Crop Insurance Options

March 18, 2020

As the weather begins to change and warm up, farmers and rural communities start to prepare for the planting season. Last year, our communities faced extreme flooding and heavy rains in the spring and an early freeze during harvest. As we inch closer to spring, experts are warning of another wet planting season. Adverse weather, commodity price instability, insect infestations and plant diseases can severely reduce crop quality, yield and return. This can result in serious harm to a farming operation in an instant, jeopardizing the business and all who benefit from it.  Fortunately, there is a resource to help protect against these risks, crop insurance. There are two general types of crop insurance, each is explained below.

1. What is crop insurance?

Crop insurance helps protect agricultural producers, farmers, and ranchers, against the loss of their crops or the loss of revenue due to declines in agricultural commodities.   Crop insurance is divided into two categories: federally reinsured Multiple Peril Crop Insurance (MPCI) and state-regulated private crop insurance. Both types provide unique benefits to farmers. 

2. Multiple Peril Crop Insurance (MPCI)

MPCI was first created to help farmers recover from the effects of the Great Depression and the Dust Bowl. The program, first developed by the Federal Crop Insurance Corporation (FCIC), has been amended over the years to better fit the needs of farmers and adjustments in agriculture technology. However, the general goal of MPCI has stayed the same: protect farmers against crop failure or extreme change in crop value. MPCI covers many natural disasters farmers may face with each year of planting: drought, flooding, freeze, disease and others. However, in order to be eligible for MPCI, farmers must purchase insurance through an Approved Insurance Provider (a private insurance company authorized to offer MPCI) before planting begins. 

3. Crop Hail

Crop Hail insurance is a second type of crop insurance.  Crop Hail insurance has been provided to farmers since the early part of the 20th century also by private sector insurance companies. Crop Hail insurance helps protect against erratic or random disasters, such as lightning, hail, or fire. Crop-hail insurance differs from MPCI because farmers can buy it at any time during the planting or growing season and up until the anticipated harvest date; it also insures against different perils. 

Crop insurance has changed drastically since its beginning in the early 1900s. From helping farmers revive their crops and their market value after the Great Depression, to the Farm Bills passed by Congress, farmers have a wide option of policies to choose from under an MPCI program, crop-hail coverage, or both.  

Sources:

USDA

i.i.i.

NAIC