Crop Insurance

What is Crop Insurance?

This type of insurance policy protects farmers’ income in the event of hail storms or other natural disasters. Farmers will have protection from things like a decline in price, drought, frost, flooding, fire, pestilence, and animals.

Who it is for? 
These policies are for farmers seeking to protect themselves from risks that could devastate their crops. The people who buy this type of insurance can be small farmers or large-scale farming companies that work thousands of acres of crops. The one thing that they have in common is their need for risk protection from natural disasters.

How it works 
A regular policy can be purchased directly from our insurance experts here at Sellman Insurance Group. Any claims that you may have can be made through us. This type of policy is usually offered hail-prone areas as it is the most devastating natural disaster that farmers face. This policy can be purchased any time of the year. The multi-peril policy must be bought before the season starts. Premiums for the year depend on and/or are watched over by the Risk Management Agencies that helps sets the rates for the sale of these policies. They also govern which crops are able to be covered by a multi-peril policy. Various forms of the policy can be sold to different regions based on the types of perils that are common in a given region. There are different types of coverage that are available for farmers based on the different types of perils they present or face.

Yield Protection
Gives protection from any loss in yield sustained from naturally occurring events. YP provides for most crops. Such events include:

  • Adverse weather
  • Fire
  • Insects
  • Plant disease
  • Wildlife
  • Earthquake
  • Volcanic eruption
  • Irrigation water supply failure (due to a natural event)

Like the APH (Actual Production History) plan of insurance, Yield Protection guarantees a production yield based on the individual producer’s APH. Unlike the APH plan of insurance, a price for Yield Protection is established according to the crop’s applicable commodity board of trade/exchange as defined in the Commodity Exchange Price Provisions (CEPP). The projected price is used to determine the yield protection guarantee, premium, any replant payment or prevented planting payment, and to value the production to count.

The coverage and exclusions of YP are similar to those for the actual production history (APH) plan of insurance. An indemnity is due when the value of the production to count is less than the yield protection guarantee. The main crops covered under this plan include:

  • Barley (includes malting type)
  • Canola/rapeseed
  • Corn
  • Cotton
  • Grain sorghum
  • Rice
  • Soybeans
  • Sunflowers
  • Wheat

Revenue Protection
Revenue protection can garantee a certain amount of protection in the event of dramatic price increase or decrease, low yields or a combination of both (for corn silage and rapeseed, protection is only provided for production losses). This coverage guarantees an amount based on the individual producers APH and the greater of the projected price or harvest price. Both the projected price and harvest price are established according to the crop’s applicable commodity board of trade/exchange as defined in the Commodity Exchange Price Provisions (CEPP). While the revenue protection guarantee may increase, the premium will not. The projected price is used to calculate the premium and replant payment or prevented planting payment. An indemnity is due when the calculated revenue (production to count x harvest price) is less than the revenue protection guarantee for the crop acreage. Crops covered under this plan include:

  • Barley (includes malting type)
  • Canola/rapeseed
  • Corn
  • Cotton
  • Grain sorghum
  • Rice
  • Soybeans
  • Sunflowers
  • Wheat

Revenue Protection with the Harvest Price Exclusion

Revenue Protection HPE is similar to RP (Revenue Protection), however, Revenue Protection with the Harvest Price Exclusion coverage provides protection against loss of revenue caused by
a price decrease, low yields, or a combination of both. Unlike RP (Revenue Protection), the revenue protection guarantee for RP HPE is based on the projected price only and it does not increase based on a harvest price. This means that the policy can be written so the level of guarantee is determined by future prices. Crops covered under this plan include:

  • Barley (includes malting type)
  • Canola/rapeseed
  • Corn
  • Cotton
  • Grain sorghum
  • Rice
  • Soybeans
  • Sunflowers
  • Wheat

Area Yield Protection
AYP coverage is based on the experience of the county rather than individual farms. Maintaining the insured’s actual production history is now mandatory and may be used by the RMA as a data source to establish and maintain the area programs. Area Yield Protection (AYP) indemnifies the insured in the event the final county yield falls below the insured’s trigger yield. The Federal Crop Insurance Corporation [FCIC] will issue the final county yield in the calendar year following the crop year insured. Since this plan is based on county yields and not individual yields. the insured may have a low yield on their farm and not receive payment underArea Yield Protection AYP.

Area Revenue Protection
This coverage is based on the county in which the farmer actuates. Like the other area plans, ARP is based on the experience of the county rather than individual farms. Coverage is provided against loss of revenue due to a county level production loss, a price decline, or a combination of both. Upside harvest price protection is included which increases the policy protection at the end of the insurance period if the harvest price is greater than the projected price and if there is a production loss. ARP will pay a loss when the final county revenue is less than the trigger revenue which is calculated using the higher of the projected price or harvest price.

Area Revenue Protection with Harvest Price Exclusion
Like AYP, ARP-HPE is based on the experience of the county rather than individual farms. Maintaining the insured’s actual production history is now mandatory and maybe used by HMA as a data source to establish and maintain the area programs. An ARP- HPE policy provides protection against loss of revenue due to a county level production loss, price decline, or a combination of both. This plan only uses the projected price and does not provide upside harvest price protection. An indemnity is due under ARP—HPE when the final county revenues published by FCIC are less than the trigger revenue. Since this plan is based on county revenue and not individual revenue, the insured may have a loss in revenue on their farm and not receive payment under ARP-HPE.

Actual Production History
APH protection is the oldest product listed in this comparison. The Actual Production History plan of insurance provides protection against a loss in yield due to nearly all natural disasters. This coverage is also available for crops that do not have any prices set by any commodity exchange.  For most crops, those natual events includes:

  • Drought
  • Excess moisture
  • Cold and frost
  • Wind
  • Flood

Unavoidable insect damage and disease
Like YP, the APH plan of insurance guarantees a yield based on the individual producer’s actual production history. This coverage protects the farmers should they lose their crops due to insects or disease.  Unlike Yield Protection, the available price elections are established by the Risk Management Agency. An indemnity is due when the value of the production to count is less than the liability. 0f the small grain crops, only oats, rye, flax, and buckwheat remain covered under the APH plan of insurance for the 2015 crop year.

Area Risk Protection Insurance
ARPI is one basic provision with three plans of insurance: ARP, ARP-HPE, and AYP. ARPI is an area-based coverage that protects against widespread loss of revenue, yield, or a combination of both in a county. It is a policy that protects against natural causes of loss that cause the final county yield or revenue to be less than the trigger yield/revenue. ARPI replaces the Group Risk Plan (GRP), Group Risk Income Protection (GRIP), and GRIP-Harvest Revenue Option (GRIP-HRO). The GRP and GRIP plans of insurance will no longer be available.

Major benefits

 The benefits of crop insurance will vary from one person to the next. A small-yield farmer may stand to lose his farm and his home in the event that his crop is destroyed by a hail storm or some other natural disaster. By having protection, the farmer is financially protected from financial ruin.

As for the large industrial farmers, they are protected from loss of income. A loss of income can mean that employees do not get paid and workers leave. Having Crop coverage ensures that the farmer is able to plant and harvest the next coming season. If you are looking to buy crop insurance, then call our agency today! We offer great rates and other coverage options for farmers looking to protect their investment. We can answer any questions that you might have and help you get the protection you need for your crops.

Note:
Individual farm revenue and yields are NOT considered when calculating losses under ARPI.
It is possible that an individual farm may experience reduced revenue or yield and NOT receive an
indemnity under ARPI.






Share: