How Does Hail Insurance Work?
Climate change has brought extreme weather conditions to the world over the years. It affected the health and livelihood of the people especially the farmers’ source of income – their crops. These unexpected weather conditions, such as hail, had resulted in risks and profit losses to crop businesses. It caused severe damage that ended the season of growing the crops. Apparently, it also brings up a remarkable yield loss.
Crop insurance has made a big impact in helping the farmers recover from the unanticipated loss. Here in Denver, Colorado, we are very prone to hail so we came up with a better explanation of how hail insurance would work for you. This way we can help you in evaluating the advantages of purchasing this policy before that event happens.
What is hail and why does it appear?
South Dakota was the one who has experienced the fall of the largest hailstone. It was the first one in the United States and was recorded on July 23, 2010. It measured 8 inches in diameter and weighed 1.93 pounds. It was so big you could have imagined the worst scenario to the properties and crops!
How is hail formed?
When the drops of water in the atmosphere freeze together with the thunderstorm clouds, hail is formed. Precipitation pertains to the water in the atmosphere and hail is a solid form of it. Ice balls, large ice pellets, and lumps are formed and they are called hailstones. These ice stones grow because of the colliding of water drops and therefore freeze again on the surfaces of the hailstone. Thus, these hailstones grow bigger in size and become heavy at the freezing level in the clouds.
When does a hail storm start to fall?
When the updraft of the thunderstorm can no longer hold the weight of these hailstones, they fall. These hailstones fall to the ground at a fast speed. The falling speed would depend on their size, melting point, wind conditions, and the friction between them and the surrounding air. It eventually made a drastic change to crops and properties due to damages.
Nebraska, Wyoming, and Colorado are the states that experience the most hail storms. With an average of 7 to 9 days of hail yearly, these states meet in “hail alley”. Denver got hit by the costliest hail 30 years ago and American history refers to it as the worst hailstorm. It happened on July 11, 1990, and the hailstones dropped made up baseball and golf ball sizes. Total losses that time was $600 million, thus, it was called the costliest hail storm in history.
What to do with the crops before and after the hail storm?
Hail is a weather condition that can not be avoided by most of the farmers. Since Colorado sits in what we call hail alley, this state is pretty much prone to hail. They have May to July as the peak hail season. It also ranked second with the most hail claims from 2017 to 2019 in the US. But what about the effects? How are you going to cope and start anew when hail pummeled your crops?
The effects of hail would inflict havoc on the crops such as exposed roots, uprooted and stripped crops, spots and discoloration, and the reduced or loss of yield. These effects would make plants and crops susceptible to disease later on. Here is the list of the things you can do when hail attacks.
While the hailstorm is on, do not go outside to check the crops and try to recover from damage.
Most likely, you will be hit and hurt in the process. You may go check on them after a day or two before assessing how far the damages were. Experts recommend waiting for about 3 to 10 days before evaluating the damage. You may find the remaining plants that you think would survive.
Healing your crops is essential after the hail had struck them
It may have caused yield loss but try to look at other crops that are viable. There may be some of them that need healing and recovery. You may choose to put fertilizers in order to provide nutrition for the plants. Also, fungicides can be applied if it is needed to prevent further disease.
If there is a hail forecast, be prepared.
It is very hard to remedy what would be left off from the yields of crops. Try to put some row covers, make a greenhouse tunnel, or alternative canopies using tarps to protect them from hailstones. One of the good reasons why you also need to keep them from exposed areas while growing is to make the plants grow stronger. Strong plants, most of the time, can withstand hail.
Protect your other assets.
Aside from the crops, there are things like your farm equipment and tools that need to be secured. You may find the best shelter where they can be parked and kept as long as the hail is striking.
Be secured by having the right insurance.
It is good to know you are insured with comprehensive crop insurance when hail wipe out what you have worked for. Severe damage would mean difficulty in regaining where you left off especially if the crops are on its yielding point.
Fill out the Notice of Loss.
After the hailstorm subsides, you have to submit the Notice of Loss within 72 hours. You may submit it through email, online, fax, or through the mail. Every policy has this form attached to it when issued. Filing over the phone is a no-no because your insurance provider needs a complete form with details on it. That is when the adjustments push through.
Crop-hail insurance is an inexpensive crop insurance that can be purchased from a private insurer. It is not part and not subsidized by the Federal Crop Insurance Program, unlike Multiple Peril Crop Insurance. State insurance departments regulate this policy. Farmers living in states that experience hail frequently purchases this coverage to protect yielding crops. It can be stand-alone crop insurance or may be partnered with MPCI as supplemental coverage. This type can be purchased at any time of the growing season.
