All About Hail Insurance: What You Get Out of the Deal (and Some Perks to Hail Insurance You May Not Know)

All About Hail Insurance: What You Get Out of the Deal (and Some Perks to Hail Insurance You May Not Know)

March is here, and that means April is not too far around the corner. For row croppers, orchard growers, and the like, this means the hail season is not too far behind, along with certain choice deadlines for getting hail crop insurance lined up before planting your crop for 2023.

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Farmers should know that hail damage is not covered under the main Federal Crop Insurance Program in the U.S. For hail-specific coverage, you’ll need to contact a private insurance agent or company that offers it… which we happen to do.

While farmers might wince at the thought of having to shell out cash for hail coverage (and not getting government-subsidized insurance to help drive down the prices), one of the major perks to hail insurance: is very low deductibles, and sometimes no deductible at all! This is because it’s pretty common for hail damage to not meet the deductibles on other types of weather-related insurance policies. Thus, the need for hail-specific coverage with low to no deductibles.

Want to know all about hail insurance? Considering a policy? Here’s what you get out of the deal, and some perks to hail insurance you may not know.

Hail insurance covers a lot more than just hail!

Despite the deceptively simple title, hail insurance is inclusive of a lot more than just hail damage. However, that can and does depend on the insurance agent or company.

Many private agents and companies (including us here at Colville Crop Insurance!) offer coverage for several other weather-related events wrapped right up into your policy. And no, it’s not a Multi-Peril policy… it is technically a Named Peril policy, even if the policy still addresses multiple weather perils.

Some coverage you may find included with your hail insurance policy:

  • Fire. Wildfires are becoming increasingly common and highly devastating weather events to farmers everywhere. Your hail insurance policy could cover fire events that are related to weather that damage your crops (but not related to on-farm originated fires or electrical fires). At Colville Crop Insurance, we also offer a policy that compensates growers for fires damaging product even post-harvest while it is still in the harvester.
  • Lightning. It’s true that most wildfires are caused by lightning, and thus coverage for this could be wrapped up under fire insurance with your hail policy. That said, lighting strikes can cause damage to crops in other surprising ways. If lightning strikes the soil around your crops, it can create an unnatural spike of nitrates that may damage or kill them off — and in instances like these, lightning under hail insurance will have you covered. Like fire insurance, Colville Crop Insurance protects against damage to crops even post-harvest while still in the harvester.
  • Vandalism. That’s right, some hail insurance policies will help you cash in on stealing, tampering, malicious damage, shrinkage, etc. to your crops in the field (and in some cases, post-harvest) that affect your revenue. It’s not just Mother Nature’s mischief farmers might need to be worried about, but the human-caused type, too.
  • Transit protection. Some hail policies may also throw in transit protection as part of the deal. This means product (post-harvest) is covered during transportation from damage or loss to accidents or other events while in the vehicle or other transit method. For example, we offer coverage for transit to the first storage location up to 50 miles and even protect against damage to product caused by collision, culvert/bridge/dock collapse, and even unanticipated overturning of the transport vehicle.
  • Plenty of add-ons. Not enough coverage? No worries. A lot of hail policies are also designed for implementing and incorporating other types of weather events that could happen and potentially damage your crops: such as wind, re-planting costs, unanticipated harvest expenses, and more.

You can purchase hail-specific insurance anytime during the season.

While in many ways Multi-Peril Crop Insurance (MPCI) policies tend to be more favorable purchases for farmers — and they cover hail damage along with many other types of natural and non-natural threats — one of the huge bonuses to hail insurance under the Named Peril category is that you can buy it any time of year.

That means there’s no rush to get coverage squared away in the next couple of months in order to make sure you’re secure against hail or other incidents.

You could be covered for hail even if it didn’t happen on-farm.

This may come as a surprise to some farmers. Some insurance providers (including us), as part of the policy, hone in on a specific set area of square mileage that you are protected for. We can specifically offer coverage for hail in a 3-square mile grid (3 miles by 3 miles).

What if hail damage occurred within the 3 by 3 mile grid, but impacted your neighbor’s fields instead? You could still get compensation for this loss. It could be advantageous in some ways for multiple farms or farmers to share or “go in” on policies together, when it makes sense.

If you live in a less hail-prone area, you’ll pay less for insurance.

Farmers who have never dealt with hail — or don’t expect to deal with it often, based on their location — might still want to consider hail insurance nevertheless.

For one, your policy will be far less expensive than if you live in a hail-prone area. On the other hand, “freak” hailstorm events are becoming more frequent, more intense, and popping up in more areas where they are not expected. Even if it is a bit of extra change every year for your business, having (or not having) hail insurance could mean the difference between a rogue hailstorm completely making or breaking your business — yes, even completely losing the family legacy.

Take last year’s February hailstorms in Texas for example. Or even the story about this Ohio apple farmer, who might have had to close their doors if they didn’t have hail insurance. Hail is not a common occurrence in Ohio!

Remember: hail insurance goes far beyond needing it because you live in a hail-prone region, and it offers many other perks of coverage that you should consider. If you’re curious about what Named Peril and Multi-Peril hail insurance policies could cover, get in touch with us today!

Is Hail Getting Worse? | Statistics About Hailstorms, Agriculture, and Why Crop Insurance Matters

Is Hail Getting Worse? | Statistics About Hailstorms, Agriculture, and Why Crop Insurance Matters

Is hail getting worse? Should you worry more about potential crop damage, your insurance coverage, and the longevity of your business when it comes to this icy weather event?

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• According to insurance statistics, hail insurance claims are going up.
• Hailstorm damage and frequency are both increasing with intensity.
• “Hail Alley” – And how it’s changing over the years
• Hailstorms are becoming more commonplace and destructive in areas where they weren’t before.
• Which areas are the most likely to experience hailstorms and hail damage?
• How much in damages are hailstorms causing?
• Farmers: don’t overlook the importance of hail insurance this spring.

