Emergency Relief

Emergency Relief

As a means of helping agricultural producers cope with natural disasters in 2020 and 2021, Congress included emergency relief funding in the Extending Government Funding and Delivering Emergency Assistance Act (P.L. 117-43). A minimum of 750 million dollars will be allocated to livestock producers impacted by droughts and wildfires.

In the past two years, the USDA has worked diligently to develop programs, policies, and provisions that will equitably distribute these much-needed payments to producers hard-hit by catastrophes. As program details become available, USDA will keep producers and stakeholders informed through proactive communication and outreach.  

There will be two phases of distribution: Emergency Livestock Relief Program (ELRP) and Emergency Relief Program (ERP).

Emergency Livestock Relief Program (ELRP) – Phase 1

In the first phase of the ELRP program, producers will be compensated for the cost of supplemental feed as a result of forage losses in calendar year 2021 due to droughts or wildfires, using the data already submitted to FSA through the Livestock Forage Disaster Program (LFP).

ELRP Phase 1 only includes 2021 LFP participants.

Livestock producers who have losses due to drought are eligible for assistance if:

  • Any area within the county in which the loss occurred was rated by the U.S. Drought Monitor as having a D2 (severe drought) for eight consecutive weeks, or a D3 (extreme drought) or higher level of drought intensity during the applicable year.
  • Producers whose permitted grazing on federally managed lands was disallowed due to wildfire are also eligible for ELRP payments.

All grazing animals that meet their majority of nutritional needs by grazing forage grasses or legumes are eligible, including alpacas, beef cattle, buffalo/ bison, beefalo, dairy cattle, deer, elk, emus, equine, goats, llamas, reindeer, and sheep.

How to Apply

For ELRP Phase 1, eligible livestock producers are not required to submit an application for ELRP phase 1; however, they must have the following forms on file determined by FSA’s Deputy Administrator for Farm Programs:

  • CCC-853, Livestock Forage Disaster Program Application
  • Form AD-2047, Customer Data Worksheet;
  • Form CCC-902, Farm Operating Plan for an individual or legal entity as provided in 7 CFR part 1400;
  • Form CCC-901, Member Information for Legal Entities (if applicable); and
  • Form AD-1026 Highly Erodible Land Conservation (HELC) and Wetland Conservation (WC)
  • Certification for the ELRP producer and applicable affiliates.

Payments

Payments under Phase 1 of the ELRP will be calculated by multiplying an eligible livestock producer’s gross LFP payment for 2021 by the applicable ELRP payment factor.

The ELRP payment factor will be 90 percent for beginning, limited resource, socially disadvantaged, and veteran farmers and ranchers, and 75 percent for all other producers.

Form CCC-860, Socially Disadvantaged, Limited Resource, Beginning and Veteran Farmer or Rancher Certification, must be on file with FSA with a certification applicable for the 2021 program year to receive a payment based on the higher payment factor.
Payment Limitation and Adjusted Gross Income

Adjusted Gross Income (AGI) limitations do not apply to ELRP, however the payment limitation for ELRP is determined by the person’s or legal entity’s average adjusted gross farm income (income derived from farming, ranching, and forestry operations). Specifically, a person or legal entity, other than a joint venture or general partnership, cannot receive, directly or indirectly, more than $125,000 in payments under ELRP if their average adjusted gross farm income is less than 75 percent of their average AGI for tax years 2017, 2018, and 2019.

If at least 75 percent of the person or legal entity’s average AGI is derived from farming, ranching, or forestry related activities and the participant provides the required certification and documentation, as discussed below, the person or legal entity, other than a joint venture or general partnership, is eligible to receive, directly or indirectly, up to $250,000 in ELRP payments. To request the increased payment limitation, participants must file form FSA-510 complete with participant’s certification their average adjusted gross farm income is at least 75 percent of their average AGI and a certification from a Licensed Certified Public Accountant (CPA) or Attorney that the participant meets the requirements.

