The Importance of Federal Crop Insurance and Why America Relies on Crop Insurance

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The Importance of Federal Crop Insurance and Why America Relies on Crop Insurance


  • In 2018 American farmers purchased 1.1 million separate crop insurance policies investing over 3.6 billion dollars in premiums providing production coverage on over 130 crops.
  • Federal Crop Insurance covers over 90 percent of all planted crops in America.
  • Since 2000 American farmers have invested over 54 million dollars of their own hard-earned income to purchase Federal Crop Insurance.
  • Family farms make up 96 percent of Americas 2.1 million farms and 89 percent of all agricultural production

5 Myths about Federal Crop Insurance

  1. Federal Crop Insurance is only for grain farmers

FALSE, it is true that corn, soybeans, and wheat are the three most common crops planted in America. However, farmers in all 50 states rely on crop insurance to manage their production and financial risk. Crop insurance now covers over 130 different agriculturally grown commodities that include many fruits, vegetables, livestock, and hay and the list keeps growing. With the continued growth of available crop commodities and enhancements to insurance policies, crop insurance has become vital to almost every farmer in every county in every state in the United States.

In New York state not only do we cover corn, soybeans, and wheat, but also barley. Crop insurance is also available on processing and non-processing vegetables such as sweet corn, green and yellow beans, peas, cabbage, potatoes, and onions. Many fruit crops also have a federal crop insurance program such as apples, peaches, grapes, and cherries. Not all crops have a federal crop insurance program available in all counties. Call our office at 585-589-6236 to double check which crops are covered in your county.

2. Crop Insurance only covers weather related losses.

FALSE, Federal Crop Insurance does respond to weather related losses caused by hail, drought or too much moisture. It also covers animal damage such as deer damage and insect or disease damage. However, it can also respond to revenue and income losses. Some crops have a revenue option where you can protect the loss of revenue due to falling commodity prices during the growing season. Also, whole farm revenue protection has been developed. This is an insurance policy that insures a percentage of your five-year average agricultural income. This protection can be provided for livestock income as well as income farm crops that do not currently have a specific federal crop insurance policy available. This can help protect very large diversified farms or farms growing many crops in small acreages such as a farm with a retail farm stand.

3. Most farmers do not have crop insurance.

FALSE, the Farm Service Agency recorded planted acres and recorded insured acres. More than 90 percent of all planted agricultural crop acres in the United States are covered by the Federal Crop Insurance Program. True, not all crops have a federal crop
insurance program available in their county or state. For example, peaches are insurable in Niagara and Orleans Counties in Western New York, but are not insurable in Monroe and Wayne Counties. Cabbage is insurable in Orleans and Monroe Counties but not in Genesee County. If coverage is unavailable not all is lost. When growing an agricultural crop not listed as an insurable crop, you can make an application for coverage under a “Written agreement” special request. This process takes a little time and asks for at least three years of production and acreage data. To secure peach coverage for a grower in Wayne County (where an insurance program is not available) we filled out and submitted the written agreement application in September when the sales closing date for fruit crops was not until November 20th.

It is estimated that over 96 percent of the 2.1 million farms in America are family farms, that means that Federal Crop Insurance serves family farms in most counties in all states in the country.

4. Crop insurance is free.

FALSE, the federal government does subsidize the premium paid by individual farmers. The subsidy varies by program area and by the level of coverage the farmer chooses to participate at. In most cases, the higher level of coverage the farmer chooses to protect his crop, the more he pays of the total premium. Farmers invested heavily in their crop insurance policies to the tune of 3.6 billion dollars in 2018 and well over 54 billion dollars since 2000. The lowest level of coverage a farm grower can participate in is referred to as CAT coverage. This provides coverage to protect 50 percent of the grower’s average production at 55 percent of the established commodity price for that crop. In 2018 the farmer’s CAT premium insurance was $300.00 per crop per county. With the newly passed “Farm Bill” the CAT premium will increase. Once a grower chooses to increase his coverage above this basic minimum, he pays a premium based on the planted acres. Depending on the type of crop, this premium can range from 2 – 3 dollars per acre up toward 25 – 30 dollars per acre. With apples, the premiums can be 250 – 350 dollars per acre and sometimes even more. This type of investment helps maintain the financial stability of many rural communities across the country.

5. Taxpayers bear all the risk for crop insurance losses.

False, actually the risks are shared by three groups. One, the farmer absorbs risk through the premiums paid for the level of coverage chosen. The farmer pays a large share of the actual premium. The farmer also absorbs the deductible. This is the amount of his actual production he loses before the insurance responds. This can range from 15 percent up to 50 percent loss even before the insurance responds. The average loss before insurance is probably between 20 and 35 percent. This is a direct out of pocket financial loss before insurance kicks in.

Two, the private insurance companies have risk. Federal Crop Insurance is distributed and marketed to individual farmers through independent private insurance companies. The SRA or Selling and Reinsurance Agreement, between these private insurance companies and the Federal Government spells out the rules and regulations effecting distribution and marketing of Federal Crop Insurance. The private insurance companies have set aside a large portion of their earnings as a loss reserve. Every time there is a major drought, a hurricane, or hail storm, it is the individual private insurance companies who pay first to cover losses.

Finally, through the subsidized premiums, the American tax payers are investing to insure and preserve a plentiful low-cost food supply for all Americans. Thanks to this form of crop insurance the tax payer pays for less to cover these natural disasters than the old “wait and see” ad hoc disaster programs.

Federal Crop Insurance has never been or will it ever be a profit generating mechanism for the American farmers. It is not meant to help farmers pay for their winter vacation or purchase their next tractor or pick-up truck. Federal Crop Insurance is in place to be a safety net. It is designed to help replace loss of income due to loss of crop production. It covers some of the operating costs and gives the American farmer a fighting chance to make it to the next crop year.