Crop Insurance

Two major types of crop insurance are now available to American farmers: multiple peril crop and crop-hail. Both are not mutually exclusive. A farmer or rancher might decide to buy both types of coverage at once.

It is important to understand the differences between these two types of crop insurance, whether you’re just starting a business or looking for the right insurance policy for your existing agricultural business. Understanding the utility of crop income insurance can help protect your investment in your land.

Multiple Peril Crop Insurance: Federal Government’s Crop Insurance

Multiple peril crop insurance (MPCI), is offered by the Federal Crop Insurance Corporation, a wholly owned government entity that is under the supervision of U.S. Secretary Of Agriculture. The United States Department of Agriculture Risk Management Agency (USDA RMA), currently sets annual prices and allows over a dozen private companies to create MCPI policies. These companies provide insurance for the MPCI policies they offer and adjust and process any claims that their clients might file.

MCPI is the preferred Crop insurance option for more than 90% of American farmers. The program’s flexibility is a major reason for this. MCPI is available for more than 120 types of crops, including milk, soybeans, cattle, and swine. Even niche agricultural products like figs and caneberries or Hawaiian tropical tree could be covered by MCPI policies. MCPI policies may not cover all crops. However, policies must be purchased in both the A and B seasons and before any insured crops can be planted.

The Federal Government’s interest in making MCPI accessible to all American farmers is simple. They want to preserve a vital American industry in the event that yields are lower or total crop losses result from natural disasters.

• Fire
• Hail
• Frost
• Drought
• Maladies
• Flooding
• Earthquake
• Insect damage
• Wind that is destructive
• Unavoidable causes can cause irrigation failure

Volcanic eruptions (not a huge risk for Midwest farmers, but Hawaiian tropical tree-growers are rightfully concerned about it).

Producers can choose the amount of their average yield that they want to insure when purchasing an MCPI policy. This may vary depending on where they are located. The policy holder can also choose a percentage to insure their crop at a predicted price, which could be between 55 and 100%.

Crop-Hail Insurance: Private Sector’s Crop Insurance

The FCIC does not offer crop-hail policies (CHI) as part of its insurance program. These policies are sold by private insurers and are not federally subsidized. However, they are regulated in each state by the insurance department of the policyholders.

Contrary to its name, a CHI policy doesn’t only cover hail damage. Depending on where the policy holder lives, a CHI policy might also cover damage caused by lightning, wind, vandalism or fire. CHI is not like MPCI and does not cover drought, flooding, or death frost.

Crop Insurance in Pakistan is usually sold on an acre by acre basis. Farmers can choose to insure high-risk areas on their property, and then collect if crops are damaged or destroyed on a small area of land. A CHI policy may be used to insure corn farmers who have lost crop repeatedly on a particular area of their property because they are frequented by teenagers driving pick-up trucks.

Crop Revenue Insurance: A hedge against poor yields and unpredictability

MPCI and CHI usually cover farmers in the case of severe weather. Crop revenue insurance (CRI), however, provides coverage for farmers when their yields are low or when market rates for their crops is unusually low.

For yield coverage, the provider refers to the policy holder’s actual production history (APH), in order calculate the payout. The provider will consider both the policy holder’s actual production history (APH) and futures market prices, as determined by the Chicago Mercantile Exchange.

It is essential that you have insurance to protect your livelihood from natural disasters, vandalism, and unpredicted markets if you’re just starting out in agriculture. Even if you have an established agricultural business, it’s possible that your current coverage is inadequate.

Since decades, the Hoffman Agency has been helping farmers, ranchers, and other agricultural producers in the Sioux City, Iowa, area. Contact us today to discuss your Crop Insurance in Pakistan or other insurance requirements!