Word is going around (and farmers themselves report) that hailstorms could be getting more intense, more frequent (in certain areas), and popping up more and more intensely in areas where they weren’t as common in the past. But what do the statistics say? What does this mean for you as a grower and for your crop insurance?

During this spring season — and with hailstorms taking a turn for the worse around the world and in the U.S. in recent years — considering a hail insurance policy is a worthwhile measure to take for the well-being of your operation. Here are some statistics about hailstorms, agriculture, and why crop insurance matters when it comes to hail and farming.

According to insurance statistics, hail insurance claims are going up.

There aren’t many statistics specifically on hail insurance claims for agricultural crops out there. Nevertheless, the stats across the entire insurance industry (including hail property damage) are quite telling in terms of the direction where general hail insurance coverage is headed: and that direction is upwards.

The Rocky Mountain Insurance Information Association, along with the NICB, indicate that claims for hail damage have gone up over the recent years of 2018 through 2020. Standard claims went up by 2%, with the actual number of claims jumping up by over 100,000 between 2018 and 2019.

Meanwhile, QC claims related to hail damage (QC meaning Questionable Claims, or claims insurance companies suspected were fraudulent), went up by 34%, over one-third from previous years. This is substantial! Even with a rise in mostly Questionable Claims alone (with some of them proven to be legitimate, others not), this indicates a steep trend of hail incidents so severe that farmers and property owners alike are needing to lean on insurance for better security more and more.

Again, while there aren’t statistics like these on hail insurance for crops, the insurance industry overall — both farmers and insurers — are braced for these general trends. Farmers on the ground can speak to there being greater fears around hail damage now more than ever…something a proper hail insurance crop policy could address.

Hailstorm damage and frequency are both increasing with intensity.

More and more hailstorms are happening in recent years. When they do, they’re worse than usual, studies show. Climate data from these studies also expect that gradually rising temperatures will enable MORE hailstones to form when these events take place; research shows that warming temperatures enable both the formation of more hailstones in storms and a greater chance of landfall as a result. Worse: hailstones that do make landfall are starting to get larger and larger on average!

That said, surveys of row crop farmers show that large hailstones aren’t necessarily the kind of hail they fear the most. Rather, high volumes of small hail moving at high speed, such as in a windstorm, are shown to inflict far more damage on crops than large hail (think of a shotgun vs. a rifle blast). Still, this type of dangerous hail — sometimes called the “icy combine” because of what it does to crops — could also become more likely thanks to increasing temperatures.

Larger hail over time may also be a greater threat to livestock farmers than row crop farmers. Not to mention: larger hail creates hazards and damage to infrastructure, buildings, and mechanical equipment for farmers of all kinds, no matter what they produce.

While hail insurance or crop insurance won’t cover the direct death or loss of livestock to injury or hail incidents — nor can it cover damage or destruction of farm buildings or equipment — it can protect what farmers grow along with their revenue by compensating for losses due to hail damage to crops in the field. (Not to mention: hail insurance can cover a LOT of other perils besides hail!)

“Hail Alley” – And how it’s changing over the years

It’s just the way insurance works: if you’re in an area more prone to certain weather, your premiums on that type of weather are going to be higher as a result. That’s not a bad thing.

The region known as Hail Alley in the U.S. is a perfect example. All up and down this corridor you may find higher hail insurance rates from some insurance companies if you want a policy that fully protects you from damage. That said, the rates are probably more than worth the price considering the losses they could inflict on your business. All farmers know that a hailstorm could make or break a successful year of production, or even an entire business. Here’s the thing…

Hailstorms are becoming more commonplace and destructive in areas where they weren’t before.

In the past, the region known as Hail Alley historically spanned out east from Wyoming to Nebraska, then down through eastern Colorado. Some experts insist it stretches even further down into Oklahoma, Kansas, and the Texas Panhandle.

However, research is showing that the nature and area of Hail Alley could change in the coming years. In fact, Hail Alley could be moving into new areas and even intensifying. (For example, current Hail Alley regions like Colorado and Kansas could expect more intense hailstorms on the whole.)

On the other hand, data seems to show Hail Alley could expand farther and farther south the warmer temperatures get. This means places like Texas could become a more prominent part of Hail Alley and thus even more hail-prone than they were before.

Statistics agree: Texas is a massive target for Mother Nature and her hailstorms. Texas had the highest number of hail events in 2022 AND in 2020. Texas-based hail claims made up 23% of ALL hail claims in the entire U.S. from the years 2018 to 2020, and the state consistently had more hailstorms than any other state over the years 2012 through 2021.

This is notable considering Texas still doesn’t top the list of states considered the most hail-heavy, but it’s getting there. The bottom line: with rapidly changing weather trends and patterns across the country, hail insurance could quickly become a standard insurance policy to keep agricultural businesses protected from more intense and surprising hail events.

Even if you thought you shouldn’t fear hail and don’t need hail insurance, this could change at the drop of a hat, with trends like these!

Which areas are the most likely to experience hailstorms and hail damage?

What other hotspots should be made more aware of hail and hail insurance coverage, considering these trends?

While only the northern part of Texas is a hail-prone region (albeit a heavy one), entire states like Kansas and Nebraska carry a high risk for hail just about anywhere you live… yes, no matter where you are in the state. In fact, these two states make up the bulk area of Hail Alley, even if they experience less hailstorms on average than north Texas.

Great portions of Iowa and Oklahoma should watch out, too, as they likewise make up a substantial portion of the corridor. That said, climate predictions expect that overall hailstorm frequency in the U.S. will go down, even in Hail Alley… but the intensity of these storms will go up, especially in Texas more than any other state.

