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U.S. Crop Insurance Options: An Overview of Crop-Hail versus Multi Peril

Posted by Parker Beauchamp on Mar 12, 2015

flickr-cropinsurance-859391-editedFarming and agribusiness are at the root of our country’s economy—an essential component of domestic food production and U.S. exports. However, due to the volatility of production yields and other external factors, the nature of the agriculture industry puts business owners at a high risk for loss.

From shifting demand and changes in government subsidies, to severe weather patterns and climate change, unpredictability is part of a farmer’s day to day. Knowing these variances and how to protect yourself from loss is essential to owning and operating a profitable agribusiness.

U.S. farmers have two options when it comes to crop insurance—Crop-Hail and Multiple Peril Crop Insurance. Below are overviews of both policy types and the coverages to consider when purchasing insurance for your farm or agribusiness.

Multiple Peril Crop Insurance (MPCI)

Multiple Peril Crop Insurance (MPCI) assures the security of your property, should a significant loss or large-scale event render you unable to harvest or sell your crops. U.S. farmers can obtain MPCI policies through a unique private-public partnership established between the government and a select group of private insurers. 

Congress approved the development of the Federal Crop Insurance Program, as well as other initiatives, to help farmers recover in the wake of the Great Depression and Dust Bowl. In 1938, the Federal Crop Insurance Corporation (FCIC) was established to carry out this program.

Today, the FCIC is operated and managed by the U.S. Department of Agriculture’s Risk Management Agency (USDA RMA). The USDA RMA develops/approves premium rates, insurance products, which crops can be insured throughout the country, and administers premium and expense subsidies. It also determines which insurers are permitted to write, sell and service MPCI policies.

Currently, the USDA RMA authorizes 19 private insurers to sell federal crop insurance. These companies are required to provide insurance to all eligible farmers who request it.

MPCI cannot be purchased after crops have been planted, so if you rely on this form of crop insurance, it is essential to evaluate your needs prior to the growing season.

MPCI policies offer the following coverages:

  • Crop yield;
  • Drought;
  • Excessive moisture or rain;
  • Freeze;
  • Hail; and
  • Insect or bacteria diseases.

Crop-Hail Insurance

A lot can happen between when crops are planted and harvest season; so, farmers must prepare for the worst before it’s too late. Crop-hail insurance is purchased to protect high yielding crops and insurable assets not covered within the MPCI program.

By adding crop-hail insurance to your existing MPCI policy, you can proactively prevent losses unforeseen at the beginning of the season, such as damages from hail and other unpredictable environmental factors.

Crop-hail insurance can be directly provided to farmers when purchased through private insurers. Crop-hail offers protection in the event of unfortunate circumstance, such as:

  • Fire and lightening damage;
  • Replanting;
  • Stored crop coverage;
  • Substitute crops;
  • Transit accidents; and
  • Vandalism.

Crop-hail offers additional peace of mind for farmers who opt-in to the extended coverage. Knowing you have the option to add crop-hail to your existing insurance at any time during the growing season can provide you with assurance that the full value of your crop can be insured against loss

Related article: Crop Insurance In America—How It Works

2014 Farm Bill Market Changes

Insurance and risk management solutions provide a sense of security for the safety of your farm. In addition, the 2014 Farm Bill introduced new changes to support the growth and evolution in the agriculture industry. With a goal aimed to enhance the quality of crop insurance, two new supplemental insurance policies were created: 

  • Stacked Income Protection Plan (STAX): Policies within this insurance plan are specifically related to cotton producers. This coverage protects cotton farms from unexpected revenue losses and is considered to be a companion plan for already existing crop insurance coverage. Specialized insurance programs depend on factors such as expected yield, coverage range, protected price and factors.
  • Supplemental Coverage Option (SCO): This particular program offers the opportunity for crop producers to provide additional coverage for underlying crop insurance deductibles. To purchase extra crop protection under this policy, farmers must choose coverage in yield protection, revenue protection or revenue protection with the harvest price exclusion.

Related article: 2014 Farm Bill: The Supplemental Coverage Option

These programs were created to enhance the farm safety net, which is intended to expand protection against natural disasters and unpredictable price declines. STAX and SCO insurance policies are available for farmers to purchase at the beginning of the 2015 crop year (season start dates vary by state).

Learning the ins and outs of all your coverage options and insurance programs will help to provide your farm with the solutions needed to keep your business, employees and consumers safe.

Contact INGUARD to learn more about agribusiness and crop production insurance options. Located in the heart of the mid-west, we specialize in farm and agribusiness insurance, and have access to leading industry solutions.

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Image credit: Claire via Flickr

Topics: Business Insurance