Multi Peril Crop Insurance
Crop Insurance Basics
Q: Do I really need crop insurance?
A: Buying a crop insurance policy is one risk management option. Producers should always carefully consider how a policy will work in conjunction with their other risk management strategies to insure the best possible outcome each crop year. Crop insurance agents and other agri-business specialists in the private and public sectors can assist farmers in developing a good management plan.
Q: Does crop insurance cover crops in the event of natural disasters?
A: Producers who purchased crop insurance are covered for all natural causes of loss listed in their policies. For those without insurance, the Noninsured Crop Disaster Assistance Program (NAP), managed by USDA’s Farm Service Agency, provides financial assistance to producers of non-insurable crops when low yields, loss of inventory, or prevented planting occurs due to natural disasters.
Q: Crop insurance seems complicated. What are some of the common mistakes that producers make that can cost them money?
A: Here are some of the most common mistakes that could cost the producer money:
- Underreporting your planted acreage per unit
Production to count for an insured crop is derived from all planted acreage for that crop per unit, whether you reported all of the acres in that unit or not. Therefore, if you underreport your acres your yield will be artificially inflated and you will receive a lower indemnity payment.
- Over reporting your planted acreage per unit
If you have over reported your acres, your production to count will be derived from all planted acreage for that crop per unit. The acreage will be reduced to the correct number of acres. Your indemnity will be slightly less due to the reduction in your total guarantee (not your per acre guarantee) and you will be refunded any overpayment of premium.
- Failure to report all farm serial numbers (FSNs) planted to the insured crop
If you fail to report all of the FSNs planted to the insured crop, the unreported FSNs will not have coverage. This oversight generally seems to occur with added land, but many times occurs because the producer fails to insert the planted acreage figure under thee farm number on their acreage reporting form. The indemnity payment will be reduced.
- Failure to report the production for all farm serial numbers (FSNs)
If you do not report all of your FSNs, with production information, on or before the production reporting date, the production cannot be added at acreage reporting time. The unit without production will be assigned a yield based on the variable T-yield procedure discussed previously. This yield is generally lower than the grower’s actual yields. The yield guarantee will be reduced and any indemnity payment will be less.
- Failure to elect “New Producer” status
If you are a new producer and fail to elect New Producer status on or before the production reporting date for the insured crop, the yield on the crop will be assigned using the variable T-yield method (a percentage of the county T-yield) instead of more favorable method of using 100% of the county t-yield. The yield guarantee will be reduced and any indemnity payment will be lower.
- Failure to indicate “Added Land” on your acreage report
If you fail to indicate Added Land on your acreage report for new farms, the yield will be calculated using the variable T-yield method instead of more favorable methods. The yield guarantee will be reduced and any indemnity payment will be lower.
- Harvesting the crop in a manner other than insured
If you are harvesting the insured crop in a manner other than intended without informing the crop insurance carrier and have a claim, you will have a problem. For example: the producer has insured his corn as grain, but harvest the corn as silage. If there is no actual harvested grain for the adjuster to measure, the crop must be field appraised for grain content before harvested. The adjuster cannot appraise the grain content of harvested corn silage and the production to count will be assessed at the full guarantee. No indemnity will be paid.
- Destroying the insured crop without the company's approval
Production for a crop that is destroyed before the claim adjustment is made will be assessed at the full production guarantee and no indemnity will be paid.
Q: What is a crop year?
A: The crop year is designated by the year in which the planted crop is normally grown and harvested. For example, crops planted in the fall of 2004 are considered to be grown in the 2005 crop year because they are harvested in the spring or early fall of 2005. Crops planted in the spring of 2005 are also considered to be grown in the 2005 crop year because they are harvested in the fall of 2005.
“Frequently Asked Questions/Crop Insurance Basics.” RMA Home Page. Web. 19 Jan. 2012. - http://www.rma.usda.gov/help/faq/basics.html