Reports are also showing that hailstorm frequency AND intensity are establishing in states and areas outside of Hail Alley. These are the weather patterns that growers around the country should be paying attention to. Even if you’re not in a hail-prone area and never considered hail insurance, with these changing trends… it may be time to!

For example, South Carolina is becoming a more hail-associated state, even though it lies far outside of Hail Alley. Still, it trails only four states behind Texas on the list of states that experienced the most hailstorms between 2012 and 2021. It’s still nowhere close to the most historically hail-heavy region of the U.S.; and yet, it is experiencing substantial damages owed to hailstorms.

Then there is Ohio, which experienced 144 substantial hailstorms between 2012 and 2021 responsible for around $11.1 billion in damages. Ohio row croppers and even orchard growers don’t tend to put hail insurance on the front lines of their coverage — though some Ohio growers have found a hail policy to be life-saving even if they never expected hail to touch their crops. (Especially in a state so far out of Hail Alley)!

The takeaway: statistics, farmer experiences, and even on-the-ground reports from insurance agents (including ours) speak for themselves. If hail hasn’t happened to you yet, even if you live far out of Hail Alley, there’s no telling if that will keep being the case.

The likelihood of significant hail damage taking place just about anywhere is going up. The only thing that will fully prepare you for that eventuality and any possible economic losses to your business… hail insurance!

How much in damages are hailstorms causing?

It goes without saying: there’s a reason hail insurance exists. State Farm Insurance has reported that costs of hail insurance damage (to property), and the insurance claims associated with them, have gone up by $1 billion from 2021 to 2022.

Though there aren’t exact numbers for agricultural claims and amounts specifically, it’s a sign that hail damage is becoming a serious and peaking trend, and it might continue to do so in coming years.

According to the Lincoln Journal Star, Nebraska— a notoriously hail-prone state in the center of Hail Alley — suffered $4.6 billion in natural disaster damage throughout 2022, even higher than weather-related causes in previous years…including the 2019 major flood, 2021 tornado outbreaks, and the 2020 derecho. One major contributor to these damages: hail.

June 2022 brought hail and high winds to Nebraska, along with hailstorms that occurred through April 2022, bringing about severe economic damages to homes and agriculture alike. June 11th alone created 5-inch diameter hail in one part of the state, breaking local records for largest hailstones ever measured in the county!

Together with all these storms reported by the Lincoln Journal Star, hail took part in creating some of the largest monetary losses in the history of Nebraska. Insurance companies state that they haven’t seen anything comparable to these wind- or hail-related damages like this in years before 2022. All in all, hail caused $2 billion in losses associated with insurance claims in Nebraska alone — and those are only the insurance claims that were actually covered, and not speaking for farmers or property owners who were uninsured or under-insured.

Farmers: don’t overlook the importance of hail insurance this spring.

Even if hail doesn’t seem like a peril to your agricultural operation at the moment — or it even if it hasn’t affected your operation, state, or region in years past — keep your eyes on the trends! Experts, farmers, and insurance authorities all sing the same tune: hail is a serious economic threat and could get worse in the coming years.

Hail is getting more intense everywhere, and becoming a more frequent occurrence in places where hail damage is not typical. Even the geographics of Hail Alley may be changing. Not to mention, overall, hail insurance claims for property damage have spiked. No doubt they will spike for agricultural professionals as well.

For farmers who haven’t had concerns about hail damage to their crops, mostly because of where they are located, this highly damaging weather event could become a new norm and a new reality in their region — and you don’t want to be caught unprotected by unprecedented hailstorms, and worse, deal with a serious loss of revenue (or the loss of an entire business and family legacy).

Get in touch with a trusted insurance company and agent for more info about hail insurance. The wonderful thing about these hail insurance policies, many will have you covered for many other types of perils: such as fire, lightning damage, damage during transport, and more!

Enhanced Coverage Option (ECO) and Supplemental Coverage Option (SCO) For Crop Insurance: What Are They? And Do You Need One?

Enhanced Coverage Option (ECO) and Supplemental Coverage Option (SCO) For Crop Insurance: What Are They? And Do You Need One?

Farmers need all the crop insurance and protection they can get in their line of work —especially row crop growers. This is why, over the last 10 years, new and innovative coverage options for farmers have been introduced to both enhance and supplement what’s already out there.

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So far two main categories have been introduced and implemented as federal relief programs for row croppers: the Enhanced Coverage Option (ECO) and Supplemental Coverage Option (SCO) for crop insurance. In addition to federal plans, these coverage options are designed to place an extra layer of financial protection and compensation in addition to what either foundational federal plans or private company plans already underwrite for you and to give you extra “security” if you have a high deductible.

Further, these coverage options may “kick in” during circumstances that otherwise wouldn’t get triggered by your “main” policy or deductible. This is because ECO and SCO can be tied to local production and trends on your county’s level rather than what you actually produce or yield directly on your farm. This can come in handy: you may receive a payout in some cases, even if your farm is doing very well on its own!

As of now, these policies only cover row crops and not livestock or dairy production. You can almost think of these policies as a “team” policy: covering the well-being of not just one farmer, but an entire community or region in order to ensure agricultural production in a specific area is robust. The best part of all, the Federal Government covers more than half of the costs of these policies if you enroll (65%).

So, how do you know if purchasing or applying for SCO or ECO would be right for you and your business? How do these coverage options work? What are they? And do you need one?

Do ECO and SCO work the same, or are there differences (and which one would be right for you)? Read on — we’ll answer all these questions and more.

What is Enhanced Coverage Option (ECO)?

