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.
Table of Contents
- What is Enhanced Coverage Option (ECO)?
- What is Supplemental Coverage Option (SCO)?
- Are ECO and SCO coverage the same? What’s the difference?
- What are signs that I should get an ECO or SCO added to my policy?
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.