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Multi-Peril Crop Insurance

Multi-Peril Crop Insurance is a federally subsidized risk management tool for farmers and ranchers. It is insurance for unavoidable loss from naturally occuring events such as: adverse weather, fire due to natural causes, wildlife, earthquake, volcanic eruption, and failure of irrigation water supply caused by an insured cause of loss.

Plan of Insurance

When you elect to have crop insurance coverage, you have a few decisions to make.  The first is the plan of insurance.  The two most popular options are Yield Protection and Revenue Protection. With each of these options you can add an area-based upgrade to your policy to add more coverage with SCO and/or ECO.

Image by Marek Studzinski

Yield Protection

Yield Protection covers bushels.

Your approved yield x planted acres x projected price x your share = guaranteed bushels.

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Revenue Protection

Revenue Protection covers a dollar amount. Your approved yield x planted acres x the higher of the projected price or the harvest price x your share = guaranteed $.

At harvest time, you will have up and down price protection.  You get more price risk coverage with Revenue Protection.

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SCO & ECO

Supplemental Coverage Option is an area-based band coverage starting at your coverage level and goes up to 86%. When using SCO your FSA program for the same crop must be on PLC.

Enhanced Coverage Option is also an area-based band coverage that ranges from 86% up to 90% or 95%. There are no FSA restrictions with ECO.

Coverage Level

You will need to choose your coverage level. It ranges anywhere from 50% up to 85% in 5% increments.  Your coverage level is like a deductible.  If your historical average production yield for the crop you are insuring is 100 bushels. And you choose to have a coverage level of 75%, then your guaranteed bushels will be 75 bushels/acre. When choosing your coverage level, you want to select one that is going to help you cover your input costs.

Options

There are many options you can add to your policy that will outline how your coverage is set up.

1. Units- Units elect how your fields will be insured.

  •  Basic Units- will separate and insure your policy by your shareholders. All of your 100% share ground will be insured together. Then individually by your landlord or shareholder. This option is not commonly used.

  • Optional Units- will separate each field/or location out by itself to be insured individually.

  • Enterprise Units- will use the guarantee from each location and add them up for a total guaranteed number of bushels or dollar amount depending on which plan you are on. You do have to qualify for the enterprise unit option by having 20 acres or 20% of the planted crop in a second location (section of land).

  • Multi-County Enterprise Units- You can elect to keep the price advantage of Enterprise Units if you have ground in another county that is contiguous to your primary county.  Your primary county would have to qualify for enterprise units and your secondary county would not qualify within that county.

2. APH Adjustments

  • Trend Adjustment- adjust yields in APH databases to reflect increases in yields through time in the county.

  • Yield Adjustment- adjusts low yields up to 60% of the T-Yield, unless you are Beginning Farmer Rancher, in which case 80% is used.

  • Yield Cup- Keeps your yield from dropping more than 10%/year on disastrous years.

  • Yield Exclusion- Excluding actual yields for any crop year where RMA determines that it applies due to inadequate yields in the county. An eligible crop year occurs when the average per planted acre yield for the crop/county is 50% below the simple average for the previous 10 crop years.

  • There are several other options available, but not all are appropriate for the crop or area.  The insurance agent will know what works best for their producers based on area history.

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