Of the two options, an Enhanced Coverage Option (ECO) may be the more desirable add-on as it doesn’t take much to reach some sort of payout — even if your farm is doing well, but production elsewhere in your county is lagging. This option was introduced by the federal government quite recently for farmers to take advantage of extra coverage (in 2021).

If you purchase an ECO, all that needs to happen for a partial payout of your deductible is for county-wide production to fall below 90-95%. If it falls below 86% however, coverage for this starts to work differently (see below about Supplemental Coverage Option (SCO).

Because most Federal Crop Insurance coverage only kicks in at 85% (these policies can’t cover more than that by law), many farmers will go with an ECO option to get even more coverage if their individual business or county-wide revenue losses don’t dip quite that low. With ECO, even a more marginal loss of less than 10% of expected yields or revenue could get you an indemnity or a payout — which can be very helpful in a pinch.

That said, you may not be able to get ECO if you have certain margin protection, risk protection, or weather coverage policies. Be sure to talk or discuss with your agent if an ECO is the right addition to your plan, or about how to change your foundational coverage so that ECO can be added.

What is Supplemental Coverage Option (SCO)?

The Supplemental Coverage Option (SCO), on the other hand, is a crop insurance option that has been around for a while longer. It was first introduced back in the 2014 Farm Bill for 2015 and in some ways adds the “first layer” of extra county-level coverage to a foundational policy by helping cover part of your other policy’s deductible (especially if that deductible is high, and hard to reach).

You can only have SCO if you also have a Revenue Protection or Yield Protection policy in place (and the same goes for ECO, for the most part). It cannot supplement other types of policies, most notably some risk-related policies. As a general rule, your SCO coverage will kick in when overall production county-wide dips below 86% of expected production (yes, even if your farm is producing well), which is the legal maximum limit (85%) of how much a Federal Crop Insurance plan can compensate you.

Fun fact: you can have both SCO and ECO options together added to your policy. A SCO can actually cover your ECO acreage and make sure that as much of your deductible not covered by that 15% revenue loss still gets matched with something. Getting both gives you the ultimate security!

Are ECO and SCO coverage the same? What’s the difference?

While ECO and SCO can function very similarly, they are obviously not the same, as you have probably gathered from reading up on both so far. There are some important differences to highlight between the two.

A Supplemental Coverage Option (SCO) will only protect you from revenue losses that drop below 86% (that 85% that Federal Crop Insurance programs can’t cover more of). This is still higher than many of the deductibles a lot of insurance policies may provide and is absolutely worth signing up for.

That said, an Enhanced Coverage Option (ECO) will push that even higher, so you are getting a payout or indemnity even with a 5% revenue loss. Getting both together ensures you receive a payout for what seems like even a minor dip in yield or revenue — even if it is not your own! Remember: these don’t relate to your on-farm revenue, but your county’s overall revenue and yields.

The Supplemental Coverage Option (SCO), on the other hand, is a crop insurance option that has been around for a while longer. It was first introduced back in the 2014 Farm Bill for 2015 and in some ways adds the “first layer” of extra county-level coverage to a foundational policy by helping cover part of your other policy’s deductible (especially if that deductible is high, and hard to reach).

You can only have SCO if you also have a Revenue Protection or Yield Protection policy in place (and the same goes for ECO, for the most part). It cannot supplement other types of policies, most notably some risk-related policies. As a general rule your SCO coverage will kick in when overall production county-wide dips below 86% of expected production (yes, even if your farm is producing well), which is the legal maximum limit (85%) of how much a Federal Crop Insurance plan can compensate you.

Fun fact: you can have both SCO and ECO options together added to your policy. A SCO can actually cover your ECO acreage and make sure that as much of your deductible not covered by that 15% revenue loss still gets matched with something. Getting both gives you the ultimate security!

What are signs that I should get an ECO or SCO added to my policy?

If you like your crop insurance policy but have a very high deductible, ECO and SCO are great options to consider. These can help ensure that you get some sort of payout even for minor dips in revenue or yields.

Keep in mind, however, that ECO and SCO options are designed to follow what’s set out in your underlying policy. As such these add-ons are quite variable and flexible, and very likely to work with whatever insurance policy you have — after all, that’s what they’re designed to do!

You should also consider these add-on modifiers if you live in areas (specific counties) where revenue and yields can be volatile or unpredictable. Be certain to also talk to your agent about whether ECO or SCO would be a good fit for your current policy or not — and if not, you can always change things up with your base policy to make it work.

The Different Types of Dairy and Livestock Insurance: Which Kind Should You Get?

The Different Types of Dairy and Livestock Insurance: Which Kind Should You Get?

So, you’re running a livestock operation. Maybe you’re focusing only on meat or dairy or all of the above, perhaps even juggling those alongside some row cropping and looking into more coverage.

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As you know, profit margins can be razor-thin for livestock and dairy farmers. And the markets can be unpredictable. Naturally, any extra financial protection and security you can find peaks your interest— which leads you towards crop insurance livestock coverage. Maybe you want to expand or try it out if you haven’t already.

For those new to the world of livestock and diary insurance specifically, getting coverage can look different than the typical row crop insurance. There are many different subcategories with varying abbreviations, meanings, and strategies to livestock coverage that can be hard to navigate at first.

For someone who just wants simple coverage for their operation, where do you even start? Lucky for you, we’ve put together this little guide to help you get acquainted with different types of dairy and livestock insurance coverage. Our goal was to break down DRP, DMC, LRP and LGM in the simplest possible way.

This will give you the basic knowledge needed to start talking to your insurance agent. So sit tight and learn about the different types of dairy and livestock insurance available and which kind you should get— so you can save yourself some time, and feel informed about your options!