Attribution of payments apply to ELRP and payments to a legal entity are tracked through four levels of ownership, attributed, and limited to persons or legal entities that hold an ownership interest in the legal entity. For more information, see the Direct Attribution information on the Payment Limitations webpage.

Emergency Livestock Relief Program (ELRP) – Phase 2

In order to ensure that much-needed emergency relief program benefits are distributed evenly and equally, the FSA will continue evaluating and identifying the impacts of 2021 drought and wildfire on livestock producers.

All ELRP information and resources will be updated as Phase 2 policies and provisions are available.

Emergency Relief Program (ERP) – Phase 1

The first phase of ERP assistance will provide payments to producers who were impacted by wildfires, droughts, hurricanes, winter storms, and other eligible disasters experienced during calendar years 2020 and 2021 using existing Federal Crop Insurance or Noninsured Crop Disaster Assistance Program (NAP) data already submitted to FSA.

Fact Sheet

Who is Eligible?

For ERP eligibility, “related conditions” are damaging weather and adverse natural occurrences that occurred concurrently with and as a direct result of a specified qualifying disaster event. They include:

As part of ERP eligibility, “related conditions” are weather events and adverse natural occurrences that occurred concurrently with or directly resulting from a qualifying disaster event. They include:

  • Excessive wind that occurred as a direct result of a derecho;
  • Silt and debris that occurred as a direct result of flooding;
  • Excessive wind, storm surges, tornados, tropical storms, and tropical depressions that occurred as a direct result of a hurricane; and
  • Excessive wind and blizzards that occurred as a direct result of a winter storm.

For drought, ERP assistance is available if any area within the county in which the loss occurred was rated by the U.S. Drought Monitor as having a D2 (severe drought) for eight consecutive weeks or D3 (extreme drought) or higher level of drought intensity.

2020 drought counties eligible for ERP
2021 drought counties eligible for ERP

How to Apply

For ERP Phase 1, FSA will send pre-filled application forms to producers whose crop insurance and NAP data is already on file because they received a crop insurance indemnity or NAP payment. This form includes eligibility requirements, outlines the application process, and provides ERP payment information. Producers will receive a separate application form for each program year. Receipt of a pre- filled application is not confirmation that a producer is eligible to receive an ERP Phase 1 payment.

Producers must also have the following forms on file determined by FSA’s Deputy Administrator for Farm Programs:

  • Form AD-2047, Customer Data Worksheet;
  • Form CCC-902, Farm Operating Plan for an individual or legal entity;
  • Form CCC-901, Member Information for Legal Entities (if applicable); and
  • Form AD-1026 Highly Erodible Land Conservation (HELC) and Wetland Conservation (WC)
  • Certification for the ELRP producer and applicable affiliates

Most producers, especially those who have previously participated in FSA programs will likely have these required forms on file. However, those who are uncertain or want to confirm should contact their local FSA county office.

In addition to the forms listed above, certain producers will also need to submit the following forms to qualify for an increased payment rate or payment limitation.

  • Form CCC-860, Socially Disadvantaged, Limited Resource, Beginning and Veteran Farmer or Rancher Certification, if applicable, for the 2021 program year.
  • Form FSA-510, Request for an Exception to the $125,000 Payment Limitation for Certain Programs (if applicable).

In addition to the forms listed above, certain producers will also need to submit the following forms to qualify for an increased payment rate or payment limitation.

  • Form CCC-860, Socially Disadvantaged, Limited Resource, Beginning and Veteran Farmer or Rancher Certification, if applicable, for the 2021 program year.
  • Form FSA-510, Request for an Exception to the $125,000 Payment Limitation for Certain Programs (if applicable).

Payments

For crops covered by crop insurance, the ERP Phase 1 payment calculation for a crop and unit will depend on the type and level of coverage obtained by the producer. Based on the producer’s level of crop insurance or NAP coverage, each calculation uses the following ERP factor.

