Guide
Guide
Guide
Crop insurance helps protect farmers and ranchers against a decline in crop yields and/or revenue. Crop insurance has two categories: Multiple Peril Crop Insurance (MPCI), which is federally subsidized, and Crop-Hail Insurance, which is privately offered and state regulated. MPCI is a Federal Crop Insurance Program governed by the United States Department of Agriculture Risk Management Agency (USDA RMA). Since Crop-Hail Insurance is not part of the federal program, it is acquired directly from private insurers.
Multiple Peril Crop Insurance (MPCI) provides protection from loss of crop yields due to many types of natural causes, such as excessive moisture, freeze, drought, disease, and other natural causes. In recent years, coverage options have evolved to include not only yield protection, but also price protection to guard farmers against potential revenue loss due to low yields or changes in the market price. MPCI insurance policies must be purchased before planting begins.
The program is overseen and regulated by the United States Department of Agriculture Risk Management Agency (USDA RMA) which sets the rates companies can charge and they also determine which crops can be insured in different parts of the country. All authorized insurance providers in the program are obligated to sell crop insurance to eligible farmers who request it.
Crop-Hail insurance is provided to farmers directly by private insurance companies and is not part of the Federal Crop Insurance Program. Crop-Hail insurance covers hail and fire and may be purchased at any time during the growing season. 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. Since hail can destroy large areas of a planted field while leaving the rest undamaged, farmers often purchase Crop-Hail insurance to protect their high-yielding crops.
Crop insurance is risk protection for farmers and ranchers. Should the unexpected happen, crop insurance can help provide financial security so farmers and ranchers can stay in business, stay competitive, and plant the next season. It is a public-private partnership between the federal government and private insurance companies which helps increase efficiency and ensures aid is delivered quickly following a disaster, often within days or weeks.
The United States government partners with private crop insurance providers (insurance carriers) to offer agricultural producers the opportunity to purchase crop insurance on an equal-opportunity basis nationwide. The insurance carriers are “approved” to sell crop insurance and they use independent licensed agents to market crop insurance directly to farmers. In the case of MPCI insurance, there are roughly 15 private companies authorized by the United States Department of Agriculture Risk Management Agency (USDA RMA) to offer the policies. A Standard Reinsurance Agreement is the contract between the approved insurance providers and the Federal Crop Insurance Corporation that renews annually. This allows the approved providers to administer the crop insurance program including the marketing and underwriting of the insurance policies, training and monitoring of their agents and staff, and transmitting the program data back to the federal government.
No, all authorized insurance providers in the crop insurance program are obligated to sell crop insurance to all eligible farmers who request it.
In general, thanks to federal support, crop insurance is affordable for most crop producers. The federal government subsidizes crop insurance premiums to help reduce the cost to farmers and ranchers. The government program also reimburses its authorized insurance providers to help offset operational expenses that would normally be included in the premiums, thereby reducing the overall premium cost to farmers and ranchers. The price of crop insurance is constant throughout the industry, meaning, the cost is the same regardless of the crop insurance company or agency you choose to work with. When considering a crop insurance agent, be sure to look for deep crop insurance knowledge, exceptional customer service as well as claims support, and robust insurance offerings.
Unit structure refers to the way a farmer chooses to group fields or acreage. Crop insurance claims are paid based on the total yield or production of a specific unit. Units can be structured in various ways, such as all fields or acreage can be placed into “one unit.” Alternatively, each field or location can have a separate unit. Therefore, if all fields are grouped together, then all production or yield is considered as a whole. Conversely, if smaller groups are elected, each smaller unit is reviewed individually, which increases the chances of a claim payment. Obviously, by increasing the likelihood of claim payments due to smaller units, the premium will be higher. There are rules surrounding how acreage can be grouped together and how unit structure affects premiums.
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