Crop Insurance Policy Information
Crop Insurance. Crop insurance can be purchased by farmers or agricultural producers to protect them against the loss of their crops due to a natural disaster or loss in revenue due to declines in the price of their commodities.
Cash grain farms grow a variety of grain crops for sale, including barley, corn, oats, rice, rye, soybeans, and wheat. While weather conditions are outside the control of farmers, grain farming also depends on natural substances such as compost and manure to be successful, plus several chemical applications such as fertilizers, fungicides, herbicides, and pesticides.
Bailers, combines, cultivators, disks, drills, hay rakes, mowers, plows, press wheels, seeders, tillers, tractors, and other types of farming machinery are required to support grain production on these farms.
Let's take a look at crop insurance policies that you might need to make sure that your crops and your income are protected.
Crop insurance protects your cash crops like corn, cotton, soybeans, and wheat from weather damage or falling prices - with rates as low as $77/mo. Get a fast quote and protect your income now.
Below are some answers to commonly asked crop insurance questions:
- What Is Crop Insurance?
- How Much Does Crop Insurance Insurance Cost?
- What Does Multiple Peril Crop Insurance Cover?
- What Does Crop-Hail Insurance Cover?
- What Does Crop Revenue Insurance Cover?
- What Does Crop Insurance Cover & Pay For?
What Is Crop Insurance?
Crop insurance is a type of insurance policy that provides financial protection to farmers in the event of crop damage due to natural disasters, pests, or disease. It helps to minimize the financial losses incurred by farmers due to unforeseen circumstances, such as drought, flood, or extreme weather conditions, and ensures that farmers are able to continue their business operations.
The insurance coverage can include coverage for crops grown for commercial purposes, such as corn, soybeans, wheat, and cotton, as well as crops grown for personal consumption, such as fruits and vegetables. The amount of coverage and the premium paid vary based on the type of crop and the size of the farm.
How Much Does Crop Insurance Insurance Cost?
The average price of a standard Crop Insurance policy for small farms and agribusinesses ranges from $47 to $89 per month based on location, crops grown, acreage and more.
Types Of Crop Insurance
There are two main types of crop insurance available: Crop-Hail and Multiple Peril Crop Insurance (MPCI). Both of these coverages are available to farmers and agricultural producers in the United States:
What Does Multiple Peril Crop Insurance Cover?
MPCI covers farmers for crop loss due to natural events or disasters. This insurance also covers for lower yields as a result of natural events. Some common natural events that can affect a crop include: destructive weather (hail, damaging wind), drought, disease, insect damage, fire or flooding.
MPCI is federally regulated, but is sold by private crop insurance companies. Around 90% of farmers who choose to purchase crop insurance choose to buy MPCI coverage. This coverage is available for over 120 different crops. There are geographical restrictions, though, on which crops are covered.
Multiple Peril Crop Insurance policies must be purchased before the start of the particular crops growing season. The federal government establishes deadlines for when MPCI must be purchased. Many of these policies include incentives to replant crops if they are damaged early enough in the season. They also may enforce a penalty if the crops are not replanted.
What Does Crop-Hail Insurance Cover?
This type of crop insurance is important to farmers living in areas of the country where hail is a frequent event. Hail can be incredibly damaging to crops, however, it is unique in that it can completely destroy one area of the crop, but leave the rest untouched.
These policies are sold by private crop insurance brokers and are regulated by the state insurance department.
A lot of farmers choose to buy crop-hail insurance as a supplement to their Multiple Peril Crop Insurance. These crop insurance policies typically include a very low to no deductible. This coverage can be purchased at any time during the growing season.
Many farmers find crop-hail insurance to be beneficial as a supplement to MPCI because some hail claims are smaller than what the deductible for their MPCI is, so they end up paying less out of pocket for small hail claims when they have this coverage.
MPCI mixes federal insurance with private crop insurance to successfully offer comprehensive and affordable coverage to America's farmers.
What Does Crop Revenue Insurance Cover?
Another type of crop insurance is called crop revenue insurance. This policy helps to protect farmers during the years when their crops have a low yield or when the price of their crop is low. This type of coverage helps to ensure that the farmer's revenues are protected against dramatic swings in crop prices.
Cash Crop Insurance Risks & Exposures
Property exposures depend on the size of the operation, type of grain stored, and the number and types of buildings. Primary ignition sources include the automated conveyance equipment, static electricity built up within grain storage areas, faulty wiring, fuel, heaters, and smoking. Explosion can arise when grain dust and vapors from certain chemicals, fertilizers, and fuels are combined with stored grain or hay.
The age, condition and construction of buildings and structures must be considered. All machinery should be grounded to prevent static buildup and discharge and inspected and maintained regularly to avoid wear and tear or overheating losses. Wiring must be up to date, of sufficient capacity, and with explosion-proof fixtures. Moisture and temperature levels must be continuously controlled. Lightning may strike buildings unprotected by rods and Ground Fault Interrupters (GFIs), grain dryers can overheat or become jammed, decaying organic material may spontaneously combust, burning operations may spread, and severe winds and tornados may destroy property in certain geographical areas.
