What is Crop Insurance?

By: Kathi Levan, Crop Insurance Manager

*This article was originally published in 2018 and has been updated for 2020 to reflect the change from Dairy Livestock Gross Margin to Dairy Revenue Protection.*

No two farm operations are the same. That’s why we customize your loan to suit your needs. We also understand that each operation also comes with its own risks and rewards, and we respect that, which is why we offer crop insurance. Managing your risk today means taking control of your future, because when it comes to crop damage, no one likes surprises.

Before we can discuss the different kinds of crop insurance policies, let’s start with the basics, and answer some frequently asked questions about crop insurance coverage.

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What is crop insurance and what does crop insurance cover?

Crop insurance is a risk management tool that is federally supported and regulated. It is serviced by private-sector crop insurance companies and crop insurance agents.

Crop insurance protects against the loss of crops due to natural disasters, like drought, freezes, floods, fire, insects, disease and wildlife, or the loss of revenue due to a decline in price.

In other words, crop insurance minimizes risk from elements outside of your control.

Who is eligible for crop insurance?

If you produce an agricultural commodity such as corn or soybeans, you are eligible to purchase crop insurance.  Some insurable crops may not have a specific policy available in your area, but it may be possible that coverage can be obtained through a Written Agreement or under another type of policy, such as the Whole Farm Revenue Policy (WFRP).  If you are unsure whether a crop is insurable in your area, contact a crop insurance agent.  The Farm Service Agency also offers some limited coverage for non-insurable crops through the NAP program.

What types of crop insurance are available?

Yield Protection (YP)

Yield protection crop insurance provides comprehensive protection against weather-related causes of loss and certain other unavoidable perils. YP provides late planting, prevented planting and replant protection.  Basic CAT (Catastrophic) policies do not provide coverage for replant.

Revenue Protection (RP)

Revenue protection crop insurance provides comprehensive protection that covers weather-related losses, other certain unavoidable causes of loss and price fluctuations. RP is similar to YP, except it provides the addition of price protection.

Additional Crop Insurance Coverages Available

  • Dairy Revenue Protection (DRP)
  • Livestock Risk Protection (LRP)
  • Whole Farm Revenue Protection (WFRP)
  • Pasture, Rangeland & Forage (PRF)
  • Hail/Fire Policies
  • Coverage for field crops such as corn, soybeans and milo, organic crops, orchards, nurseries, processing and/or fresh market vegetables, tobacco, grapes, wheat/barley, etc.

Important Crop Insurance Terms and Definitions

Sales Closing Date – This is a specified date on file in your agent’s office. Sales closing dates are intended to be early enough that neither party to the insurance contract has knowledge of the crop’s production prospects for that year.

For policies continuing from last year, the sales closing date is the last opportunity to make changes (like coverage level or price election) to your contract for the upcoming year.

Production Reporting – To keep your actual production history (APH) up to date, you must certify each year your total production harvested. Production reports are due 45 days after the sales closing date for the crops insured on your policy.

Final Planting Date – This is the latest date a crop can be planted in the area and qualify for the full insurance guarantee. Acreage planted after this date may still be insurable, but at a guarantee that has been reduced to reflect the shorter expected growing season.

Acreage Reporting – After the crop is planted, insured producers must file an acreage report to certify the number of acres planted, the farming practice (example: irrigated, non-irrigated, etc.) and any other information required to insure that crop in that area.

Cancellation – Crop insurance policies are continuous policies, meaning they’ll continue from year to year unless you cancel them before the sales closing dates for the crops you have insured.

Claims – A claim should be filed on your policy as soon as you feel there may be a loss to your crop. Do not destroy any acreage until you’ve spoken with your crop insurance agent.

Subsidies –

Coverage Levels CAT 50 55 60 65 70 75 80 85
Basic & Optional Units Subsidies 100% 67% 64% 64% 59% 59% 55% 48% 38%
Enterprise Unit Subsidies n/a 80% 80% 80% 80% 80% 77% 68% 53%

CAT = Catastrophic insurance

Premiums – They are the same for all insurance providers and are usually due around the time that the crop is harvested.

Who pays for crop insurance?

Congress created and provides funding for the modern-day crop insurance system as a way to help farmers manage the risks of natural disasters and market fluctuations.  The Federal Crop Insurance Corp. and Risk Management Agency set program standards, approve new products, set premium rates, and discount farmer premiums.  Even though the premiums for crop insurance are subsidized, the farmer still pays a large portion of the premium out of his own pocket, along with shouldering an average deductible of about 25-30% of his crop.

Why do I need crop insurance?

Using crop insurance as a risk management tool puts a safety net under your cash income. In times of low production or damaging weather, crop insurance enables you and your operation to meet your financial obligations – both business and personal, and helps to ensure the survival of your farm business.

How do I sign up for crop insurance?

In addition to being full-time crop insurance agents, our staff members are trained to act as advisors on your team. Give us a call and ask to speak to a crop insurance agent today – they’ll review the ins and outs of your operation, educate you on the products that are available in your area, and help you choose the level of coverage that fits your needs. Once you sign up, they’ll even keep you on track with sales closing dates, reporting needs and other deadlines.

You can find other resources on crop insurance through the USDA Risk Management Agency, including policies, registered agents, and more!

Kathi Levan began her career with Farm Credit in June of 2000 and has been the manager of the Crop Insurance department for over 15 years.  She grew up in Sudlersville, MD where her family owned and operated the local grain elevator along with an insurance office, a grain and hog operation and a sporting clay range.  Kathi has been a licensed insurance agent for 30 years.