Now, farmers can avail the benefits of Crop Insurance Program and protect their crops against natural disasters, pest attack, and other mishaps. If a farmer encounters any damage, s/he can simply file an insurance claim to get his crops secured, under the provisions of the crop insurance policy.
Types of Crop Insurance Programs
In the United States, there are two kinds of crop insurance programs available: The multiple Peril Crop Insurance Program (MPCI) and the Crop-Hail Program.
Multiple Peril Insurance Program
The Multiple Peril Crop Insurance Program covers the loss of yield that a crop faces due to harsh weather conditions, diseases, excessive moisture, drought, and different natural causes. This insurance program is supported by the Federal Government. Farmers who want to purchase the Multiple Peril Insurance Program must purchase it before they start planting their crops.
A farmer is paid the claim in accordance with the yield-based policy, if his/her current yield is less than the usual. If the losses are 50% greater than the usual yield, then the farmer receives 55% of the crop’s expected market price. Catastrophic coverage doesn’t require any premium, however, the farmer must pay the procedural fee.
A farmer is protected by yield-based policy against a crop revenue loss due to a decline – in the harvesting prices, a drop in yield, or both. A farmer incurs revenue losses when there exists a massive difference between the harvesting prices and the estimated prices.
When buying a revenue-based policy, the farmer is entitled to select a level of coverage in terms of percentage of average yield. The farmer can choose the coverage level while purchasing the revenue-based insurance policy. If the affected crop is not included in the program offered by the Federal Government, then a farmer can apply for the Crop Disaster Assistance Program. This program covers those losses that occur due to inventory loss, low yields, or failure to plant a crop, as a result of a natural disaster.
Crop-hail Insurance Policy
The Crop-Hail Insurance Program is not offered by the Federal Government. It is the private insurers who offer farmers the Crop-Hail Insurance policy. The policy is in high demand and is being purchased by many who live in hail-affected areas.
Farmers can purchase the policy any time during the crop growing season. This option is not available for the Multiple Peril Crop Insurance Program.
Crops covered by the Multiple Peril Insurance Program
The Multiple Peril Insurance Program doesn’t cover all kinds of crops, only specific crops like cotton, corn, wheat, and soybean. It is also possible to insure the growth of such crops that are less frequently produced, for instance, blueberries, pumpkins, walnuts, citrus, dry peas, etc.
The Risk Management Agency can be asked by the farmers to further expand the insurance program if a particular crop isn’t covered by the insurance program.
The Importance of Crop Insurance Programs
In the US, the crop insurance programs allow the farmers to remain competitive and increase their crop yields. In case something unexpected happens, or a disaster strikes, the farmers can stay relaxed because they know that they have financial security and they can continue with their business.
Other than protecting a farmer’s investments and reducing risks, these programs also enable them to borrow cash for improving or expanding their business. After receiving crop insurance, a farmer can assure the lender that he can repay the loans in due time.