In some ways, crop insurance is very similar to any other insurance you carry. The larger number of people it covers, the less risk each participant assumes. When the chance of loss is spread over a larger and more diverse group of participants, premiums for everyone involved decrease. Just like other types of insurance, your crop insurance premium will be based on the amount of coverage you select and how many elective options you choose within that coverage.

Additionally, participants in all forms of insurance must pay premiums and shoulder deductibles. This gives the insured some ownership of their individual protection and discourages participants from engaging in risky behavior.

And, as with most insurance claims, when you file a crop insurance claim you will be assigned a loss adjuster who will assess the loss, verify policy information, and submit their findings to a Claims Supervisor for audit. Typically, checks arrive within 30 days of the claim being filed.

So the basic insurance/loss/claim cycle should feel very familiar to you:

1. You will work with your insurance agent to create a plan that fits your needs.
2. You will be required to pay certain premiums for your coverage.
3. When disaster strikes, a claim is filed.
4. A private-sector adjuster will then investigate and verify the loss.
5. Once the claim is complete, you will receive an indemnity check.

The vast majority of crop insurance in America is subsidized by the Federal Government, which creates a unique, yet beneficial system of insurance.
While there are a limited number of private crop insurances that are loss specific, (we offer Production Hail Insurancel and Production Hail policies), these policies are not a part of the Federal Crop Insurance Program, and they are not subsidized by the government. Most of the information herein applies specifically to federally-subsidized policies.

We all know that agriculture is a unique kind of business that suffers unique kinds of losses. As such, agriculture losses tend to be more severe and geographically targeted than other insurance losses.

For instance, it is unlikely that an entire town will require medical attention in one day, or every vehicle on one highway will crash in the same day. But just one flood, storm, or drought can cause a catastrophic loss for numerous farming operations in a county or region. This distinction puts the agriculture industry at an expressly higher risk, as farmers assume a greater concentration of losses and greater likelihood for wide-scale disaster than any other insurance line. As such, crop insurance would be exceptionally cost prohibitive and limited if it were operated as standard insurance. America has therefore developed a crop insurance system based on a partnership between private insurance providers and the U.S. Department of Agriculture wherein a variety of affordable policies, categorized collectively as Multi-Peril Crop Insurance (MPCI), are offered.

The program services – writing and reinsuring the policies, marketing, adjusting and processing claims, training and record-keeping, etc – are managed by one of 15 government authorized insurance providers (AIP’s) (Link to the AIP’s page). These private companies are required to sell insurance to every eligible farmer who requests it. In addition, insurers cannot refuse to provide protection, raise the premium rate or impose special underwriting standards on any individual eligible farmer, regardless of risk. The United States Department of Agriculture (USDA) Risk Management Agency (RMA) is responsible for the oversight and regulation of the program, including determining the premium rates and eligible crops per location.

Here’s where it gets particularly interesting: In order to keep premium costs affordable for farmers, the federal government allocates significant premium subsidies to the farmers — generally between 50% and 80% of the total premium cost, depending on coverage. On top of that, the federal government also pays subsidies directly to the private insurance companies in return for the services they provide. This is done to help offset hefty administrative fees and related costs, which would otherwise be reflected in higher premiums for the farmers. The government also benefits from this arrangement, as farmers can now affordably protect their own yield. This has drastically reduced the once common practice of distributing unbudgeted federal funds in disaster legislation during years of weather catastrophe.

The premium portion that you will be liable for is the difference between the total premium for the policy and the portion of the premium that is subsidized by the Federal Government. Premiums are based on what policy you choose and the percentage of crop you want to insure. Subsidies range from 38% – 80% of the total premium.

• For example — If your total policy premium is $2,954 and you have chosen a coverage option that allows for a 68% subsidy, the government will pay $2,009 of the total premium, leaving your total out-of-pocket premium at $945.

Comprehensive coverage options, subsidy information and a premium/indemnity calculator can be found for each policy plan on our website.

Many crop insurance policies guarantee a specific amount of crop production. This guarantee is calculated by multiplying your Actual Production History (APH), your coverage level, your share in the crop and the number of acres insured.

Other policies offer a price protection option that will protect you in the event of market fluctuations that decrease your projected revenue. A guaranteed revenue price is calculated differently depending on what policy you choose.

Claim payments are then based on the difference between the actual yield and/or the appraised production and the guaranteed revenue. Learn more about specific policy coverages here.

