Top 5: Making the Most of Crop Insurance

Published online: May 27, 2017 Top Five
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This article appears in the June 2017 issue of Potato Grower.

Insurance is just one of those things most people would rather not think about. After all, if you end up using it, something bad must have happened. On top of that, there are a lot of ins and outs that can seem pretty daunting to get through on your own. But, crop insurance is something every grower should probably have. With the gracious help of the fine folks at National Crop Insurance Services, we’ve put together five points to consider when you’re shopping for crop insurance for your operation.

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  1. Risk Management

Crop insurance is a risk management tool that farmers buy to protect against the loss of their crops due to natural disasters such as hail, drought, freezing, flooding, fire, insects, disease and wildlife. Federal crop insurance is supported and regulated under the USDA and is sold and serviced by private-sector crop insurance companies and agents.

More than 763 million acres of potatoes were insured under the federal crop insurance program in 2016. Potato growers in 37 states protected $1.1 billion in liability and received almost $38 million in indemnities.

Each state has specific requirements for determining insurability for potato coverage. In certain states, special endorsements and options are available to enhance protection against quality deficiencies, provide extended coverage, and exclude low yields. It is recommended that growers visit with a licensed crop insurance agent to discuss all options before making a purchase decision.

 

  1. Reporting Accurate Acreage

Growers have a lot at stake in making sure crop insurance acreage reporting is accurate and on time. Those who fail to report on time may not be protected.  Those who over-report acreage may pay too much in premium. Under-reporting may result in recovering less when a claim is filed. Working closely with a crop insurance agent will ensure accurate and timely reporting of acreage.

Over the last several years, measuring land has switched from traditional paper maps to updatable electronic versions. Every field farmed has been photographed, creating a digital database that helps growers in several ways. First, it ensures greater accuracy when reporting acreage. Second, it permits more detailed tracking of risk (frequency and severity of indemnities), allowing more accuracy when setting premium rates on less risky land. Third, it will reduce the amount of time spent on acreage reporting.

 

  1. Important Dates

There are several dates that are critical for growers to remember when buying federal crop insurance protection. Developing a good relationship and communicating frequently with a crop insurance agent is critical to ensuring coverage is maintained.

Important deadlines include: Sales closing deadline (last date to apply for coverage); cancellation date (last date to give notice if no insurance is desired next year); production reporting date (deadline to report actual production history); final planting date (if unable to plant, a grower must contact his agent by this date); acreage reporting date (acreage planted must be reported to agent by this date); payment due date (interest charges begin to incur after this date); final date to file notice of crop damage (any perceived damage must be reported by this date); end of insurance period (latest date of coverage for current year’s crop); and finally, debt termination date (insurance coverage for next year will be cancelled if payment is not made by this date).

 

  1. Crop-Hail Insurance

Crop-hail policies are not part of the federal crop insurance program. These policies are sold by private insurers to growers and are regulated by individual state insurance departments. Hail is the one catastrophe that is most likely to destroy part of a crop and leave the rest looking fine. The portion of the acres that hail destroys may well be less than the deductible of a grower’s federal crop insurance policy, or it may not impact the yield enough to generate a loss.

Crop-hail insurance can fill that gap. While the federal crop insurance policy protects growers against losses severe enough to significantly drop the yield per insurance unit, crop-hail insurance gives growers acre-by-acre protection that can be up to the actual cash value of the crop. And coverage can be purchased during the growing season (prior to damage) to protect added profit potential from bumper crop yields or higher-than-normal crop values.

Even if the frequency of hail damage in a particular region is low, crop-hail coverage is rated for all areas and is an inexpensive way to protect against hail damage.

 

  1. Lenders Like Crop Insurance

Securing an operating loan may be one of the most important tasks a grower does each year. Crop insurance can help. Agricultural lenders look at crop insurance as a form of collateral for an operating loan, and it can enhance a grower’s capacity to qualify for a loan.

Crop insurance enables growers to manage risk in a way that helps them invest in and improve their operations. Many growers may not be able to afford to do this if they cannot qualify for loans.