The Importance of Crop Insurance

Farmers and ranchers purchase crop insurance to protect their crops against adverse weather conditions and other risks.

FREMONT, CA: Crop insurance is an insurance policy that farmers and ranchers purchase to protect their crops from adverse weather conditions and other risks. The program is administered in partnership with private crop insurance companies such as AgriSompo North America.

What is Crop Insurance?

Consider a farmer who purchases a policy to protect her corn from a broker. If there is a drought, the farmer is eligible for compensation. Losses are frequently calculated based on the farmer's or rancher's past performance. This varies by plan.

Why crop insurance?

Crop insurance is well-liked in the agriculture industry due to its speed. In the past, when a natural disaster (flood, drought, etc.) occurred, farmers and ranchers had to petition Washington, D.C., for aid. Sometimes it would take years for assistance to arrive. Some farms may not have survived at that point.

How is crop insurance a better alternative?

Farmers and ranchers currently pay for crop insurance, making it more affordable. In the case of a natural disaster, farmers can get paid days after putting in a claim.

How is crop insurance administered?

Here's a walkthrough of the annual crop insurance cycle.

Initial Release or Change of Actuarial Options: The Risk Management Agency (RMA) announces the end dates for sales of insurance products that will be available soon.

Policy Renewal: Since most crop insurance policies are continuous, they automatically continue into the next crop year.

Closing Date for Sales: Ranchers and farmers send applications to their local agents before the closing date for a crop sale. There are various sales closing dates for crops, and some have multiple closing dates. Use the RMA's actuarial information browser for information on a particular crop.

Confirmation of Policy: The agent submits the application to private crop insurance companies. The policy is examined for accuracy and conformity and then approved. For the initial crop year, policyholders cannot cancel their policies.

Production Report: Insureds report their yield from the prior crop year or years. Reporting production helps establish an Approved Production History (APH), which enables private crop insurance companies to determine the policy coverage for an insured.

Acreage Reporting: When planting begins in a unit, insurance coverage begins (similar to a line of insurance). Acreage reporting is when the policyholder reports the number of planted acres, the planting date, and farming methods. The need for additional information may arise in some cases.

Insurance Policy Schedule: Private crop insurance companies give their clients a coverage summary or insurance schedule. These documents detail the reported insured and uninsured acreage. Policyholders are strongly encouraged to verify the accuracy of these documents.

Loss Notification: If a flood, drought, or other unavoidable peril happens after the insurance goes into effect, but before harvest, the insured must file a Notice of Loss or claim within 72 hours.

Claim Inspection: Claim adjusters strive to contact an insured within 24 hours of receiving a claim to schedule a claim inspection. The adjuster visits the insured, conducts inspections, and collects production data to ascertain the insured's loss. The insured and the adjuster sign the loss paperwork, which is then submitted to the office for review.

Checking Indemnity: Once the claim has been reviewed and processed, the insured is sent an indemnity check. The average private crop insurance company pays within days if all documentation is in order.

Premium Billing: Premium billing is the final step within the crop insurance cycle. Whenever an indemnity did not previously cover a premium, the insured receives a bill.