Types of Crop Insurance

June 15, 2022

Farmers and ranchers are under a lot of pressure these days. They bear the burden of providing most of the world’s food supply despite growing economic uncertainty. One way the agricultural industry protects itself from unforeseen circumstances is with crop insurance. This serves to guard against drastic price swings, severe supply shortages, and major losses due to natural disasters. Several types of crop insurance are available on the market today. Here’s a brief overview of the most common ones in our experience. 

Crop Insurance 

Agriculture and insurance have a longstanding history of supporting the global economy. The United States is the world’s largest net exporter of food, supported by millions of American farms. Science, technology, nature, and insurance work together to feed billions of people across the world every single year. 

After the Great Depression, the need for a unified American agricultural policy was clear. The Federal Crop Insurance Program (FCIP) arose in response, and it now plays a vital role in the national farm safety net. The FCIP encourages farmers to purchase crop insurance against financial losses from adverse market and growing conditions. It does this by working with private sector providers, regulating insurance policies, and subsidizing their premiums. 

In 2019, the FCIP sold over 2 million policies that insured more than $116 billion of crops and livestock. Crop insurance covered over 120 commodities, and about 9 in 10 acres of all American corn, soybeans, cotton, and wheat were insured. Overall, 16 companies sold many types of crop insurance to farmers who enrolled over 375 million acres of farmland in the federal program. 

Multiple Peril Crop Insurance (MPCI) 

Farmers benefit from many types of crop insurance. These policies can provide coverage for dozens of different commodities against a wide variety of causes of loss. Therefore, federal crop insurance is also known as multi-peril crop insurance (MPCI). 

MPCI is arguably the most common type of crop insurance available today. It generally covers perils including adverse weather conditions like hail, frost, drought, and flooding. These policies may also insure crops against market price declines, irrigation failure, natural fires, plant diseases, and damage caused by insects or wildlife. The FCIP regulates MPCI policies and sets up federal deadlines for each growing season before planting begins. That way, if damage occurs early enough, policies often include incentives to replant and penalties for failing to do so. 

Federal crop insurance policies only cover agricultural commodities such as annual, perennial, and forage crops, as well as livestock and animal products. MPCI policies may cover commodities separately, or they can be bundled together to insure a farm’s entire production process. Commodities can either be insured for market, marginal, or replacement value depending on the exact crop, product, or timeline. While direct coverage for buildings, vehicles, and equipment is unavailable through FCIP, private-sector policies often bridge this gap.  

Crop-Hail Policies 

The second most popular form of crop insurance covers hail damage. These crop-hail insurance policies were once more common, but multi-peril coverage is now the top seller. Unlike MPCI, farmers and ranchers can purchase these policies at any point in the growing season. 

There are many areas of the country where damaging hail occurs often. American farmers understand the dangers posed to their crops and livestock by large amounts of hail. That’s why they often buy specific insurance policies to protect their high-yielding crops from sudden losses. While crop-hail policies aren’t part of the FCIP, private insurers provide them per state guidelines. 

If farmers purchase a crop-hail policy, it typically serves to supplement multi-peril coverage. Though they are less common, these policies rarely, if ever, have high deductibles because hail can destroy one portion of crops while leaving another completely untouched. Hail-crop insurance claims also tend to be much less than standard MPCI deductibles.  

American farmers deserve our appreciation. They carry the tremendous weight of feeding over 20% of the world alongside other net exporters like Brazil and the Netherlands. Crop insurance policies help to support them by protecting their valuable assets before, during, and after each growing season. If you’re in need of a policy, feel free to contact us today for more information about crop insurance. Our agents would love to discuss any specific questions you may have about this important topic.