Crop Insurance – the ERP factor is 75% to 95% depending on the level of coverage ranging from catastrophic to at least 80% coverage.
NAP – the ERP factor is 75% to 95% depending on the level of coverage ranging from catastrophic to 65% coverage. FSA will perform a conventional NAP payment calculation with an adjusted guarantee equal to the ERP Factor.

ERP factors tables can be found on the ERP Fact Sheet.

FSA will mail application forms for policy holders with 2021 crop year coverage under Stacked Income Protection (STAX), Supplemental Coverage Option (SCO), Enhanced Coverage Option (ECO), Margin Protection (MP), and Area Risk Protection Insurance (ARPI) when data becomes available.

Payment Limitation and Adjusted Gross Income

The payment limitation for ERP Phase 1 is determined by the person’s or legal entity’s average adjusted gross farm income (income from activities related to farming, ranching, or forestry).

Specifically, a person or legal entity, other than a joint venture or general partnership, cannot receive, directly or indirectly, more than $125,000 in payments for specialty and high value crops and $125,000 in payment for all other crops under ERP (for Phase 1 and Phase 2 combined) for a program year if their average adjusted gross (AGI) farm income is less than 75 percent of their average AGI the three taxable years preceding the most immediately preceding complete tax year.

If at least 75 percent of the person or legal entity’s average AGI is derived from farming, ranching, or forestry-related activities and the participant provides the required certification and documentation, as discussed below, the person or legal entity, other than a joint venture or general partnership, is eligible to receive, directly or indirectly, up to:

  • $900,000 for each program year for specialty crops; and
  • $250,000 for each program year for all other crops.

The relevant tax years for establishing a producer’s AGI and percentage derived from farming, ranching, forestry-related activities are:

  • 2016, 2017, and 2018 for program year 2020;
  • 2017, 2018, and 2019 for program year 2021; and
  • 2018, 2019, and 2020 for program year 2022.

To request the increased payment limitation, participants must file form FSA-510 complete with participant’s certification their average adjusted gross farm income is at least 75 percent of their average AGI and a certification from a Licensed Certified Public Accountant (CPA) or Attorney that the participant meets the requirements. To learn more, visit the Payment Eligibility and Payment Limitations fact sheet.

Requirement to Purchase Crop Insurance or NAP Coverage

Producers who receive ERP Phase 1 payments must purchase crop insurance, or NAP coverage if crop insurance is not available, in the next two crop years to be determined by the Secretary. Purchased coverage must be at 60/100 level of coverage or higher for insured crops, or at the catastrophic coverage level or higher for NAP crops.

 

Emergency Relief Program (ERP) – Phase 2

Updates will be made once program details are finalized.

All ELRP information and resources will be updated as Phase 2 policies and provisions are available.

Easy Crop Insurance Mistakes That Keep You from Getting Your Payout

Easy Crop Insurance Mistakes That Keep You from Getting Your Payout

Crop insurance is federally funded and it is crucial to adhere to the deadlines and requirements of your crop insurance policy, in order to receive your claim dollars when they are due. These are the top mistakes we see.

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1. Documents do not have a signature or a date
2. Important Deadlines were missed
3. Application Time
4. Acreage Report
5. Production Report
6. Claims

Documents do not have a signature or a date

It is vital that all crop insurance documents are signed and dated promptly. Signatures on FSA paperwork are not valid.

Important Deadlines were missed

Your insurance could be canceled if you miss important dates. With most companies you can sign up for emails or text service to receive reminders about important dates and what you need. See more important deadlines here

Application Time

Changes in the entity – all insurance companies need to know when your farming operation has changed. Crop insurance is tied to the entity that sells your grains. This is the entity you should certify your acres with at FSA. However, this is not an absolute requirement. Some people overlook other changes such as marriage, divorce, and death.