Buildings may collapse under the weight of stored grain. Farms are in rural areas where fire response time may be slow and a water supply to douse a fire may be undependable. Smoking should be prohibited. The business income exposure can be high as some processing equipment may be difficult to repair or replace quickly.
Equipment breakdown exposure is high due to the extensive use of machinery and equipment for planting, harvesting, and storage. All machinery and equipment must be regularly inspected and maintained.
Crop exposures are high because growing crops are in the open and are susceptible to damage by animals, bacteria, drought, flooding, frost, fungi, hail, insects, lightning, snow, viruses, weeds, wildfire, wind, and winterkill. While some of these can be mitigated by proper farming practices or chemical applications, others are random acts that may or may not be covered by insurance.
Crime exposures are minimal. Most equipment and inventory are large, heavy, and difficult to remove undetected. Cash exposures are usually small. Employee dishonesty exposures are minor in family-owned and run operations. Pre-employment background checks should be done on all outside employees having access to cash, checks, safes, and equipment.
Inland marine exposures include accounts receivable if customers are billed, computers, goods in transit, mobile equipment, and valuable papers and records for customer, regulatory, and supplier information. Grain farms require a lot of agricultural machinery including combines, irrigation systems, and tractors. Farm equipment stored in buildings can be damaged or stolen. Grain in transit to offsite storage facilities or to customers can be damaged by overturn or collision, which may result in a total loss due to the possibility of food contamination.
Premises liability exposures are generally low. The operation of farming equipment and ATVs not subject to motor vehicle registration falls under premises liability, not automobile liability, even when being used on public roads. Poor rural road conditions combined with heavy or awkward equipment and occasional operation by underage drivers can result in accidents. Group tours and frequent visits by agriculture agents, chemical applicators, mechanics, and inspectors increase the exposure.
Visitors may be injured due to uneven walking surfaces, inadequate housekeeping, farm machinery, and confined or closed spaces in bins, tanks, and silos. Dust explosions and fires may affect neighboring properties. If third parties use the land for recreational purposes, such as hunting, fishing, or camping, the exposure increases as there may be remote areas that are difficult to patrol and control.
Products/completed operations liability exposures are limited when the farmer delivers produce to processors, although there can be a possibility of contaminated grain from the use of chemical applications. Only FDA approved pest control chemicals should be used around stored grain. Genetically engineered seed and grain is a social concern, but health hazards are not known at this time.
Environmental impairment liability exposures can be high due to the potential for air, land, or water pollution from agricultural chemicals, animal waste, fuels for machinery and motor vehicles, refrigerants, and solvents. Use and disposal of all chemicals must be documented and meet all FDA and EPA standards. If there are underground storage tanks, a UST policy will be required.
Workers compensation exposures are very high as farming is very labor-intensive. Work may be required for long hours and in all kinds of weather conditions. Workers may be seasonal, speak another language, and lack adequate training and supervision. Working around farm machinery, tools and equipment can result in a variety of injuries ranging from minor to severe.
Slips, trips, falls, back injuries from lifting, broken bones, foreign objects in the eye, hearing impairment from noise, and muscle strains are common. Employees can receive shocks from malfunctioning electrical equipment or from static charges built up from grain dusts. Exposure to farm chemicals and organic dust can lead to respiratory issues. Workers can suffocate in confined spaces such as grain bins, tanks, silos, and pits. Safety harnesses and respiratory protection are required.
Injuries can result from falls from heights and loading and unloading vehicles.
Business auto exposures are moderate. Grain transport vehicles are heavy and awkward, especially on narrow rural roads. Drivers who are less than 16 may be permitted to drive vehicles during planting and harvest times. All drivers must have appropriate licenses and acceptable MVRs. Vehicles must be well maintained with documentation kept at a central location.
What Does Crop Insurance Cover & Pay For?
Following are some commeon examples of what sort of cliams crop insurance covers:
1. Drought: Suppose a farmer has planted a large field of corn, but a severe drought hits the region, causing a significant reduction in yield. Without crop insurance, the farmer would bear the loss entirely. However, with crop insurance that covers drought-related losses, the farmer can file a claim. The insurance would then compensate the farmer for the loss in yield, mitigating the financial impact of the drought.
2. Hail Damage: Another farmer could have a large orchard of apple trees, but a sudden hailstorm could damage or destroy a significant portion of the apple crop. Again, without insurance, the farmer would have to absorb this loss. But with a crop insurance policy that covers hail damage, the farmer could make a claim, and the insurance would pay out a sum relative to the extent of the damage, helping to offset the loss.
3. Flood: A farmer with fields in a floodplain might see their entire crop wiped out by an unexpected flood. With a crop insurance policy that covers flood damage, they can file a claim. The insurance company would assess the damage and provide compensation based on the policy's terms, ensuring that the farmer is not left destitute due to a natural disaster.
