Best Insurance for Commercial Crops

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Contributor, Benzinga
September 21, 2020

If you’re an agricultural producer, your crops are your most valuable commodity. To properly manage the crop-related risks of running a farm or ranch, you could benefit from crop insurance. Here’s what you need to know to make sure your crops are protected. 

Best Crop Insurance

You can work with an approved insurance provider to find the right crop insurance policy for your farm’s needs. 

But there may also be other types of business insurance you can benefit from. Get a fast and free quote to compare options from several different insurance providers.

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Types of Crop Insurance

While most crop insurance products are established by the federal governments, there are different types of crop insurance that you should be aware of. Keep in mind that each type of insurance is designed to provide a specific set of coverage for your crop production business.

Multiple Peril Crop Insurance

Multiple peril crop insurance — or MPCI — offers crucial coverage for all producers. This type of coverage is available for more than 120 different crops. However, not every crop is covered nationwide. 

Coverage depends on the geographic area that you are producing your crops in.  It covers losses that are caused by natural events, including:

  • Destructive weather, such as hail, frost and damaging wind 
  • Crop disease
  • Drought
  • Fire
  • Flooding
  • Insect damage

It’s important to keep in mind that this insurance policy must be purchased before you plant the crops that you’re looking to insure. Purchasing your multiple peril crop insurance should be considered during the planning process for the upcoming growing season for your crops. 

In some cases, your MPCI policy may include incentives to replant damaged crops. If your policy includes that incentive and you do not replant after damages that occur early in the crop’s growing season, you may face a penalty. 

The amount that your insurance provider will pay out for losses under this type of insurance policy will depend on the value of the crop(s) that were affected.

Crop-Hail Insurance

If you live in a part of the country with a colder climate, you may want to consider crop-hail insurance. This type of crop insurance is common among farmers who live in areas that frequently face hail. Hail can be devastating to crop producers, wiping out an entire area of crops in just 1 storm. 

Fortunately, crop-hail policies often have low deductibles, and in some cases, no deductible. This means that you may not have to pay for any losses due to hail on your own before your insurance policy will pay out to cover the damages. 

This type of insurance is not part of the Federal Crop Insurance Program. Crop-hail insurance policies are regulated by state insurance departments and sold by private insurance companies. This type of coverage is often purchased as a supplement to MPCI. 

Since crop-hail insurance isn’t part of the Federal Crop Insurance Program, it doesn’t face the same amount of restrictions. Unlike UPCI, crop-hail insurance can be purchased at any point in the growing season. 

Crop Revenue Insurance

This is another coverage option that can be beneficial for farmers who are worried about having a loss in revenue. It can help farmers and other crop producers protect their earnings against lower crop prices in a given year, no matter why the price has dropped. 

The amount your insurance provider may payout will depend on how much lower your yearly revenue is compared to the previous year’s earnings. 

Cost of Crop Insurance

The cost of your insurance will depend on the type and value of the crop.

Unlike other types of business insurance, crop insurance prices remain constant throughout the industry. This means that the cost of your crop insurance policy will be the same no matter the insurance provider. 

The cost of your crop insurance policy is known as the premium. The premium rates are established by the Federal Crop Insurance Corporation (FCIC) for all of the crop insurance products that it develops. In some cases, there may be a crop insurance product that is developed by insurance providers. 

Even so, these products must be established with FCIC approval and the price of your crop insurance products will remain the same no matter which insurance provider you choose. 

How Crop Insurance Works

Crop insurance works a bit differently than most of the typical business insurance policies.  Crop insurance is offered through private insurance providers that have entered into a partnership with the U.S. government. All providers that offer crop insurance agree to offer crop insurance on an equal opportunity basis to all agricultural producers across the nation. 

Each year, the insurance providers that have been approved by the federal government must enter into a contract with the FCIC called the Standard Reinsurance Agreement. This agreement holds insurance providers responsible for administering the crop insurance program and for training and monitoring all agents and staff operating under the insurance provider. 

Crop insurance is meant to protect farmers, ranchers and other agricultural producers against losses that can occur throughout the crop year. These losses must be due to things that are unavoidable or beyond the policyholder’s control. This can include:

  • Drought
  • Freezing conditions
  • Diseases to the crops

Some crop insurance policies may also include coverage for adverse weather events, such as the inability to plant crops due to excess moisture or the quality of the crop leading to losses. Crop insurance usually covers loss of yield of revenue that exceeds a deductible amount. 

This means that the number of crops that you produced or the money made from these crops is lower than expected. Loss of the number of crops can occur from a wide range of weather conditions. Loss of revenue can also be an effect of a lower yield due to the weather conditions. It could also occur due to changes in the market price of that crop.  

Each year, there is a specific process that crop insurance goes through. The crop insurance cycle begins with the annual publishing of actuarial documents by the Risk Management Agency. 

These documents detail the insurance plans, crops, types, varieties and practices that may be insured. This is broken down by state and even by county. The documents show insurance providers the amounts of insurance, insurance options and levels of coverage that can be offered in each state and county. It also provides information about which premium rates and subsidy amounts are applicable. 

As a crop producer, you are responsible for completing and signing an insurance application. Unlike other types of business insurance, you will need to complete the application process within a specific period of time. The crop actuarial documents specify sales closing dates. If your application is signed after the crop sales closing date, it may be rejected by the insurance provider. 

Once your application has been received, the insurance provider will process the application as long as it has been properly completed and submitted on time. If for some reason you are determined to be ineligible due to federal statute or regulation, your application for crop insurance may not be processed. 

If it is accepted, you’ll receive a summary of coverage and the appropriate policy documents from the insurance provider. After your application has been accepted and you receive these documents, you cannot cancel your crop insurance policy during the initial crop year.

The way in which your crop insurance begins for each crop depends on the crop type:

Annual crops have crop insurance that attaches annually when planting begins. Annual crops must be planted before or on the crop’s published final planting date. 

In some cases, it may be planted later if the crop couldn’t be planted on time due to specific causes. The acceptable causes for late planting will be detailed in your policy’s crop provisions.

Perennial crops have crop insurance that attaches on the calendar date that is specified within the crop provisions.

After the initial crop year, your crop insurance coverage can be canceled by yourself as the policyholder or the insurance provider if necessary. Your crop policy will include a specified cancelation date. 

If you want to cancel your crop insurance coverage, you must provide written notice to the insurance provider before the cancelation date. This will cancel your policy for the following crop year. You can also make changes to your crop insurance policy for the following crop year as long as it is done before the crop sales closing date. 

Your insurance provider may also cancel your crop insurance coverage for the following year by providing you, the policyholder, with written notice before the cancelation date in your policy. 

Some of the reasons that your insurance provider may terminate your crop insurance coverage include:

  • Nonpayment of an outstanding debt
  • If it has not received a premium on a crop for 3 consecutive years

If no written notice is provided by either the policyholder or insurance provider, the crop insurance policy will automatically renew for the next crop year. 

Find Crop Coverage Today

Reach out to a crop insurance professional to discuss your crop insurance options and get advice from a professional. You may also benefit from getting a quote for other insurance types for your business. 

Working with specialists can help you rest easy knowing you have the coverage that your crop-producing business needs.

Methodology

Benzinga crafted a specific methodology to rank commercial insurance. We prioritized carriers based on coverage options, specialized industries, customer service experience and how quickly and easily you're able to get insured including online tool usage. We also included commercial insurance quote aggregators in lists to make it easy and efficient to compare policy quotes and options. To see a comprehensive breakdown of our methodology, please visit see our Commerical Insurance Methodology page.