First of All: There is No “One Size Fits All” Insurance for Livestock or Dairy

Talk to an insurance company or agent and you’ll quickly learn: getting your livestock or dairy products covered isn’t a walk-in, walk-out process. For the best coverage, you’ll need to have an in-depth talk about your enterprise, its needs, its numbers, and production history to get all your insurance options on the table.

While one type of policy may work well for one producer, it doesn’t mean it will work well for all businesses. But on the whole, all of these policies are designed to complement the vast majority of livestock or dairy operations. There are different aspects of coverage — such as risk, revenue, gross margin, and more — that you’ll want to understand in order to determine which combination will be best for YOUR own business. To protect your livelihood in the most effective way possible, your policies will probably look different from other farmers or ranchers and that’s okay!

So, what are all the ways you can get covered? How do you determine which kind of dairy or livestock insurance would be best for you and your operation? To help you figure that out, we’ll look at all the different options right here so you can determine which may be the best fit for you and your financial security.

There are many different types of dairy and livestock insurance.

Livestock producers and farmers may visit websites or talk to insurance agents only to have hard-to-understand terms or acronyms thrown at them: Risk protection. Gross Margin Coverage. DRP. LRP. The list goes on and on.

Below is a guide to the most common terms you’re likely to come across in the industry as a dairy or livestock farmer exploring their insurance options. You’ll hear these often when pouring over options or speaking to an agent, but it’s not always straightforward (or intuitive) to know what they might mean.

Having a basic knowledge of these can help you feel better equipped and confident that you’re getting the right coverage while also dispelling any possible confusion and uncertainty in the process. This will help match you with the right plan and protection for you and your business that much quicker.

Livestock Gross Margin (LGM)

This type of coverage is broad spectrum and wide-reaching, meaning it can cover a wide variety of different enterprises: not only the livestock themselves but also the products they produce (so yes, that includes dairy). LGM can cover dairy though in this form it’s sometimes called DGM or Dairy Gross Margin coverage (scroll down to read more about this).

The way LGM works: policies protect against any reduced gross margin in projected established margins that year based on market prices for products or livestock feed. This gross margin is calculated by subtracting the feed costs for livestock from the established market value of the product: whether that be the livestock, meat, or dairy product (including yearlings, swine, etc.).

If this gross margin is compromised — whether through an increase in feed prices, or a drop in dairy or other prices — your LGM coverage plan would kick in and cover you from any deficit you experience as dictated by the market. This type of coverage is a good plan for farmers and producers who deal with fairly volatile prices or if they feel (or know for certain) that changes in market prices impact them the most.

Livestock Risk Protection (LRP)

While dairy farmers can certainly benefit from this type of policy, LRP or Livestock Risk Protection policies are more dialed into the needs of livestock ranchers specifically. That said, coverage of any cattle through a livestock policy no doubt has great promise for any dairy operation.

The way LRP works: you get covered for the decline in livestock prices, pure and simple. Most coverage plans will offer anywhere between 70% and 100% of the losses on various types of livestock. That means if prices dip anywhere under those percentages, you’ll be compensated for that price loss — and yes, if you have a 100% deductible, ANY dip in price with your livestock means more money in your pocket!

Plans can cover a wide range of different livestock types from cattle and swine to feeder cattle (and fed cattle as well). Again, this may be the better plan for you if you have a diversity of different livestock under your enterprise and if you don’t specialize in dairy (though dairy farmers can certainly benefit) and if feed prices are the most likely issue to get your goat.

Dairy Revenue Protection (DRP)

Take the previous policy, Livestock Risk Protection (LRP), give it a “dairy spin” and you have Dairy Revenue Protection (DRP). This approach works much like LRP, only it is more closely tied to the typical ups and downs of the dairy industry. Since fluctuating prices tend to be far more volatile and less predictable than livestock prices, a completely separate approach to coverage is set aside for dairy.

The way DRP works: if there are drops in milk prices that impact your bottom line and revenue projections, coverage kicks in to fill the gap based on future expected milk (or milk solids) prices. To get more into the specifics of coverage, this gap is determined by quarterly (3-month) insurance periods where revenue is “set” at the beginning of each.

When the price drops during this set quarterly period (from the projection set at the time insurance is obtained), you will then be compensated for the revenue drop during that period if it doesn’t meet your projected gross sales.

You can go in one of two directions with DRP. There is the Class Pricing Option, which is based on milk prices and milk prices only. Then there is the Component Pricing Option based on the prices for milk solids, butterfat, and protein for processed and value-added dairy products. Obviously, the choice comes down to what the final product of your dairy will be.

Dairy Margin Coverage (DMC)

The Dairy Margin Coverage program (DMC) is offered through the USDA Farm Service Agency (FSA) and is also similar to the prior program it replaced (Margin Protection Program for Dairy or MPP-Dairy). Just like DRP correlates to LRP, DMC works a lot like Livestock Gross Margin (LGM). When the margin between national milk prices and cattle feed prices hits a certain level, coverage kicks in to compensate producers for feed price increase or milk price decrease (it doesn’t matter which one— it’s the margin that counts).

More on how DMC works: no quarterly periods are set for this approach, unlike DRP. Compensation can also kick in at any time. Your agent will talk about your production history with you and establish what your dairy operation is bottom line expected to produce. You can also enroll with a network or co-op of dairy producers under one policy, including and not just limited to your operation alone.

If dairy prices drop and interfere with these projections, you get covered. If feed prices likewise go up, you get covered. If both occur— you get covered. If the margin meets a certain point that interferes with your financial bottom line, this is where your policy would come in handy.

For the most part, the government completely covers the costs for this type of insurance (if you qualify as a dairy farmer). But you also have the option of buying higher tiers of coverage, even catastrophic coverage where you can pay a premium on top of what the government covers for you.

Can you Enroll in More Than One of These Coverage Plans?

