How Does Crop Insurance Work?

All businesses need property insurance. After all, it is this coverage that will help them replace damaged belongings—stock included—when something comes along to harm them. Farmers are no different, with the exception being that their stock is often their crops, which are very sensitive commodities.

Therefore, to insure your crops, you will need to invest in the niche benefit of crop insurance. It is designed to specifically cover you in the event that crop damage occurs. Here’s how it works.

The Basics of Crop Insurance 
At its simplest, crop insurance provides compensation to the farm if crops are lost or destroyed due to certain incidents. Covered incidents often include:

• Fire
• Wind
• Hail
• Lightning
• Smoke
• Theft
• Vandalism
• Drought

Additionally, your policy will offer you income replacement coverage, which will help you when you have to stop production due to incidents beyond your control. For example, if you experience price drops or government mandates to destroy crops, then you will have coverage for those losses.

However, not all crop insurance policies are created equal. There are many different types of crop insurance, and you’ll need to choose the appropriate one in order to receive the most appropriate benefit for your specific operations.

There are two main types of crop insurance policies:

• Crop-Hail Policies: May be purchased through a private insurer at any point in the season, and will protect your crops against hail.
• Multiple Peril Crop Insurance: These policies are only available at select insurers through the Federal Crop Insurance Program. This policy covers crops against a range of threats, such as excessive moisture and freezes. This insurance must be purchased before the crops are planted.

When you have to file a claim, you will contact your insurance provider who will send an underwriter to investigate. Once the claim is approved, you will receive compensation for crops that have been lost or damaged, and you may receive temporary revenue assistance.

What Does Crop Insurance Cost? 
Like all insurance policies, crop insurance will come at a cost. However, various factors might influence your precise premium, including the:

• Location of the farm
• Size of the property and your crop yield
• Type of crops being grown
• Harvesting season

What’s important to do is to be upfront with your agent about your goals for your operations. Ensure that they know the size and value of your crop production, and exactly how much money you will stand to lose if crops get destroyed.

Additionally, don’t forget to determine how best to integrate your crop coverage with the rest of your farm’s insurance benefits. You will need coverage for your farm buildings, livestock and equipment, not to mention liability benefits, employee benefits and workers’ compensation insurance if applicable.

No matter what you grow or where you grow it, crop insurance can protect your agricultural business from heavy financial loss. Calculate the value of your crops and find the right policy.