Crop Insurance Basics Beth Slack and Melody McCurry
HOW IT COMES TOGETHER
• FCIC Federal Crop Insurance
Corporation
• RMA Risk Management Agency
• AIPS Approved Insurance Providers
• Agencies and Agents
WHAT ARE THE MAJOR RISKS FACING YOUR
OPERATION? • Drought • Excessive Moisture • Excessive Heat • Hail, lightning, wind • Insects and Wildlife • Cold, frost, freeze • Disease • Price variations • Others?
ELIGIBLE PERSONS
• Be Competent • Be of legal majority, 18 years or
older, or conferred by court • Have an insurable interest in the
crop at the time coverage begins • Provide applicable identification
number and person type • NOT be ineligible
APPLICATION • Applicant Information • SBI Information • Crop Information • Cancellation/Transfer Information • Conditions of Acceptance • Privacy Act and Nondiscrimination Stmt • Signature Blocks
APPLICATION
APPLICATION
APH ACTUAL PRODUCTION HISTORY • Reporting production is done, by unit • Acreage must be reported separately,
by unit • Coverage is provided separately, by
unit • Harvested production must be
maintained, by unit • Indemnities determined, by unit
UNIT STRUCTURE
Four types of units: • Basic • Optional • Enterprise • Whole Farm
3 most common types
BASIC UNIT
• The building blocks of a policy. A policy’s coverage broadens or becomes more localized if the insured elects unit structures other than basic units.
• Determined first by crop then by share arrangement 1. 100% share ownership or 2. Which is owned by one person and operated by
another person on a share basis
OPTIONAL UNIT
• The units must be located in separate sections, section equivalents, or separate farm serial number (FSN)
• Irrigated and Non-Irrigated Practices • Organic and Conventional Farming • Written Agreement • The insured must have the prior year’s production by
section reported to the company no later than the Production Reporting Date of the current crop year
ENTERPRISE UNIT
• All insurable acreage of the same insured crop in the county in which the insured has a share on the date coverage begins for the crop year
• Must be elected by sales closing date • Available for: • - Revenue Protection • -Yield Protection • -Non-revenue crops if allowed by special provisions • Election is continuous, unless insured notifies agent
by sales closing • Enterprise unit must contain same crop on 2 or more
sections.
WHOLE FARM UNIT
• All insurable acreage of all the insured crops planted in the county in which the insured has a share on the date coverage begins for each crop for the crop year.
• With Revenue Protection elected • Without Revenue Protection only if in the special
provisions.
The Basics of Crop Insurance
vs Chocolate
PLANS OF COVERAGE vs
TYPES OF CHOCOLATE
• CAT • ARPI (formally GRP)
• YP – Buy Up 85%
• RP
• Dollar Store • Hershey
Minatures • Dove Chocolate • Ghirardelli
CATASTROPHIC RISK PROTECTION
• Individual policy/ APH data base • Guarantees bushels per acre against a
catastrophic loss • Coverage level- 50% of APH @ 55% of
established market price • $300 Admin fee per crop per county • Basic units only
ARPI formally GRP • Area Risk Protection Insurance
• Coverage based on an area, not an individual, yield or revenue amount.
3 plans • ARP – Area Revenue Protection • ARPHPE Area Revenue Protection w/
Harvest Price Exclusion • AYP – Area Yield Protection
MULTI-PERIL (YP) PLAN
• Individual Policy/ APH Data Base • Guarantees bushels per acre • Coverage Levels Available
– 50% to 85% of Approved Yield • Premium rate is determined by APH,
Level, Price, and County • Basic, Optional, and Enterprise Units
Available • Gov’t. Subsidy % varies by level
REVENUE PROTECTION RP
• Individual Policy/ APH Data Base • Guarantees bushels per acre • Coverage Levels Available
– 50% to 85% of Approved Yield • Premium rate is determined by APH,
Level, Price, and County • Basic, Optional, and Enterprise Units
Available • Gov’t. Subsidy % varies by level
RP Example Assume: Wheat NI 45 Bu average yield Coverage Level: 70% Base Price: $7.02/ Bu* Harvest Price: $6.25/ BU* (Example Price only) Actual Harvest 20 bu/ac
Minimum Guarantee Calculation Approved Yield X Base Price X Coverage Level = Base Guarantee
45 Bu/Ac X $7.02* X 70% = $221.13
Indemnity Payment Calculation Calculated Revenue Actual Yield X Harvest Price = Calculated Revenue 20 Bu/Ac X $6.25/ Bu* = $125.00/ Ac
Indemnity Payment Minimum Guarantee - Calculated Revenue = Indemnity Payment $ 221.13 - $125.00 Ac = $96.13/ Ac
* Note: All prices used in this illustration are for illustration purposes only and do not portray actual prices used for loss calculation!
Calculating The Value of the Crop Not Covered Under the MPCI Policy
$ Coverage By Level $ Not Covered by
Level
APH Plan Under MPCI Coverage Under MPCI Coverage
CROPS ACRE AV
Yield MP PRICE Crop Value 65% 70% 75% 65% 70% 75%
WHEAT 1 45 $ 7.02 $ 316 $ 205 $ 221 $ 237 $111 $95 $79
CORN 1 90 $ 4.39 $ 395 $ 257 $ 277 $ 296 $138 $118 $95
GSORG 1 70 $ 4.30 $ 301
$ 196 $ 211 $ 226 $105 $90 $75
SBEAN 1 30 $ 12.87 $ 386 $ 251 $ 270 $ 290 $135 $116 $96
Things to Remember
• Sales Closing dates • Spring planted crops March 15, 2014 • Fall planted crops September 30, 2014 Check to make sure tax id #’s are correct Martial status Any entity changes Changes to FSA #’s, shareholders, shares Are you adding any land to your farming operation? Have you acquired any acreage in another county? Do you want to make changes to levels or types of coverage? Production History and Unit Structure • This is not an all inclusive list, however these are some important things to remember.
QUESTIONS????
Thanks for your time and have a great day!!
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