If your crop rotation has changed.

Changing your rotation could have an impact on your premium. Although you don’t need to tell us exactly where your crop is until the acreage reporting deadline, it’s a good idea for your agent to discuss your plans for the year.

Acreage Report

If the FSA documentation is missing, a claims adjuster will first look at your FSA certification to verify the information necessary to pay claims. It helps if the information matches. FSA should send you your report, or you can include it with your acreage report. It is a common way to verify errors.

Your schedule is ready for you to review – Once you have completed your acreage report, you will receive a schedule with insurance. Double-check this document as soon as you can, this is another way to find errors.

Don’t wait too long to correct errors. It is possible for your indemnity to be denied if an error in acreage reporting is not detected until the claim time, or later, depending on the circumstances.

You may not have reported all your acres. Crop insurance requires you to report all your crop acres that are insured on your acreage report. This includes uninsurable, late-planted, prevent-plant, double-crop, and other areas. Learn more about crop acreage reporting here.

Production Report

Don’t wait too long to submit your production. Knowing the final production will help you determine if you have a claim. In case of a claim, it is crucial to give your figures to your agent soon after harvest. 

Commingling production – It is recommended that you keep track and report your production the same way as your acres. You can commingle production if you have qualified for enterprise units. You could face penalty yields in your historical databases if you don’t indicate commingled output. You can’t combine the farms of optional units. If you do, penalty yields will be assessed. You must keep a log of the way your bushels were separated for each farm when you place your crop in a storage container.

You have forgotten to include the production type in your form. The production type is what indicates how you established your production for the year (ie. If it was sold, fed or combined monitor records.

Claims

Not telling your agent about crop problems is a mistake. Claims can be submitted online, by email, phone, text or written notice. Insurance money can be denied for delayed claims or notices. Learn more about how to file a claim here

Yield claims must be submitted generally no later than 15 working days after the end date of the insurance period. This could be either when the crop has been harvested or December 10, whichever comes first.

The claims process with an adjuster should be started within 60 days of the end of the insurance period. Failure to do this will result in a delayed claim. After the final price is established, revenue claims must be submitted within 45 days.

Waiting until Harvest is Complete – Claims must be submitted by crop/by county and by unit. Waiting until your entire harvest is in can cause you to miss a claim deadline for one of your units or crops. If you have a low yielding farm, it is better to call your insurance company right away to discuss options. It is much easier to withdraw a claim than to submit a late claim. It is not a crime to withdraw a claim after you have submitted it. 

You must initiate the claim process – Agents cannot submit claims without your permission. The policyholder must initiate claims.

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10 Questions You Should Ask Before Getting Crop Insurance

10 Questions You Should Ask Before Getting Crop Insurance

Aside from climatic disasters, you must secure your investments against low yields. This is where crop insurance comes to the rescue. But crop insurance can be complex and there are a ton of options, so how do you know which one is right for your farm? At Scott Colville Crop Insurance, we visit your farm to help you understand all the options and benefits so that you can make the right crop insurance decisions for your business. These are some of the questions you should ask when looking at your crop insurance options.

 

1. Suppose I have a Revenue Protection Policy, what is considered a loss?

In most policies, if your revenue is less than the revenue specified in your policy then you can make a claim. You can choose a level of revenue protection before signing a policy. The maximum level you can choose is 85%.

2. Can I make a claim if I have one bad field?

You may claim if you have optional units divided by different sections and shares. If you have an enterprise or basic unit then you might not have an option to make a claim.

3. Once I discover a crop loss, what should I do next?

You should inform your insurance company within 72 hours. You can inform in person, over the phone, or in writing. Report a Claim

4. Who assesses crop loss and how is the appraisal made?

This is a very important step of the process and as a farmer, you should have a good understanding of how losses are assessed. In most cases, the insurance provider will send an adjuster to determine the level of damage and coverage. The adjuster can make or break your claim. Because we are a private insurance agency, we can choose which insurance providers to write policies with, usually based on how good their adjuster is for your specific crop in your area.