4. Pest Infestation: A farmer could face severe crop loss due to an uncontrolled infestation of pests like locusts. If the farmer has a crop insurance policy that covers pest-related losses, they can file a claim to receive compensation for the lost crops. This could help the farmer recover financially and potentially fund pest control measures for the future.
5. Disease Outbreak: Diseases can also decimate crops, leaving farmers with significant losses. For instance, a vineyard owner may lose a significant portion of their grapes to a fast-spreading fungus. If they hold a crop insurance policy that includes disease coverage, they can claim against this loss. The insurance payout could help them manage the immediate financial hit, invest in disease prevention for the future, or replant the affected area.
In summary, crop insurance provides a safety net for farmers, who often have to contend with unpredictable and uncontrollable factors that can cause significant losses. By filing a claim in any of these scenarios, the farmer can obtain financial relief and, in many cases, the means to rebound from the event and prepare for the future.
Commercial Insurance And Business Industry Classification
- SIC CODE: 0111 Wheat, 0112 Rice, 0115 Corn, 0116 Soybeans, 0119 Cash Grains, Not Elsewhere Classified, 0191 General Farms, Primarily Crop
- NAICS CODE: 111110 Soybean Farming, 111120 Oilseed (except Soybean) Farming, 111130 Dry Pea and Bean Farming, 111140 Wheat Farming, 111150 Corn Farming, 111160 Rice Farming, 111191 Oilseed and Grain Combination Farming, 111199 All Other Grain Farming
- Suggested ISO Farm and Commercial General Liability Code(s): 06518, 06519, 06618, 06619, 06718, 06719, 06818, 06819
- Suggested Workers Compensation Code(s): 0037 Farm - NOC & Drivers
Crop Insurance - The Bottom Line
Regardless of what types of crop insurance you choose to purchase, having that layer of protection is essential.
Interested in learning more and finding out which type of crop insurance is right for your agribusiness? Talk to a private crop insurance specialist today about your options and what will work best for your farm or ranch. Private crop insurance, how much does crop insurance pay, types of crop insurance, crop insurance companies, what does crop insurance cover, federal crop insurance program & crop insurance calculator.
Additional Resources For Agribusiness Insurance
Learn about small business agribusiness insurance - a type of commercial insurance protects farmers against loss of, or damage to crops or livestock.
- Insurance Farming Terms Glossary
- Aquaculture Fish Farm
- Commercial Fishermen
- Dairy Farm
- Equine & Horse Farm
- Farm And Ranch
- Farm Equipment Dealers
- Farm Labor Contractors
- Livestock & Cattle
- Mushroom Farms
- Nursery And Greenhouse
- Nut Farm
- Orchards & Groves
- Poultry Farm
- Sheep & Goat Farm
- Swine, Hog & Pig Farm
- Tobacco Farm
- Specialty Farm Risks
The agribusiness industry is a vital sector of the global economy, providing food, fiber, and other essential products to people around the world. However, it is also a complex and risky industry, with many potential sources of loss and damage. This is why the agribusiness industry needs commercial insurance.
One major risk in the agribusiness industry is natural disasters, such as floods, droughts, and hurricanes. These events can devastate crops and livestock, leading to significant financial losses for farmers and other agribusiness owners. Business insurance can help protect against these losses, providing a financial cushion to help businesses recover and continue operating.
Another risk in the agribusiness industry is the potential for accidents or injuries on the farm. Farming can be a dangerous occupation, and accidents can occur while working with heavy machinery or handling animals. Insurance can help cover the costs of medical treatment, lost wages, and other expenses related to these accidents.
In addition to these risks, the agribusiness industry is subject to various legal and regulatory requirements, such as food safety standards and environmental regulations. Noncompliance with these requirements can result in costly fines and legal action. Insurance can help cover the costs of legal fees and settlements, protecting businesses from financial ruin.
Overall, the agribusiness industry needs insurance to protect against the various risks and challenges it faces. Without commercial insurance, businesses in this industry would be vulnerable to financial losses that could threaten their survival. By investing in insurance, agribusiness owners can safeguard their businesses and ensure their continued success.
Minimum recommended small business insurance coverage: Buildings, Business Personal Property, Crop Insurance, Employee Dishonesty, Accounts Receivable, Computers, Goods in Transit, Mobile Equipment, Valuable Papers and Records, General Liability, Environmental Impairment, Umbrella, Business Automobile Liability and Physical Damage, Hired and Non-owned Auto & Workers Compensation.
Other commercial insurance policies to consider: Business Income and Extra Expense, Earthquake, Equipment Breakdown, Farm Owners, Flood, Computer Fraud, Employee Dishonesty, Forgery, Money and Securities, Cyber Liability, Employee Benefits, Employment-related Practices Liability, Product Recall, Underground Storage Tank, Stop Gap Liability and Unmanned Aerial Vehicles (UAV) (Drones).