|
Policy Types
MPCI provides protection against weather-related
causes of loss and certain other unavoidable perils. There
are several types of MPCI offered, allowing farmers to choose
the option or options that meet their risk management needs.
Click each insurance type below to discover
more about it.
Actual Production History (APH or
MPCI) Crop Insurance
APH coverage is the oldest and most popular
product in the crop insurance family of policies. Often called
simply "Multi-Peril Crop Insurance" or MPCI, it
provides protection against a loss in yield due to natural
causes. For most crops, this includes drought, excess moisture,
cold and frost, wind, flood and unavoidable damage from insects
and plant disease.
MPCI allows farmers to insure a certain percentage of actual
production history (APH) at a certain price. APH is the average
of the last 10 years of production. Farmers can choose to
insure from 50% to 85% of their APH. At the time of purchase,
farmers also choose a price in the range of 55% to 100% of
the USDA established price. The USDA sets the established
price in the spring.
Catastrophic coverage is the minimum MPCI
available. It covers 50% of APH and 55% of the established
price. For this coverage the farmer pays only an administration
fee of $100 per crop per county and the federal government
pays the entire premium.
A farmer who has purchased MPCI insurance
receives an indemnity from the insurance company when his/her
whole farm yield for an insured crop falls below the chosen
percentage of APH. For example, if a farmer has an APH of
120 bushels of corn and chose 70% coverage, he would be paid
by the insurance company for any yield less than 84 bushels
per acre. The price he would receive for the shortfall is
the price he selected at the time the insurance was purchased.
What are the benefits of APH?
- Protection against production loss.
- Based on a producer’s own production
history.
- Provides coverage levels of 50% to
85% of the APH in increments of five.
- Provides coverage on basic, optional,
or enterprise units and whole farm.
- Offers a competitive premium.
- Subsidized by FCIC.
How does it work?
- Establishes a guarantee of bushels per
acre.
- APH price is established by FCIC and
is independent of revenue products.
- Pays an indemnity if the production
is less than the guarantee.
When purchasing CRC the farmer first selects
a coverage level for the crop to be insured. Farmers can choose
to insure from 50% to 85% of their APH in 5% increments.
Futures market prices are used in calculating
the farmer's revenue and indemnity. The base market price
for corn is the monthly average of the Chicago Board of Trade
December new-crop corn futures prices during the month of
February. For soybeans, the average monthly futures price
of the November contract sets the base market price. The harvest
market price for corn is the average December futures contract
price during November; for soybeans it is the average November
futures contract price during October.
The revenue guarantee is calculated
as the APH times the coverage level chosen times the higher
of either the base market price or the harvest market price.
An indemnity payment from the insurance company is triggered
when the farmer's revenue (actual yield times harvest market
price or base market price) falls below the guarantee. Because
the higher of either the base or harvest price is used, an
indemnity can be paid with normal yields if the harvest market
price decreases sufficiently.
What are the benefits of CRC?
- Protects from revenue loss caused by
low yields and/or low prices.
- Based on a producer’s own production
history.
- Allows more flexibility and aggressiveness
in marketing crops.
- Provides collateral for loans.
- Uses regional commodity exchanges to
establish prices.
- Provides coverage on basic, optional,
or enterprise units.
- A production loss is always indemnified.
How does it work?
- Establishes a minimum guarantee of revenue
per acre.
- Final revenue guarantee established
using higher of base or harvest price.
- If revenue to count is less than final
revenue guarantee, an indemnity is paid.
- Coverage levels range from 50%
- 85%.
RA protects a producer's income when the
crop revenue falls below the guaranteed revenue. The coverage
and exclusions of RA are similar to those for the standard
APH policy. However, APH plan provides coverage for loss of
production, whereas RA provides coverage to protect against
loss of revenue caused by low prices or low yields or a combination
of both. RA also has the Fall Harvest Price Option (FHPO)
available. This Option uses the greater of the fall harvest
price (the final commodity price generated at harvest time)
or the projected harvest price (the expected commodity price)
to determine the per-acre revenue guarantee. So, with the
Option, RA is similar to CRC; without the Option, it is similar
to IP.
What are the benefits of RA?
- Provides a flexible and efficient management
tool to crop producers.
- Provides collateral for loans.
- Harvest Price Option has unlimited
upside protection, which is a great tool for forward contracting
grain.
- Available in unit structures of basic,
optional, enterprise, and whole farm.
- Provides discounts for producers
that insure multiple crops on whole farm units.
How does it work?
- Establishes a minimum guarantee of revenue
per acre.
- May select with or without Harvest
Price Option.
- If revenue to count is less than final
revenue guarantee, an indemnity is paid.
- Coverage levels range from 50%
- 85%.
GRP coverage is based on the experience
of the county rather than individual farms, so actual production
history (APH) is not required for this program. GRP indemnifies
the insured in the event the county average per-acre yield
(the payment yield) falls below the insured's "trigger"
yield. The Federal Crop Insurance Corporation (FCIC) will
issue the payment yield in the calendar year following the
crop year insured. Since this plan is based on county yields
and not individual yields, the insured may have a low yield
on their farm and not receive payment under the GRP plan of
insurance.
What are the benefits of GRP?
- Flexible program that allows the farmer
to choose between several coverage levels and amounts of
protection.
- Maximum policy protection is 150% of
the established price (x) the expected county yield.
- Offers a competitive premium, requires
no records and less paperwork than other plans to participate.
- Subsidized by FCIC and protects
against widespread loss of yield in a county.
How does it work?
- Uses county yields based on National
Agricultural Statistics Service (NASS) data.
- Pays indemnity if the final county
average yield is below loss payment trigger level.
- Coverage levels range from 65%
- 90%.
GRIP is based on the experience of the
county rather than individual farms, so actual production
history (APH) is not required for this program. A GRIP policy
includes coverage against potential loss of revenue resulting
from a significant reduction in the county yield or commodity
price of a specific crop. When the county yield estimates
are released, the county revenues (or payment revenues) will
be calculated the following crop year. A GRIP policy will
pay an indemnity when the county revenue is less than the
"trigger" revenue on the individual producer's policy.
Since this plan is based on the county revenue and not individual
revenue, the insured may have a loss in revenue on their farm
and not receive payment under GRIP. A GRIP Harvest Revenue
Option (HRO) endorsement is available. This Option offers
"upside" price protection by valuing lost bushels
at the harvest price in addition to the coverage offered under
GRIP.
What are the benefits of GRIP?
- Flexible program that allows the farmer
to choose between several coverage levels and amounts of
protection.
- Maximum policy protection is 150% of
the expected county revenue, more than any other multi-peril
program.
- Harvest Revenue Option allows the producer
to increase expected county revenue if the harvest price
is higher than the expected price.
- Offers a competitive premium, requires
no records and less paperwork to participate.
- Subsized by FCIC and protects against
widespread loss of revenue in a county.
- Fits well with a full coverage
crop hail policy, which provides added coverages.
How does it work?
- Uses county yields based on National
Agricultural Statistics Service (NASS) data.
- Determines expected and harvest prices
using commodity future contracts.
- Pays indemnity if county per-acre revenue
is lower than selected trigger revenue.
- May select with or without the Harvest
Revenue Option.
- Coverage levels range from 65%
- 90%.
|