5. If I disagree with the appraisal, what is the next step?

If you have a disagreement with the adjustor’s appraisal, you can leave representative sample areas until a final review is completed. If you fail to maintain the affected areas then the company might reject your claim.

6. Can I use the crop for animal feed after the final appraisal?

You should ask this question from your insurance agent. If you used that crop without getting permission, your final production to count and any claim may be affected.

7. What are insurance units and how do they work?

Some farmers insure their crops using enterprise units so they can pay lower premiums. In such cases, any loss is determined by crop per county. So it means, during loss adjustment, all of the planted crops will be counted in a given county. You can also have a choice to choose optional units, where losses are assessed on a per-unit basis but these optional units have higher premiums.

8. What do I do if I’m not sure I have a claim?

If you are not sure that you have experienced a loss, then you mustn’t risk it. Contact your insurance agent, and after the appraisal, if you haven’t experienced any loss, then you can simply withdraw the claim.

9. What type of crop insurance is available?

The two most common types of crop insurance available are crop-hail insurance offered by private insurance companies and Multi-Peril crop insurance, offered by the federal government. Also available are weather insurance, LRP, LGM, DRP, and a multitude of price enhancement products

10. If I don’t notify the agent before harvest, will I still be able to file a revenue claim?

According to revenue claim laws, you must file a claim within 45 days after discovering a loss.
Revenue claims are determined after harvest price is announced, December 1 in Indiana, Michigan, and Ohio.

We hope these questions and answers help you get a better understanding of what to expect when it comes to choosing the right crop insurance policies for your farm. The best way to be sure is by scheduling a free farm visit with our expert crop insurance agents. Knowing you have the right protections in place takes a huge weight off your shoulders and allows you to get the good sleep your body and mind need to be successful.

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Apple Policy Changes: Make Your Voice Heard

Apple Policy Changes: Make Your Voice Heard

The Risk Management Agency (RMA) has been looking at ways to improve the Apple Crop Provisions. A recent press release explains the proposed changes to the apple crop insurance policy and asks for producers and the public to submit comments before February 14th, 2022. The changes are expected to go into effect for the 2023 crop year.

 

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We’ll break down who the RMA is, how they evaluate the apple policy, what the proposed changes are and how they may affect you, and how you can make sure your voice is heard on this issue.

How RMA Evaluates Apple Insurance Policy

Apple Crop Insurance Policy insures over 220,000 acres providing close to $1.5 billion in protection to apple producers. If you fit into this category, you know full well how many factors can impact the quality and quantity of your apple crop. Whether it’s hail, frost, wind, drought, or even disease and other types of damage, Apple producers rely on the crop insurance program to ensure their hard work and investment doesn’t go to waste.

Over the last 20 years, producers have been working with the RMA to make improvements to the policy as the industry has grown and changed. Some examples include the Varietal Group coverage and the ability to use it to establish unit structure to provide growers to better tailor their coverage based on their orchard’s unique needs.

Proposed Changes To Apple Crop Insurance Policy

Since 2017, the RMA has been evaluating the policy in conjunction with apple producers and industry representatives to ensure the success and sustainability of the Apple Crop Insurance Policy. Offering listening sessions for apple producers and industry representatives, the Risk Management Agency has been seeking feedback on the current policy as well as recommendations for improvement, and has announced changes that will:

  1. Enable producers to elect different coverage levels and percent of price elections by type, which allows producers to manage individual coverage and price risk more effectively.
  2. Allow producers’ premiums to be reduced in response to orchard management practices, such as removing or grafting trees, that typically occur after the acreage reporting date and decrease an orchard’s productivity.
  3. Allow producers to insure at a higher price for apples sold predominantly to direct markets or premium processing markets.
  4. Exclude apples sold for the slicer market from being considered “fresh apple production.”
  5. Introduce a fresh fruit factor to account for the reduced market value of production insured under the Quality Option sold for a grade other than U.S. Fancy.

