Posted March 14, 2017 by Administrator
Crop insurance is a vital part of operating a farm. It allows for competition and innovation while offering protection from the unexpected. This way, farmers can stay in business in the event that their crops fail. Many crop insurance policies are customizable, so farmers can shape their policy to address their specific risks. U.S. farmers have two types of crop insurance available to them: Crop Hail Insurance and Multiple Peril Crop Insurance (MPCI).
Crop Hail Insurance
Farmers receive these policies from private insurers rather than the Federal Crop Insurance Program. Farmers can purchase this type of policy at any time during the growing season. Farmers opt to purchase this type of insurance because hail has the exceptional ability to damage substantial sections of planted fields while leaving the remainder untouched. The main purpose of this policy is to safeguard high-yielding crops in hail-prone areas.
Multiple Peril Crop Insurance
Unlike Crop Hail Insurance, farmers must purchase MPCI policies before they begin planting their crops. This type of insurance covers a variety of natural disasters such as:
- Too much moisture
There are only 18 private companies authorized to write MPCI policies under the Federal Crop Insurance Program. The United States Department of Agriculture Risk Management Agency (USDA RMA) regulates the Federal Crop Insurance Program and determines what rates insurers can charge. The RMA also decides which crops these private companies can insure in which parts of the country.
Farmers cannot afford to neglect their insurance coverage. They also need a variety of insurance policies to protect their business. As a leading provider of agribusiness insurance, Cline Wood can help farmers identify risks to their investment as well as provide services tailored to address their specific needs. Contact us to learn more.
Posted March 1, 2016 by Administrator
All businesses look for ways to save money, including agribusinesses. If you are looking to cut costs in 2016 you may be looking at reducing your crop insurance coverage. However, the money you save on insurance premiums may not make up for the money you lose later if you have a tough year.
Agriculture Act Not A Safety Net
One reason you may be looking at cutting your crop insurance is because of the Agriculture Risk Coverage-county average (ARC-County). ARC-County was created as part of the 2014 Agriculture Act to help protect agribusinesses who had below average crop yields. Many farmers and others in the agriculture industry believe that with this safety net in place, crop insurance isn’t necessary.
That isn’t the case. ARC-County offers limited protection and figures are based on lower levels as part of the county average. Because farm yields are variable, the coverage received from ARC-County wouldn’t be enough to offset losses for most agribusinesses.
In a recent study comparing ARC-County with different types of policies and coverage levels, agribusinesses would need ARC-County and crop insurance to help offset loses. And since 2016 is expected to be a tough year for crop yields, you may want to consider keeping the crop insurance coverage you have.
There are other ways for agribusiness to reduce costs and maintain adequate coverage. Contact us today and our experts can help protect your business and your bottom line.
Posted July 14, 2015 by Administrator
There have been significant drought conditions in certain parts of the country in the last few years, producing the need for clarification on crop insurance and tax regulations. In general, crop insurance proceeds are taxed in the year of receipt. A crop insurance beneficiary can elect to defer the tax liability until the following year. So in most cases the beneficiary will pay the taxes on the insurance payout in the year the payout is received, but a one-time election could be taken allowing the payment to be deferred until the following tax year.
There are, however, conditions that must be met in order for the beneficiary to be eligible for the one-time deferment.
- The insurance proceeds must have been received in the year the crop was produced.
- The majority of the taxpayer’s crop sold in the year following the year of production.
- The taxpayer must be using the cash method of accounting.
The tax deferment is an “all or nothing” type of election. For example, if the taxpayer received $50,000 in crop insurance related to production issues and $10,000 related to price issues, the $10,000 related to price issues must be paid in the year of receipt. The taxpayer could elect to defer the $50,000 if the above conditions are met, but must defer the entire amount.
May crop insurance products provide coverage for multiple types of qualifying conditions, such as poor production and low prices. If the beneficiary receives a payout for multiple coverage conditions they will need a breakdown of the benefit payout that specifies the amount for each condition. The taxpayer should retain the information in case the IRS requests it.
Please consult your tax advisor for more information about tax rules as they apply to agriculture insurance. Cline Wood Agency is a leading provider of agribusiness products. We would love to speak with you if you have any questions about agriculture-related insurance. Contact us through our website or call us at 888-451-3900.