Crop Insurance 101

Risk is inherent in agriculture. Adverse weather and volatile prices make farming a business of ups and downs. In order to help control the financial risk carried by farmers, the Federal government has partnered with private companies to offer crop insurance to US farmers. Crop insurance is the primary safety-net for US agricultural producers.

What is crop insurance?

  • Crop insurance helps producers manage risk.
  • You pay an annual premium (the cost is shared with the Federal government) to buy an insurance policy.
  • Crop insurance is purchased from private agents.
  • If your yields or revenues fall below a certain level due to a “covered cause”, you receive an indemnity payment.

How does crop insurance work?

It is similar to other types of insurance, such as car insurance:

  • You pay a premium to buy a policy
  • If something bad happens, you file a claim
  • Indemnity payment helps make you whole

What types of crop insurance are available?

  • Most commonly, farmers buy crop insurance for one single crop at a time. These policies are called single crop “multi-peril” crop insurance (MPCI) and are available as either yield or revenue insurance.
  • Whole Farm Revenue Protection allows farmers to insure an amount of their operation’s revenue. The Federal government shares a large amount of the premium cost for more diversified operations (2 or more commodities).
  • Index-based insurance products, such as Pasture Rangeland Forage (PRF) and Apiculture (API), base indemnity payments on a rainfall index for a geographic area where the farmer’s operation is located. The fact that indemnities are triggered by an area index means that there is no need for loss-adjustment on an individual farm.
  • Please be sure to check with crop insurance agent to learn what crop insurance products are available for your farm.