As part of the USDA, the RMA is required by law to operate the program in ways that “improve the actuarial soundness of the federal multi peril crop insurance coverage.” Statute requires USDA to operate the program “to achieve an overall projected loss ratio of not greater than 1.0.”

Make Your Voice Heard

The RMA is soliciting comments from growers and the public on these proposed changes. Comments must be submitted by Feb. 14, 2022.

“It is vital that we hear from the producers and public about possible updates to our policies and products,” said Marcia Bunger, RMA administrator. “Information from apple producers will help us create a more effective and beneficial service to America’s agricultural community.”

Help others understand your perspective and how these proposals will impact your farm or business by participating in this discussion. This will help RMA balance the needs of all impacted apple crop insurance participants.

Interested parties can submit comments via the Federal Register or by mail using the sample format below:

apple email samplechart

Talk To An Agent About Apple Policy

Producers can purchase crop insurance exclusively through private crop insurance agents like Scott Colville. Specializing in apple insurance products, Scott has a thorough understanding of the way these policies work. If you have questions or want to talk through these changes and how they may affect you, feel free to contact Scott.

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Livestock Insurance: Which is Better, LRP or LGM?

Livestock Insurance: Which is Better, LRP or LGM?

You know better than anyone that the best laid plans for your farm or ranch can be destroyed in the blink of an eye, especially given the recent decline in market prices and margins. Thankfully, there are two livestock insurance products subsidized by the federal government that help protect your profitability against market volatility: Livestock Gross Margin (LGM) and Livestock Risk Protection (LRP).
 

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With constant changes in the live market caused by retail price resistance, foreign imports, political pressure, and other factors, these two policies bring some stability to an otherwise temperamental market.

“For ranchers and producers that are constantly fighting for pull in the market, livestock protection can give them that bottom line point and peace of mind,” says ProAg Senior District Sales Manager, Todd Kluser. “It helps provide a guarantee of the continuation of your operation by securing a minimum price lock (LRP) or margin (LGM).”

As with most insurance policies, there are many nuances and options to consider when choosing livestock insurance. How do these two products work, what is the difference between them, and how do you determine which makes most sense for your livestock operation? First, we’ll cover the basics.

What is Livestock Gross Margin (LGM)?

In the event of a drop in livestock market prices or increases in feed market prices, Livestock Gross Margin (LGM) covers your gross margin loss. This product is available for dairy, swine, calf-finishing, and yearling operations.

How does it work? For dairy producers, LGM protects you against a gross margin loss, which is the market value of the milk minus the feed costs. In cattle and swine operations, it recovers your gross margin loss when the animal market value declines and when the feeder cattle and feed costs rise.

The main benefits of an LGM policy include:

  • Protects your profits against a gross margin loss (market value of livestock minus feed costs)
  • Can be customized to your needs and goals by the number of animals, the timeframe and the deductible
  • There is no minimum or maximum coverage, and no margin calls or brokerage fees.
  • The expected gross margin and the actual gross margin is determined by futures prices.
  • It is federally subsidized at nearly any level.
  • New for 2022! You can purchase coverage on a weekly basis (vs monthly) giving you more effective and timely risk-management.

What is Livestock Risk Protection (LRP)?

When the market price drops (according to USDA’s Agricultural Marketing Service), a Livestock Risk Protection (LRP) policy makes up the difference. This product is available for fed cattle, feeder cattle, lambs, and swine.

How does it work? You specify the number of head and the specified time period, and set a floor price based on national CME Group futures. It’s like securing a put option except your upside price potential is not affected, just the downtrend. At the end of your given timeframe, if RMA determines that the ending value is below your policy’s floor price, you may qualify for a payout of the difference between your coverage price and ending value.