The answer is yes, absolutely. That is: certain different plans overlap really well and grant you airtight coverage, while some other plans are designed to be separate options, and it may not make sense to have both together. Although in most cases, the more different types of coverage, the better.

It also should be noted that similar plans (like DMC and DRP) cannot cover the exact same products or revenue. BUT…you can have one policy cover a portion of these, and then another policy to cover the rest.

The best way to pick your perfect plans: talk to an insurance agent that specializes in these policies (like us!) so they can walk you through which combos will work the best for your operation. As a quick overview, some policies that work great together are Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP) for dairy farmers. For farmers diversifying with dairy in addition to other livestock products, Livestock Gross Margin (LGM) and DRP is probably the way to go.

What Is The Quickest Way to Know Which Plan is Best For Me?

Any of these insurance plans will have great protection potential for a wide array of farmers. An insurance agent will know best how to tailor the right plans to your specific business needs; that said, there are certain “tells” that may indicate certain policies will work better for you than others.

Obviously, if you want to save money, a government-subsidized policy like Dairy Margin Coverage (DMC) is the best option—who doesn’t like free money? If you find yourself at the mercy of dairy or livestock prices, which tend to fluctuate wildly for some periods of time, then Dairy Revenue Protection (DRP) or Livestock Risk Protection (LRP) will help shield you during these periods.

Or, let’s say you are an organic farmer or other specialized grower, and feed prices can be on the higher end (or go up sporadically). Livestock Gross Margin (LGM) or Dairy Margin Coverage (DMC) may then be the better fit for organic dairy or livestock, as these will guard you against any revenue losses owing to an increase in those outrageous premium feed prices.

Do Livestock Plans Cover ALL Types of Livestock?

This depends on the insurance company, of course! Here at Scott Colville Crop Insurance, we are only equipped to cover cattle and swine at this time. Even so, we cover yearlings, feeder cattle and fed cattle and many different sub-categories in between for these types of livestock. Many insurance companies, however, are moving into (or have already moved to) cover more types of livestock like lamb, chicken, and turkey.

It’s important to remember, these insurance plans will not directly cover the livestock themselves. Death, illness, or other types of “damage” to your livestock (or assets that help you raise livestock) are not covered under these plans. Most policies only protect your income against high overhead, market fluctuations and other influences; but not things like death, disease, weather-related loss to cattle, damage to infrastructure, equipment, or other things.

The different types of dairy and livestock insurance can seem confusing at first. But, with a little bit of info and a chat with an insurance agent, it’ll take no time for you to determine what livestock insurance policies will best protect you and what you care about most in your business.

5 Things Crop Insurance Will Protect You From – and 3 Things It Won’t (And What To Do Instead)

5 Things Crop Insurance Will Protect You From – and 3 Things It Won’t (And What To Do Instead)

Should I get crop insurance? Will the costs be worth it for me and my business? Many farmers have these questions at first, especially if they’re starting new businesses or just beginning to grow.

Table of Contents

1. Loss of revenue
2. Adverse weather events
3. Loss of crops
4. Unborn livestock
5. Fluctuations in market prices
1. Death or loss of livestock
2. Direct loss or spoilage of product (dairy, produce, other)
3. Farmer- or personnel-related accidents or losses

The basis for this: naturally, like any newcomer to anything, business owners aren’t sure about how crop insurance works. What will it cover? What won’t it? If you’ve been asking yourself these questions, or hemming and hawing over whether or not to get in touch with a crop insurance agent (without fear of being sold something you don’t need), never fear. We’ve got answers for you here.

Read on to learn 5 things crop insurance will protect you from, and 3 things it won’t (and what to do instead). Crop insurance won’t directly cover or compensate you for every single loss. But, it will protect you in other ways that may surprise you, making for those losses in other ways no matter what.

5 things crop insurance will protect you from:

1. Loss of revenue.

Whether it’s fruits, vegetables, hemp, livestock or dairy, the foremost thing most major crop insurance policies are designed to protect you from is any loss of expected revenue from your main product—that will always stand.

The way it works: regardless of your product—projected row crop harvest, dairy production, livestock sales or meat products, etc.—insurance works with you to determine your expected and guaranteed maximum revenue. If you are a dairy farmer especially, agents will also work with whatever the most recent market prices may be at the moment, as set out by the USDA (though this applies to all products across the board of course, even if they fluctuate less regularly).

Come the close of the year, coverage compensates you for anything below the ground floor you would expect from your enterprise’s revenue established with your agent—no matter the cause of revenue loss! This way you know your business is always maintaining or moving forward, never backward.

However, this can be huge for row crop farmers especially, who face the most risks to their guaranteed revenue than other farmers and deal with the tightest profit margins. In fact, crop insurance could even be considered a mainstay for annual row crop farming, though don’t discount the undeniable financial security year-to-year it grants for livestock, dairy, and perennial crop growers as well.

2. Adverse weather events.

Regardless of what you grow once again, crop insurance will have you covered. These policies are set aside as more specialized coverage options, so you are able to “shop” for and customize your protection based on the weather risks you’re most likely to face, depending on the climate and region you reside: such as hail, rainfall, frost, wind, or heat/drought events.

Any specific single weather event spelled out in your insurance policy makes it a Named-Peril Insurance product, which also has the added benefit of being purchasable any time of year (unlike other policies). That said, you can save a bundle by literally “bundling” all possible weather risks you could face together with Multi-Peril Insurance products, especially if you find more than one of these events at your doorstep (or threatening to) with any regular frequency.

