The ABCs of Crop Insurance


What Is Crop Insurance?

The federal government has entered into a partnership with private insurers to offer crop insurance on an equal-opportunity basis to agricultural producers nationwide. Approved Insurance Providers (AIP) use independent licensed agents to market this insurance. Every year, AIPs enter into a contract called the Standard Reinsurance Agreement (SRA) with the Federal Crop Insurance Corporation (FCIC) to administer the crop insurance program by marketing, underwriting, and adjusting claims for crop insurance policies.   


What Does A Crop Insurance Agent Do?

Agents are involved in the sale and service of crop insurance. The program includes multiple plans of coverage for over 100 crops or commodities. The agent receives a commission, outlined in an annual contract between the agent and the insurance company. In return, the agent provides product and premium information to the producer and collects information from the producer as required by the policy throughout the year.

Policy information often varies by crop, from state to state, and sometimes from county to county. Therefore, the policy is made up of many parts. A lot of the information changes from year to year, and sometimes month to month. An agent is responsible for understanding the crops and plans in their specific region.


Why Do Producers Buy Crop Insurance?

The crop insurance company or AIP agrees to protect the producer against losses which occur during the crop year. Losses must be due to things which are unavoidable or beyond the producer’s control such as drought, freeze, hail, and disease. Some policies offer coverage due to adverse weather events such as the inability to plant due to excess moisture or losses due to the quality of the crop.

In most cases, the insurance covers loss of yield or revenue exceeding a deductible amount. Producers can experience a loss of revenue due to low production and/or changes in the market price. The types of coverage available vary by crop and county due to the differences in each crop.