The main benefits of an LRP policy include:

  • Peace of mind that your floor price will be secured without losing your upside price potential
  • A range of coverage levels from 70 to 100% of the expected ending market value of your animals
  • A customized policy based on your situation and goals that has no minimum head requirement and recently increased maximum head limits.
  • Generally lower cost than other coverage options available
  • Federal subsidies are available for this product and there are no margin calls or brokerage fees
  • Premiums are no longer due until the end of coverage, allowing you to budget more efficiently
  • New for 2022! You can extend coverage to unborn calves and sell your livestock 60 days (vs 30) prior to the policy end date.

What are the main differences between LGM and LRP?

Aside from the aforementioned differences in the way these two policies work, there are a few notable factors that distinguish them. As stated, LGM does not have any head limits, which makes it a great policy for operations of all sizes. LRP has no minimums, making it ideal for small operations, and the recent increase in maximums makes it more attractive to larger producers than before.

Since locking in prices in the futures market requires a sizable number of pounds or animals in your contract, the flexibility of both LGM and LRP offers major benefits, ensuring that any size operation can get the livestock protection that fits their needs.

“Whether you have one head or many, if you’re looking for a way to lock in your revenue or gross margin, livestock protection is a good fit for just about any operation.” ― Whitney Redig, ProAg District Sales Manager

Recent Updates to LGM and LRP

Beginning with the 2022 crop year, you will be able to select LGM coverage weekly instead of just once per month. “This is really a pivotal change as it gives ranchers and producers even more flexibility in managing risk for their operation,” says ProAg Western Region Senior District Manager, Jacqueline Da Rocha.

The major change for LRP is that premiums are now due at the end of coverage, instead of having to pay up front like the old days. This allows ranchers to pay after you have earned money or even deduct it from your payout if you qualify for one. Additionally, LRP will now allow you to sell livestock 60 days before the policy end date versus only 30 days like it used to be.

At Scott Colville Crop Insurance, we passionately help farmers protect their livelihoods against whatever nature throws at them. Whether it’s bad weather, natural disasters, or poor yields: we help you determine the right combination of policies for your business and get you the highest returns possible so you can sleep soundly at night. Contact us today with any questions or invite us to visit to your farm.

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How Crop Insurance Works

How Crop Insurance Works

The Federal Crop Insurance Program Protects Farmers in Case of Loss

 

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Farming is a risky business. The average American won’t borrow as much money in their lifetime as a farmer might borrow for just one season. And even if you don’t have to borrow, one bad season could still take you out of business or prevent aspiring farmers from ever getting started.

Not only that, but commercial property and farm insurance policies don’t include crops as covered property. Because of this, farmers must purchase crop insurance to cover losses related to weather and equipment failures.

There are two primary categories of crop insurance: multiple (multi-) peril crop insurance (MPCI) and crop-hail insurance, also known as named peril. Multi-Peril Insurance is subsidized by the federal government, whereas crop-hail insurance, which is sold through private insurers, is not.

Overview & History of the Federal Crop Insurance Program

The Federal Crop Insurance Program (FCIP) is a partnership between the federal government and private insurers. The FCIP is operated and managed by the Risk Management Agency, which is part of the USDA.

In the 1930s, the Great Depression and the Dust Bowl left many farmers unable to grow enough food to feed their own families let alone make any money. So, Roosevelt leveraged the New Deal to create the first federal safety net for agriculture.

What is now the Federal Crop Insurance Program has grown significantly through the decades as new legislation has expanded the program and made it more and more affordable. Today, many farmers purchase insurance through the FCIP and reap the benefits in times of need.

According to the USDA, roughly 83 percent of U.S. crop acreage is insured under the FCIP. In 2020, the Federal Crop Insurance program insured more than 380 million acres of farmland through more than 1.1 million crop insurance policies.

