What is crop insurance?

Crop insurance is the largest source of financial protection to farmers. As more and more farmers are finding out about crop insurance, this coverage is becoming more popular.

There are two types of crop insurance – multiple peril which is an all-risk coverage underwritten by the federal government and serviced by the private sector and crop-hail insurance, which is provided by the private sector.

Loss of crop value as a result of all types of natural disasters, including drought is covered under all-risk crop insurance. Crop-hail insurance only insures against loss of the value of a crop as a result of damage by hail only. Because all-risk crop insurance offers coverage for all types of damage, it is considered more expensive than just crop-hail insurance.

In recent years, there have been sudden changes in the federal multiple peril crop insurance program. $3.3 billion requested in appropriations for full year 2006, according to the House Subcommittee on Agriculture, Ross J. Davidson, the administrator of the federal Risk Management Agency (RMA).

A loss due to hail and generally also fire, which is usually characterized by the same randomness as hail, is covered in a basic crop-hail policy. Damage caused by transit after harvest to store and lightning is usually covered by the policy, as well.

Compensation for the reduction in expected yield due to the later planting gate is received by the farmer when the destroyed crop is replanted. This policy can be purchased during any stage of the growing season.

Low yield and crop quality losses due to adverse weather and unavoidable damage from disease and insects are covered by a multiple crop insurance policy. A number of coverage options are provided for the owner of this policy. This policy usually provides more coverage than a crop-hail policy.

With a crop-hail policy, farmers can choose levels of coverage by acre, while with multiple peril insurance, farmers must choose their coverage levels by “unit”. Another difference is the availability to purchase these policies any time of the year.

Unlike crop-hail insurance, which you can purchase during any time of the year, you must purchase a multiple peril policy during certain dates. According to the country and crop, the purchasing dates will vary.

Purchasing crop insurance has many advantages. If you think that a crop insurance policy will benefit you, shop around and search for a policy that will suit you best. Discuss the policy terminology and don’t hesitate to call the companies that interest you and ask questions.