Supplemental Coverage Option (SCO) is an optional crop insurance endorsement that provides coverage for a portion of the deductible of your underlying crop insurance policy.

1. How Do I Buy SCO?
2. How Do I Decide If I Should Buy SCO?
3. How Does SCO Work?
4. What Happens if I Elect SCO and Signed Up for ARC?
5. How Much Does SCO Cost?

SCO can be elected only when a producer has purchased one of the following underlying plans of crop insurance:

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Yield Protection
Yield Protection policies insure producers in the same manner as APH policies, except a projected price is used to determine crop insurance coverage.

Similar to APH, Yield Protection is available only on crops that qualify for Revenue Protection. A Yield Protection plan protects against production loss.

It works the same as the APH plan but instead of using a price election established by RMA, the price is established according to the applicable board of trade/exchange as defined in the policy document called the Commodity Exchange Price Provisions (CEPP). The price that is used is called the Projected Price. The Projected Price is used to calculate the guarantee, premium and loss payments.

The producer selects the percent of the projected price they want to insure, between 55 and 100 percent. The guarantee is established by multiplying the average yield by the coverage level and by the Projected Price, and an indemnity may be due when the value of the production to count is less than the yield protection guarantee plan.

By offering revenue protection, you are protected against a loss of revenue due to an increase or decrease in price, a reduction in production, or a combination of the two.

Revenue Protection
In Revenue Protection (RP) crop insurance, the Commodity Exchange Price Provisions (CEPP) are used to determine the price, but it differs from other types of crop insurance crop insurance plans from the Yield Protection (YP) plan since it uses two different price discovery periods. The projected price is determined in the same manner as YP and is used to calculate the premium, replant and Prevented Planting payments. Near harvest time, the harvest price is released. An indemnity is calculated using this price.

The revenue protection guarantee is established by: Average Yield X Coverage Level X Insured’s Share Percentage X Projected Price.

If the calculated revenue (production X harvest price) is less than the crop acreage’s revenue protection guarantee, an indemnity may be due.

Note: When the harvest price is released, if it is greater than the projected price, the revenue guarantee will be recalculated using the harvest price as well.

While the revenue guarantee is increased, the insured is not charged any additional premium for this increase. The policy guarantee remains at the projected price even if the harvest price is lower than the projected price.

Revenue Protection with the Harvest Price Exclusion
A minimum crop insurance revenue guarantee will not be recalculated when harvest prices are released when Revenue Protection with Harvest Price Exclusion Plan (RP-HPE) is selected.

The Revenue Protection Plan with Harvest Exclusion Plan (RP-HPE) crop insurance plan is similar to the Revenue Protection (RP) plan, however it provides coverage against loss of revenue caused by price decrease, low yields or a combination of both – the price increase is not covered because the guarantee is not adjusted up by the harvest price for this plan.

Revenue guarantee, premium, and replanting or prevented planting payments are determined by the projected price. In order to count in a loss in production or revenue, the harvest price is only used to value the production. In the event of an increase, the guarantee is not recalculated.

The producer does not receive the benefit of price movement with the RP-HPE plan.

Actual Production History (APH)
APH guarantees the producer a yield based on the actual production history of their crops.

The APH plan of crop insurance provides the producer protection against a loss of production due to nearly all unavoidable, natural occurring events. For most crops, that includes drought, excess moisture, cold and frost, wind, flood and unavoidable damage from insects and disease.

For the producer’s share of the crop, the guarantee is calculated by multiplying their average yield by the level of coverage chosen. If the production (harvested and appraised) is less than the guaranteed amount, an indemnity may be due.

The pricing for most crops insured under the APH plan of insurance is established by RMA.

Several perennial crops, such as apples, peaches, and grapes, fall under the APH plan, as well as crops with no revenue coverage. Under the APH plan of insurance, grain crops such as oats, rye, flax, and buckwheat are also covered.

The Federal Government pays 65% of the premium cost for SCO.

How Do I Buy SCO?

Producers can choose SCO as an endorsement of the underlying policy. It is imperative that you make this choice by the sales closing date for your underlying policy, and it must be with the same insurance company. Farmers who have chosen to participate in the Agriculture Risk Coverage (ARC) program at Farm Service Agency (FSA) are not eligible for SCO coverage.

Contact your trusted agent, Scott Colville today to discuss policy details and availability.

How Do I Decide If I Should Buy SCO?

For those crops and farms eligible for SCO coverage, the type and amount of SCO coverage are determined by the type and coverage level you choose for the underlying policy. You should talk to Scott Colville to determine what best meets your individual risk management needs.

How Does SCO Work?

SCO follows the coverage provided by the underlying policy. In the event that Yield Protection is selected, then SCO will cover yield loss. If Revenue Protection is chosen, then SCO covers revenue loss.

As a result of the liabilities, coverage levels, and yields of the underlying policy, there are many factors that determine how much SCO coverage is provided. In contrast, SCO triggers a loss payment differently from the underlying policy. Whenever there is a loss in yield or revenue, the underlying policy pays a loss and triggers an indemnity. SCO pays a loss on an area basis, and an indemnity is triggered when there is a county-level loss in yield or revenue.

A farmer’s SCO crop insurance indemnity payment is based on county-average revenue or yield and is not influenced by the amount you receive from the underlying crop insurance policy. Individual losses can result in SCO payments not being received, and vice versa.

The dollar amount of SCO coverage is based on the percent of crop value covered. SCO also allows producers to customize their amount of coverage with a coverage percentage. The coverage percentage is selected from a range of 50% to 100%, and the maximum amount of SCO coverage is multiplied by that percentage.

What Happens if I Elect SCO and Signed Up for ARC?

In the event that a producer elects SCO and ARC for the same crop on their farm, SCO coverage for that crop on that farm will be canceled, and the producer must report the crop covered by ARC on their acreage report. If they do not report a farm covered by ARC, the acreage of that farm will be ineligible for an SCO payment. As a result of the ineligibility, the producer must still pay 60% of their SCO premium for that crop and farm. The underlying policy will remain in effect.

A farmer’s SCO crop insurance indemnity payment is based on county-average revenue or yield and is not influenced by the amount you receive from the underlying crop insurance policy. Individual losses can result in SCO payments not being received, and vice versa.

The dollar amount of SCO coverage is based on the percent of crop value covered. SCO also allows producers to customize their amount of coverage with a coverage percentage. The coverage percentage is elected from a range of 50% to 100%, and the maximum amount of SCO coverage is multiplied by that percentage.

How Much Does SCO Cost?

The exact premium cost depends on the crop, county, coverage level you choose for the underlying policy, SCO coverage level percent you choose, and the type of coverage you choose, such as Yield Protection or Revenue Protection. The Federal Government pays 65% of the premium. You should talk to Scott Colville for more information.

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