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A lot of farmers don’t know if they need crop insurance for their business. It can be confusing, and some don’t know if it’s worth the investment. Farmers that don’t currently have any debt related to their farms can sometimes be even more hesitant to make the purchase of federally-sponsored crop insurance policies. In fact, many people don’t know that all crop insurance companies have plans that are subsidized.
In fact, the premium that farmers pay for their insurance is usually only half or less of the actual cost of the premium. This subsidy is in place to encourage farmers to insure their crops. While insurance covers problems that result in crop loss on a farm level, it also protects against problems that affect the region as well such as droughts. The cost of these subsidies is more than $7 billion every year, which offers significant savings to farmers throughout the United States.
There are two types of crop insurance available in the United States. The most specific of these policies is known as crop-hail insurance. While this type of insurance is still subsidized by the federal government, it is purchased through private insurers. Hail is different than most other hazards that can damage crops as it can destroy only portions of the harvest while leaving the rest of the property unaffected. Purchasing coverage of crop-hail can be done at any time of the year.
Multiple peril crop insurance covers a much wider range of hazards that can occur to crops. It must be purchased before planting for the year. Some of the natural disasters covered by MPCI insurance include floods, droughts, disease, and freezing. There are even policies available that will protect farmers from reduced prices in the market.
There are only a handful of insurance companies that are authorized to sell these policies. To be authorized to sell these subsidized policies, they must insure any farmer that is interested in purchasing one. The Risk Management Agency of the United States determines which crops are to be covered by insurance in different regions of the country. In addition, they determine how much these insurance companies can charge for the policies.
Crop insurance can offer peace of mind for farmers who are concerned about protecting their source of income. The cost of operating a farm keeps increasing which creates even more risk for farmers. There are even more risks involved for farmers who have significant debt or rented farmland.
The rates of coverage are based on predictions that take place before harvest season begins. These predictions are based on previous prices from past harvests in the area. The prices that are predicted for 2018 are at record-highs for crops like corn and soybeans so insurance is highly encouraged and can help farmers manage their risks.
There’s no way to control the weather or other natural disasters. If the worst happens, it best to be prepared. A bad harvest can absolutely ruin a farm, but crop insurance can help to minimize the damage.