What is Crop Insurance

Crop insurance is purchased by agricultural producers, including farmers, ranchers and others to protect against either the loss of their crops due to natural disasters, or the loss of revenue due to declines in the prices of agricultural commodities. There are two major types of crop insurance: multiple peril crop insurance (MPCI) and crop-hail insurance.

Multiple peril crop insurance (MPCI)

MPCI covers crop losses, including lower yields, caused by natural events, such as:

  • Destructive weather (hail, frost, damaging wind).
  • Disease.
  • Drought.
  • Fire.
  • Flooding.
  • Insect damage.

Crop-hail insurance

In areas of the country where hail is a frequent event, farmers often purchase crop-hail policies to protect high-yielding crops. These policies are not part of the Federal Crop Insurance Program; they are sold by private insurers and regulated by state insurance departments. Many farmers purchase crop-hail coverage as a supplement to MPCI. Crop-hail policies often have a low or even no deductible. Because, unlike drought or blight, hail can completely destroy a portion of crops in one area of a farm but leave other crops undamaged, a hail claim may be less than the amount of the deductible on an MPCI policy.

Crop revenue insurance (Whole Farm Revenue Protection)

Farmers can also purchase crop revenue insurance, which helps farmers in years when crops have a low yield and/or the price of the crop is low. The amount that an insurer will pay reflects how much lower a year’s revenues are compared to previous years’ earnings. This insurance helps farmers protect their earnings against drastic swings in crop prices, regardless of the cause.

Information provided from the Insurance Institute