How Multi-Peril Crop Insurance Works

There are 13 private insurers who manage the policies offered through the Federal Crop Insurance Program, which are all approved by the USDA. These private insurance companies work through independent agents to collect premiums, issue policies, and pay claims. When a farmer files a claim for crop losses, they usually receive payment within 30 days.

The FCIP insures the insurance companies, so if a claim exceeds the premium that the insurer has collected, the government covers their losses and vice versa. So if the insurer collects more in premiums than it pays out in claims, the government gets a share of the profit.
The Federal Crop Insurance Corp (FCIC) is the program’s overseeing arm of the federal government. The FCIC determines the rates and develops the policies based on market data from recent years. This entity also subsidizes administrative expenses for participating insurers.

Farmers who wish to purchase insurance must do so before laying down seeds. Learn more about the Multi-Peril insurance that Colville Crop offers. 

What Crops Do the Federal Crop Insurance Program Cover?

The FCIP does not cover all crops, only a select few. The USDA Risk Management Agency determines which crops each county will insure each year based on the demand for coverage and risk of loss in that county.

The crops that are typically insured under the FCIP include:

  • Corn
  • Wheat
  • Soybeans
  • Potatoes
  • Cotton
  • Dry peas
  • Apples
  • Blueberries
  • Citrus
  • Pumpkins
  • Walnuts

If your crop isn’t covered in your area, you or your insurance agent may ask the Risk Management Agency to expand the program to cover that crop in your county.

What Policies are Available through the FCIP?

Multi-peril policies can cover a loss of yields or revenue due to frost, drought, disease, excess moisture, and other natural causes.

A yield-based policy will provide a payout if your yield is less than your historical yield, and thus requires a few years of history to purchase. Catastrophic coverage, which is the basic policy, will pay out if your losses exceed 50 percent of your typical yield. You receive 55 percent of the estimated market price of the crop. It does not require a premium, only an administrative fee. You can purchase a higher level of coverage if you pay a percentage of the premium–the government covers the rest.

Most farmers will choose a revenue-based policy to cover a single crop. Alternatively, they can purchase whole-farm revenue protection to cover all of their crops. These types of policies protect your revenue in case of lower yields or a decline in harvest prices, or both. Revenue protection policies cover yield losses due to natural causes such as hail, frost, drought, excessive moisture, wind, disease, or pests. Also when harvest prices differ from their projected prices at the time of planting, these policies can help recoup your losses.

If you are considering a revenue-based policy, you will select the amount of coverage you want based on the percentage of yield averages. The majority of farmers will choose between 50 and 75 percent, but you may cover up to 85 percent of the yield average.

If your farm experiences a loss on a crop that is not covered by the Federal Crop Insurance Program, then you may apply for crop disaster assistance. Losses covered under this program include inability to plant, lower yields, or loss of inventory caused by natural disasters.

Crop-Hail (or Named Peril) Insurance

Crop-Hail Insurance, also called Named Peril Insurance, offers farmers additional coverage that provides a cushion for when your crop losses don’t meet the minimum threshold to claim the federal coverage. Crop-Hail policies must be purchased through private insurers and are not subsidized by the government.

Insurers offer different levels of coverage with varying deductibles. Despite its name, Crop-Hail Insurance can cover more than just hail. Other disasters covered under these policies include wind, fire, lightning, vandalism, and malicious destruction of property. They may also cover costs incurred from replanting.

Crop Insurance: The Bottom Line

Farmers have a lot to consider when it comes to choosing your crop insurance policies each planting season. Every farm is different, so every farm should have a customized insurance plan that is designed to help you reach your business goals.

At Scott Colville Crop Insurance, we take extra care to help our farmers understand all the different options, look at all the factors that come into play, and calculate which combination of policies will serve them best. We want our farmers to sleep soundly at night knowing that they have a solid plan in place to shield them from disaster.

Contact us today to request a visit to your farm. We would love to see the business you have built and help you protect it as best we can.

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