insurance. Is that all?
Crop insurance is only one tool in the belt of a farmer or landowner who takes risk management seriously. It’s not mandatory – although crop insurance is often required to receive some benefits, participate in certain programs and receive certain loans – but it is almost always a good idea to have.
Even still, farming is a very risky business. That’s just part of its nature. So, farmers are always involved in many risk management strategies, not just having the protection of crop insurance should they need it.
What crop insurance does offer, though, that other risk management strategies cannot is proof – often to lenders at banks – that the farmer has the ability to pay back operating loans that may be required to keep the farm in business.
Crop insurance mistakes to avoid
As far as crop insurance is concerned, there are several mistakes a farmer should not make, according to the USDA. Avoiding these mistakes will help save your operation money in the event you need to utilize these insurance services and programs.
- Don’t underreport planted acreage per unit. This could result in a lower payment.
- Over reporting planted acreage per unit. This could result in a higher premium.
- Harvesting the crop in a method that is not insured. This could result in no indemnity payment.
- Destroying insured crops without a company’s approval. This could also result in no indemnity payment.
There are plenty more pointers provided by the USDA on what to avoid when dealing with crop insurance. You can dig deeper into the details here.
Midwest Land Management offers insurance services
Don’t feel overwhelmed by crop insurance. Yes, there’s a lot to know, but there are experts ready to help you navigate the service and what it can do for your farm. Crop insurance is just one of the many services offered by Midwest Land Management and Real Estate Inc.
We offer one-on-one professional corp insurance to all landowners and farmers who operate or own land in our trade territory. By working closely with insurance providers, we are able to provide our clients with the most accurate and current crop insurance information on everything ranging from multi-peril to hail coverage.
Because crop insurance options change so frequently, as do your own coverage needs, it’s important to always remain aware of what protection is available that can protect your farm from unexpected, natural losses.
We are here to help
Luckily, with Midwest Land Management by your side, you have even more control over your crop insurance decisions. Our providers include Rain and Hail, RCIS, Grinnell Mutual and Heartland.
Give Midwest Land Management a call or contact us online today to gain more control over your crop insurance decisions and options.