Crop Insurance

Crop Insurance

Farming is an expensive business and a risky one. Savvy Farmers have been insuring their crops from damage since 1880! Crop insurance comes in two forms in the United States: Crop-Hail (CH) and Multiple Peril Crop Insurance (MPCI).

Crop Insurance Brockmann Insurance Group

How does Crop Insurance work?

The federal government entered into a partnership with private Crop Insurance providers to offer Crop Insurance on an equal-opportunity basis to agricultural producers nationwide. Approved insurance providers (AIPs) use independent licensed agents like Brockmann Insurance Group to market this insurance.

Crop-Hail policies are NOT included in the Federal Crop Insurance Program and are offered to farmers directly by private insurers. In areas like ours where hail is frequent, shrewd farmers purchase Crop-Hail coverage to hedge their bets and protect themselves from the unpredictable damages caused by hail. Unlike Multiple Peril Crop Insurance, Crop-Hail insurance can be purchased at any time during the growing season.

How much does Crop Insurance cost?

Insurance terms and conditions along with premium rates are fixed by the Federal Crop Insurance Corporation (FCIC) for the products it develops. The price of insurance is constant throughout the industry. In other words, the cost is the same regardless of the Crop Insurance company or agency. 

How does Multiple Peril Crop Insurance work?

MPCI policies provide coverage for loss of production. As the name suggests, these policies provide coverage to the farmer for a number of naturally occurring perils. These types of policies cover loss in value due to a change in market price during the insurance period, in addition to the perils covered by the standard loss of yield coverage.

Multiple Peril Crop Insurance is the oldest and most common form of the federal crop insurance program in the United States. MPCI protects against crop yield losses by allowing participating producers to insure a certain percentage of their  historical crop production. Unlike Crop-Hail insurance MPCI MUST be purchased prior to planting.

MCPI policies cover loss of crop yields from all types of natural causes including drought, excessive moisture, freeze and disease. 

These combination products cover loss in value due to a change in yield and market price during the insurance period, in addition to the perils covered by the standard loss of yield coverage.

How much does Multiple Peril Crop Insurance cost?

MPCI is federally supported and regulated, and is sold and serviced by private-sector crop insurance companies and agents.

Over 90 percent of farmers who buy crop insurance purchase MPCI. Both the cost of insurance and the amount an insurer will pay for losses are tied to the value of the specific crop. MPCI coverage is available for more than 120 different crops, though not all crops are covered in every geographic area.

MPCI policies must be purchased each growing season by deadlines established by the federal government—and before a crop is planted. If damage occurs early enough in the growing season, the policy may include incentives to replant—or penalties for not doing so.

What is a Plan of Insurance?

A plan of insurance is a specific type of insurance that is offered, including all of the rules associated with it. In most cases, a crop may be insured by only one plan at a time. 

The number of insurable crops and insurance products continues to grow to meet the increasing needs of Farmers. A list of insurable crops can be found within the Actuarial Information Browser on the RMA website.

Programs are overseen and regulated by the Risk Management Agency (RMA). The RMA sets the rates that can be charged and determines which crops can be insured in different parts of the country. Brockmann Insurance Group is obligated to sell insurance to every eligible farmer who requests it.

As mentioned above,  the federal government subsidizes the farmer-paid premiums to reduce the cost to farmers. In addition, it provides reimbursement to the private insurance companies to offset operating and administrative costs that would otherwise be paid by farmers as part of their premium. Through this federal support, crop insurance remains affordable to a majority of America’s farmers and ranchers.

By combining the regulatory authority and financial support of the federal government with the efficiencies of the private sector, the crop insurance program has succeeded in meeting and even surpassing the goals set forth by Congress for broad participation, diversity and inclusion. By using the private sector, risk is shared among the private companies as well as the government.

Frequently Asked Questions About Farm Insurance

Most farmers use the cash method of accounting to report gross income and deductions from farming operations. Without a special deferral election provided in Sec. 451(d), crop insurance proceeds would be included in gross income in the year received.