When you suffer an insurable loss, it is important to contact your insurance agent as quickly as possible so a notice of loss can be submitted within the required time frame:

• You must report damage or loss of production of a planted crop within 72 hours of discovery.
• Any Revenue Protection losses must be reported within 45 days of the latest harvest price release date.
• When a loss occurs because a crop was prevented from being planted due to an insurable cause, a notice of loss must be provided within 72 hours after the final planting date, or at the time you determine you cannot plant within any applicable late plant period.

If you file a claim, you must get approval from the AIP before, and notify after, you:

• Destroy and of the insured crop not harvested;
• Put insured crop to another use;
• Put acreage to another use; or
• Abandon any portion of the insured crop

The Federal Crop Insurance Program only covers losses that are unavoidable and due to naturally occurring events. The program does not cover losses due to negligence, or any failure to follow good farming practices. In the basic provisions of the crop insurance policy, the definition of negligence is, “The failure to use such care as a reasonably prudent and careful person would use under similar circumstances.” According to the RMA, a good rule of thumb for practicing good farming practices is to follow prudent and responsible practices to produce your crop.

Comprehensive coverage options, subsidy information and a premium/indemnity calculator can be found for each policy plan on our website.

• Applicant Eligibility – Anyone applying for crop insurance must have an insurable interest in the crop to be insured, as confirmed by FSA records, settlement sheets, contracts or other applicable documents. (What else?)
• Subsidy eligibility – For farmers to be eligible for subsidy dollars under an MPCI policy, they must adhere to Conservation Compliance requirements. Producers are prohibited from planting on converted wetlands or converting wetlands for crop production, and may not use any funds from any FSA farm loan to contribute to the conversion of a wetland to produce an agriculture commodity or contribute to excessive erosion of highly erodible land. Farmers who plant annually tilled crops on highly erodible soil must have a conservation plan approved by and on file with the USDA. Anyone participating in a Federal Crop Insurance program must have a completed and signed AD-1026 form on file with the FSA for the reinsurance year of their crop policy.
• Ineligibility – A person is ineligible to participate in any crop insurance program insured or reinsured by the FCIC for at least one year if he or she:
  • Has a delinquent debt with FCIC or a reinsured company, including administrative/CAT fees
  • Has been convicted of violating the controlled substance provisions of the Food Security Act of 1985
  • Has been disqualified in any administrative proceeding

Application Deadlines — There are two specific deadlines (Sales Closing Dates – SCD) per year for a new or modified crop insurance application to be submitted. The dates can vary by crop and area, but the most common dates when a completed application for annual crops must be signed and on file with the agent are September 30 and March 15. MPCI policies automatically renew each year with the same coverage unless a written request is made to cancel or modify the current policy.

• Coverage Information — Before you submit your application, your agent will work with you to create unique coverage for your crop, including:
  • Plan of Insurance – What type of insurance plan you choose will affect your premium and your eligible loss claims. Most plans cover either loss of average production or loss of average revenue, and some cover both.
  • Coverage Levels – You will need to choose what level of coverage you would like for each insured crop/county. Most plans allow you to choose from the following coverage levels: 50%, 55%, 60%, 65%, 70%, and 75%. Additional plans allow for even higher coverage, including 80%, 85% and 90%.
  • Endorsements – There are multiple endorsements and options available to add supplemental coverage, exclude coverage, or otherwise modify coverage to your plan. None of these are required, but you must specify your choice(s) on the applicable form to be in effect for the current crop year.
• Reports — You are required to submit two reports to your agent in order to secure crop insurance. They combine to calculate as your Actual Production History (APH), which is the yield produced per unit over the last 4-10 years. Each report is required to be reviewed and submitted annually before your insurance will take effect. Accuracy is vital, as these reports are used to determine your insurance guarantee and premium rate, and may be reviewed prior to any loss payment. Your agent will play a key role in helping you both obtain and verify your information. If you do not have at least 4 years of production history, your agent will work with you to provide alternate solutions.
  • Production Report – Provides a certified, written record of yield information for previous year(s). It must include planted acreage and production for all units and is usually due about 45 days after the SCD.
  • Acreage Report — Provides information about any crop in the county for which the insured has a share. It must include acres, share percentage, location, practice/type/variety, planting date, and certain other information for the crop, and is usually due shortly after the Production Report.