A hail claim may have a lower amount than an MPCI deductible. Apparently, it is not purchased often because of its limitations. You may have the option to purchase add-ons to your policy if you don’t want to buy MPCI. That is if you find that you are bound to undergo wind and sudden frosts. Even coverage from theft can be allowed. Again, it is better to ask your agent of these possible add-ons.
Crop hail policy doesn’t just cover protection from physical damage caused by hail. It also covers events like fire, vandalism, lightning, removal of debris, malicious mischief, perils while crops are in transit, and even replanting costs if hail caused tremendous damage.
What is MPCI?
Multiple Peril Crop Insurance covers almost everything such as loss of crops, low yields caused by destructive weather, disease, drought, fire, flood, and insect damage. It is supported and regulated by the federal government and private insurance companies and agents sell and give their service to farmers.
MPCI is the choice of more than 90% of farmers. The insurance cost and the payout for losses of the insurer are tied to the cost of the crop specified. More than 120 crops can avail MPCI. It must be bought every growing season by the established deadline of the federal government, unlike crop-hail that can be purchased anytime. That means you need to purchase that before the crops are planted. Damages occurred at the beginning stage of the growing season may earn incentives when you replant. You may also be penalized if you won’t do it.
What does it cover?
Farmers choose to buy crop-hail coverage especially those who live in areas prone to hail to protect their soon-to-be harvested crops. It can destroy a huge part of the land where your crops are planted while leaving other parts unscathed. The crop-hail policy protects yielding crops and also the most vulnerable- corn, wheat, and soybeans. It also applies to other crops such as row crops, forage, fruits, and vegetables.
50 states provide crop-hail insurance. Though MPCI covers your operation generally, it is still advisable to purchase crop-hail to avoid chances of losses. Especially if the place you are in is likely to experience hail more often than expected. Different types of coverage can help you choose what you think is the best that suits your crop business. Ask your insurer about the coverages you may avail in your area.
Full or Basic
This type of coverage pays the equal amount of the loss percentage multiplied by the guaranteed value per section of the land.
Deductible/ Dollar Plans
This coverage allows you to choose your deductible and what part of the land you want to insure. You need to meet the percent deductible before payments for the loss happen.
You can choose this to insure the portion of your crops that are not covered by MPCI. It covers the same losses but has a limit in coverage when it comes to liability.
This is combined with MPCI and it checks out your production history to set your insurance. Another one is your production yield which determines losses.
How does it work?
The United States Department of Agriculture Risk Management Agency states that 6% of crop losses yearly are caused by hail. Crop-hail insurance works on a per-acre basis. It covers damage even if it’s just a certain part of the field that has been damaged by the hail. So there’s no need to insure the whole part of the operation. The losses entailed are defined based on yield loss. If the plants are not destroyed by the hail storm but have compromised its ability to yield crops, the loss would be paid.
The losses would be paid depending on how severe the damage is and how wide the damaged acres are. However, if the policy is already finalized and you have specified the areas that you want to insure, it could not be extended or transferred to another area. With this policy, you need to choose first the coverage of the dollar amount that is why the value expected is on a dollar-per-acre basis.
You may then have options with different deductibles that will allow you to insure partially to decrease premium rates. However, other conditions are not included in the policy. These are drought, frost, excessive moisture, and price changes of crops. The coverage rate depends on the history of hail experience in a particular country or town. It is determined whether this particular country had some experiences of loss because of a historical hail.
Crops, when smashed by hail, would definitely leave you impaired because of the loss of capital and profit. Buildings, equipment, and tools when ruined by hail, becomes hard to bring back to how it was before because of the high costs of repairs. Worse, it is not easy to fund another capital for lost crops. It would be hard to raise the amount you will be needing to buy new assets plus the strain of getting back to normal after being devastated by the hail.
Every year hail has brought enormous damages to crops and equipment. People tend to forget the best way to combat the loss from hail is to be prepared for its coming aftermath by purchasing insurance. It would dig a big hole in your pockets if you would shoulder the costs of repair alone and try to relive what’s left behind.
We’re here to help!
It is always a pleasure for us to help you in any way we can. Give us a call today at +1 (720) 221-8168 and we will gladly offer you a quote that best suits your crop business. Our agency, Advantage Insurance Solutions, is ready to listen to your questions and clarifications regarding the policies you would want to avail. Our agents are always ready to assist you with your insurance needs and inquiries.