And no, Multi-Peril doesn’t just apply to row crop farmers or fruit growers! Whether a wind event takes out a good portion of your field or an entire livestock facility, it won’t matter. For a wide spectrum of farmers (including diversified growers that produce both row crop AND livestock or dairy), Multi-Peril Insurance is considered yet another mainstay for fully insured and financially progressive farming. Built into these policies are included Revenue Protect (RP) and Yield Protection (YP), giving you options to approach compensation from either the financial or product side of things—or, both.

3. Loss of crops.

Any substantial and financially threatening loss of crops—whether it be fruit, vegetable, hemp, or other row crops—will be covered in some way by crop insurance. While this technically tends to be caused directly by weather events, you will also find protection against common nature-related crop losses such as excess moisture or disease, which tend to go hand-in-hand with weather causes.

Loss of any crop you grow (especially if you deal with disease or moisture issues) is best addressed and protected through a Multi-Peril Insurance product. This is because these types of issues could be caused by any number of weather events: hail, excessive rain, heat stress, wind damage, and more. Again, you also get the benefit of Yield Protection (YP) to be rest assured you’ll be well taken care of in any instance of crop loss.

However: if these are concerns, be sure to purchase your plan before you get anything in the ground! An insurance agent will work with you on the numbers before determining or cashing out your coverage.

Unfortunately for ranchers and dairy farmers, product loss due to things like disease is not specialized to or directly covered by insurance like it is for row crop farmers. But for those with livestock, this can be indirectly covered with Revenue Protection (RP) plus these producers get a different set of advantages.

4. Unborn livestock.

While row croppers should explore and move forward with options before their planting season begins, dairy and livestock farmers get the benefit of extending coverage to unborn livestock like cows and piglets: directly protecting their assets well into the future.

Plenty can imperil the health of adult livestock and thus the financial success of your operation. But young animals represent livestock at their most vulnerable stage: they’re more easily prone to loss, whether it’s to disease, predation, or other health complications. They also represent the future of your enterprise and require protection, too.

If you’ve ever wondered if you could get coverage for unborn livestock for your dairy or other livestock operation, the answer is yes. This could even kick in if birth numbers for the year are far below what was expected, or if the unpredictable (or unthinkable) occur to reliably fertile or pregnant animals. The best named policies for this type of coverage will be a Livestock Risk Protection (LRP) product.

Not all crop insurance companies offer this type of protection. But, you’ll find that the most specialized companies and agents do—and will. If you keep tight records of expected new additions to your herd, with reliable past records showing how your livestock operation can be expected to grow, this will be instrumental to getting this type of coverage; otherwise, if you don’t have these records and this coverage could greatly help you…start keeping those records, now (even if the numbers aren’t certain)!

5. Fluctuations in market prices.

Farmers and ranchers know all too well that things are always changing on the farm—perhaps with nothing changing more often than product prices. Crop insurance companies know this very well, too. That’s why an insurance plan for any farmer (row crops, dairy and beyond) takes changes in market prices into consideration.

Prices go down to the point where you don’t meet your expected revenue? Crop insurance will take care of that. And yes, most insurance companies as a rule make policies flexible with the changing of market prices, taking into account the market forces that will never be in the farmer’s control…but that shouldn’t be the farmer’s fault!

For livestock raisers, a Livestock Gross Margin (LGM) insurance plan would be right up your alley. This will even take into consideration any price hikes in livestock feed that could impact your farm operation and bolstering overhead.

Reading the writing on the wall, having coverage that takes this into consideration is one of the biggest lifesavers most of all for dairy farmers. Getting a Dairy Revenue Protection (DRP) policy takes into account the frequent changes in dairy product prices, up to as frequently as monthly changes.

3 things crop insurance won’t protect you from:

1. Death or loss of livestock.

Unlike row crop insurance which offers policies that directly cover crop loss, most crop insurance companies won’t offer policies that directly cover or compensate for the costs of loss of livestock: whether from disease, accidents, or predation.

While this may read as disappointing on paper (and not make sense at first to dairy farmers or ranchers), once you get more deeply acquainted with other policies that extend to dairy or livestock coverage, you’ll see that they can get at the heart of what really hurts a farm business the most when death or loss happens: loss of revenue.

If possible livestock loss is of concern to your business, or you’ve dealt with loss with increasing frequency, the best thing to do is to look at Livestock Risk Protection (LRP) coverage products or Livestock Gross Margin (LGM) plans. Or, if you’re a dairy farmer, take a look at the more dairy-specialized Dairy Revenue Protection (DRP) coverage.

Take into consideration as well that Named Peril and Multi-Peril policies will cover loss of livestock due to weather related events. While you won’t get compensation dollar-to-dollar for the loss of your livestock assets, you will get money back in your pocket for how that loss impacts your product in the future.

2. Direct loss or spoilage of product (dairy, produce, other).

Accidents happen: none worse than the loss of meat product, dairy or crops after they have been harvested from the field and stored, and before they get to market.

However, a crop insurance policy—just like with loss or death of livestock—won’t match or cover you dollar-to-dollar for that product loss right as it happens. Instead, it’s best to keep record of the loss and submit it as part of your end-of-year (or other period) claims with a Revenue Protection or Gross Margin-protecting policy of some sort purchased in advance of the year.

It’s a no brainer anyway: the bottom line being impacted with loss or spoilage of product (or damage in transit, for example) is loss of revenue regardless. Out of all categories of growers and producers, dairy farmers are the most vulnerable to this type of product loss, damage or spoilage. This is why dairy-covering policies like Dairy Revenue Protection (DRP) are so well-tailored and suited to dairy farmers: this type of loss happens and it is guaranteed to be covered in some way.

3. Farmer- or personnel-related accidents or losses.

Larger agricultural companies with plenty of employees and workers may occasionally have to deal with the occasional accident or incompetence with equipment, product or animals. No matter how careful a farmer is, sometimes the workers aren’t!

