You Need Federal Crop Insurance: Even If You're Already Insured
The federal government offers crop insurance. Here's why it exists and why you need it, even if you're already insured.
America's farmers contribute over $100 billion to the national economy.
If you're one of these farmers, you'll know that the job you do is one of the most important and rewarding out there. However, it comes with more than its fair share of risks.
To protect yourself from risks to your machinery, premises, crops, and animals, you'll need considerable insurance coverage.
Read on to learn more about federal crop insurance and why every farmer should have it.
What Is Federal Crop Insurance?
Federal crop insurance provides coverage to farmers in the event that their crops suffer damage. The program is run by a federal agency called the Federal Crop Insurance Corporation (FCIC).
Under this system, farmers choose to insure all they have of a given crop in a given county. If they have several different crops, they can choose to insure some without insuring the others. If, for instance, a farmer grows potatoes, carrots, and corn, they can choose to insure carrots and potatoes and not insure corn.
However, a farmer cannot choose to insure only some of his corn, leaving the rest uninsured. They must insure either all or none of a given crop. This rule serves to avoid the adverse selection problem.
Farmers purchase crop insurance from private providers like us. However, the FCIC subsidizes the premiums that you pay for this coverage, which means that you get far better protection for the premium you pay than you would in a traditional insurance arrangement.
What Does Federal Crop Insurance Cover?
Not all crop losses will be covered by federal crop insurance.
Firstly, every policy will have a deductible amount. This is the amount of loss in excess of which compensation is available. Any losses up to this amount fall to the farmer.
Only losses that result from an unavoidable peril that the farmer could not have prevented through some reasonable intervention that they failed to take are considered. A common example of this is an extreme weather event, such as a hurricane.
However, in recent years compensation has also become available in respect for losses resulting from a loss of value due to a change in market prices.
Development of the Program Over Time
President Franklin D. Roosevelt initiated this program as part of the New Deal in 1938. It sought to prevent farmers from descending into extreme poverty after the Dust Bowl ruined a huge number of crops across the country.
However, the system as we know it did not exist until 1980. It was then that the federal government enacted the Federal Crop Insurance Act of 1980.
This legislation made government-backed crop insurance accessible for all farmers. The government at the time intended all farmers to take part in the insurance scheme, as they felt that it represented a valuable and worthwhile source of protection for them.
However, involvement in the program did not escalate at the rate the authorities had hoped for. This led them to enact the Federal Crop Insurance Reform Act 1994.
This legislation made it mandatory for farmers to hold federal crop insurance if they wanted to benefit from certain government assistance programs, including price support programs.
These new rules saw a significant increase in participation rates. Nowadays, the majority of US farmland is insured under this program.
Why Do I Need Federal Crop Insurance?
Even if you have other types of insurance that might cover damage to your crops, you should still take out federal crop insurance.
As outlined above, participation in the federal crop insurance program is necessary in order to avail of benefits like price support. The USDA's price support system is a means through which farmers can sell their goods and apply for financial assistance.
Also, as noted above, federal crop insurance represents great value for money for farmers. Because of the assistance that the federal government provides, the coverage is much cheaper than other options.
Additionally, crop insurance indemnifies you against specific risks that may not be covered by any other policy.
What Other Types of Farm Insurance Are There?
As you know, there is far more to insure on your farm than just your crops. Farm and ranch insurance is a broad area of coverage, and there are many different areas in which you should consider taking out policies. You can usually get coverage for all of these risks under a single farm insurance policy depending on your individual requirements.
We've looked at a few of the most important areas here.
If you have farmhouses, sheds, or barns, you'll want these to be protected. Premises insurance can indemnify these buildings against damage wrought by fire, weather events, or freak accidents outside of your control.
Farm machinery can be very valuable, especially if you buy it new. This makes it a target for thieves.
Machinery insurance provides coverage for your machinery in the event that it is stolen, damaged by a fire, weather event, or unavoidable accident.
If you raise animals, you'll know that there are a huge amount of different things that can cause them harm. Diseases and adverse weather conditions can both be detrimental to the health of your livestock.
Livestock coverage will keep you protected financially in the event that any of these things become a major issue for you.
Your health is the most valuable thing you have. Unfortunately, it's often at risk on the farm.
Health coverage covers you against losses due to illnesses or injuries resulting from your farm work.
Getting the Coverage You Need to Sustain Your Business
No farmer wants to take on extra costs unnecessarily. However, crop insurance might be the best investment you ever make if a disaster happens to strike.
If you'd like to learn more about federal crop insurance, or any of our other insurance solutions, contact us today.