Farmers can Protect Their Product and Business with Crop Insurance

Crop Insurance is an example of the wide variety of different types of things, products, people and events for which today’s insurance industry can write a policy.

Crop insurance for the South Carolina Farmer can be a Godsend. Think about this opening line from the popular nursery rhyme “Little Boy Blue, come blow your horn; the sheep’s in the meadow, the cow’s in the corn.” It conjures up images of an errant, sleepy farmer boy, asleep on a pile of hay, while the sheep run amuck in the meadow and the cows are gobbling up valuable corn crop. While this may bring a smile to the faces of many, it wouldn’t be as funny to the real life farmer whose very livelihood depends on these crops to pay his family’s bills and expenses.

Today, prudent farmers, agricultural producers, ranchers and others purchase a form of protection known as crop insurance. While I’m not sure that cows eating the corn would be a covered expense (though it might!), crop insurance protects them against the loss of their crops due to natural disasters, such as hail, floods and droughts. Additionally, if the price of agricultural commodities declines, they are protected against the resulting loss of revenue. Ultimately, coverage can be purchased for two types of crop insurance: crop-yield and crop-revenue insurance.

Crop-yield insurance has been around for a long time, dating back to the early 1800s. The earliest form of this coverage was called crop-hail coverage, protecting farmers from loss of crops due to hailstorms. But the coverage was limited to hail-related damage. Most recently, the advent of Multi-peril crop insurance (MPCI) covers a more broad spectrum of perils, including insects (nope, cows are not insects), disease, and others.

Crop-revenue insurance is based on crop yield guarantees, based on the individual farmer’s past production records. In essence, if the farmer’s yield is less than the cash settlement price and guaranteed production amount listed in the policy, the policy pays an indemnity amount. The crop-revenue portion of the policy covers the decline in price that may occur during a crop’s growing season, but not from one season to another.

Don’t get caught under a haystack – if you’re in the agricultural field, this may well be a wise and necessary investment to protect your assets!

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