Operators may wonder: how are these mistakes covered by insurance? Are they at all? Rest assured that any loss of revenue due to an accident or incompetence, even if done by an employee or worker, will be covered by most crop insurance plans. It doesn’t matter if it is you or someone you hired. However, once again, the expenses of the loss won’t be covered dollar-to-dollar.

Like with damage to product or death of livestock, you can turn to a Revenue Protection or Gross Margin-protecting policy of some sort in order to gain those losses back, especially if they impacted your bottom line significantly at the end of the year. Worried about especially high losses? Look into enhancing your coverage with an Enhanced Coverage Option (ECO) or Supplemental Coverage Option (SCO) to make sure your deductibles can be easily met, and that your coverage will go the extra mile.

Farmers are resourceful and cautious by nature. We don’t blame you for looking twice at whether a crop insurance plan would really be worth it, or “right” for you and your business—it’s wise to do so.

We also know that farmers are outcome- and results-oriented! Once you get in touch with a specialized crop insurance agent, and they’re able to walk you through how crop insurance works and addresses all your financial concerns, you may just find that policies are perfectly crafted for just about any situation, and the proof is in the pudding: crop insurance is a mainstay for successful farming all over the country.

When Does Your Business Need Crop Insurance? Can I Afford Crop Insurance?

When Does Your Business Need Crop Insurance? Can I Afford Crop Insurance?

At some point, every growing farm business owner or operator sits down at the table and begins asking these questions: when does your business need crop insurance? Can I afford crop insurance?

Here are some reasons why you should consider having some sort of crop insurance policy in place to protect you.

Get insured if farming is a large part of your income.

Some people keep the “back 40” in the family as part of a tradition or a hobby. In that case, you probably don’t need (or want) crop insurance. But, if you insist on making farming of some sort a substantial part of your income, you will probably want to be insured.

Even the biggest livestock, row crop, or dairy operations can operate on razor-thin margins. A brush with sickness, high pest numbers that year, or even just an operation accident — whether on the corporate or the family farm — can mean the difference between finishing the year in the black or finishing in the red.

The right coverage options, however, can make sure you stay in the black.

Get insured if you’re vulnerable to floods, wind, or hail.

That’s certainly not a comprehensive list of all the natural disasters you could face as a farmer. Having insurance in tornado alley, the flood plain, increasingly fire-prone areas, or other disaster-vulnerable regions can draw the line between treading water year to year or putting food (for both your family and your customers) on the table.

As farmers around the country report increasingly unpredictable climate and weather patterns, the most vulnerable areas should absolutely consider insurance — especially with some patterns predicted to worsen.

In some areas, crop insurance may in fact be foundational to your enterprise’s survival owing to the possibility of weather events there. Be sure to look into a policy that covers natural disasters, even more, important if you’ve experienced losses from more than one already. ether on the corporate or the family farm — can mean the difference between finishing the year in the black or finishing in the red.

The right coverage options, however, can make sure you stay in the black.

Get insured if pests, predation, or disease are a problem.

From the smallest microbe to the largest predator, farmers are constantly working against all the forces of nature. If your operation borders or is otherwise exposed to wildlife hungry for a taste of your product, an insurance plan can help protect you from the losses caused by this expected yet pesky (and pesty) part of the agricultural business.

While some policies may not directly cover or compensate for the loss of livestock (calves, pullets, lambs, etc.), the product you derive from your livestock can be protected. That way predation losses won’t hit you or your business so hard.

For row crop growers, any loss of crop from pest or disease — even the occasional hungry deer or, worse, pest swarm — can be compensated for.

Even if you’re organic, specialty, or a “micro-farm” – you can still get insured.

If anything, small specialty and organic growers can be even more vulnerable to the above risks than the “average” or “typical” large or conventional farm business. Even with higher premiums, organic growers and ranchers face greater challenges against the elements, volatile markets, pests, and disease than their conventional counterparts owing to the methods they use. In many cases, these businesses deal with even tighter profit margins as well.

It’s a big myth that small farmers and specialty growers can’t get crop insurance, or that it’s not a worthwhile investment for them. It is. Many specialty products — diverse vegetables, CSA’s, heritage breed livestock, hemp, specialty fruits, and beyond — can easily have a crop insurance coverage policy that protects them from losses that could endanger their businesses.

Can I afford crop insurance?

We get it: the overhead adds up quickly when you’re running an agricultural business. The thought of another bill or payment, stacked up against thin profit margins, can make even the most financially meticulous farmer’s head spin. “Can I really afford another expense or payment? Will I need it in the end?”

Crop insurance is the mainstay it is in agribusiness for a good reason. Insurance companies are not just invested in the success of farmers financially for the well-being of their families, health, and livelihood; they’re also invested in the vital role farmers play in the economy. Insurance companies all over the country pay out farmers their losses in the billions of dollars every year. Let’s just say: we’re invested in farmers!

Farmers grow food and bring crucial commodities to the table, keeping their communities and other parts of the country clothed, fed, and nourished. Any loss to the farmer means a loss to the economy and the community. It could mean a less stable commodity or food system!

While you may not think you can afford crop insurance payments, nobody can afford to lose the farm. Even if you’ve managed to run your farm business without facing major risks or losses like natural disasters, pests, or volatile markets, that moment could be right around the corner— and for many farmers, it’s when that blindsiding moment hits that makes them grateful for coverage…or pushes them to seek it after as soon as they can.

These moments — never expected, but sometimes inevitable — can be the ones that make or break the future of an enterprise, which for some is the entire family legacy. If you’re concerned about crop insurance payments being costly, chatting with a specialized crop insurance agent can allay your fears. It’ll give you the information you need on policies perfect for your business, and completely affordable to you in the present —while being completely worth it for you further down the line, if anything were to happen.