Understanding Crop Insurance

Posted March 14, 2017 by Administrator in Agribusiness, Risk Management | 0 comments

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:

  • Drought
  • Disease
  • Frost
  • 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.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

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