Law \ Legal

Understanding Types Of Insurance In Agricultural The Sector


What is a crop? What is a commodity?

Commodity is the more word to use when describing crop insurance because lots of coverages are not usually intended for plants. Many different commodities are insured, such as livestock, plants, clams, apiculture, pasture, oysters, and much more. 

Farmers can also insure their crops under many different plans. For instance, a grower’s wheat coverage may include area yield protection, revenue protection, yield protection, and many others. However, there are other crops that can have just one plan, such as wine grapes, which can only have a yield-based plan. The coverage types vary depending on the difference in the crop’s properties and characteristics. 

Types of crop insurance

There are different types of crop insurance that come with varying benefits and coverage. Here are some of the most important ones:

Actual Production History – APH

APH stands for Actual Production History. With this type of insurance, the experts take into account the production history of the farm over the year. So, the production history of the farm over a period of about four to ten years will be considered in the policy. The average amount of yield for that period will be calculated, and a percentage of it will be paid for as compensation if a loss is incurred. 

The APH insurance policy covers a variety of damages. For instance, the growers can file a claim for damages due to hail, disease, insects, drought, and even excess moisture. Once the claim is filed, the insurance sends an agent to assess the damage. For example, if a natural disaster is a frost, the agent will carry out a frost damage assessment. However, the farmers should also be versed in frost damage prevention techniques. Knowing how to prevent frost damage is a great way to avoid disasters which may reduce yield. APH is the most common type of crop insurance and is used by farmers worldwide. 

Multiple Peril Crop Insurance – MPIC

This type of insurance covers farmers for damages caused by natural disasters such as wind, frost, diseases, pests, excess moisture, and drought. Preventing blossom frost damage and other natural disasters should be a priority for farmers. Growers can choose the average amount of their yield they want to insure. Usually, it’s from 50 percent to 75 percent (in some cases, up to 85 percent). They can also select the predicted price percent for their crops (usually between 55 percent to 100 percent). 

Group Risk Plan – GRP

GRP is a risk management tool that provides insurance against massive losses or drops in production of covered crops in a region. It uses the yield index of a region to determine the loss of production. First, the farmers have to set up their trigger yield level. If the county’s yield level (set by the National Agricultural Statistics Service) drops below the producers’ level, then insurance is paid. These payments do not depend on a single farmer’s crop yield. Producers can cover their crops for up to 90 percent of the average county yield. The main advantage of GRP is that it is cost-effective and does not involve lots of documentation. However, the downside is that a farmer can have low yields on the insured crop but will not receive a payment if it doesn’t go below the county’s level of yield loss.

Revenue Protection – RP

This type of insurance provides producers protection against loss of revenue due to low yield and/or low prices. The harvest price is one of the key components of the revenue protection policy. The grower gets protection for the harvest price automatically when they buy an RP policy. Also, they can decide not to include the added price coverage by selecting the Harvest Price Exclusion.

This policy is the best fit for farmers that often sell their products before harvest is done. Lots of these farmers get a contract to market part or all of their products during the growing season for the contracted price. It helps the farmers get funds that can help in other farming activities. The growers are still obligated to provide the contracted amount of product under the contract if the crops are damaged. They have to purchase the crops at the harvest prices and deliver or refund the buyer’s money at the contract price. The revenue protection policy ensures that farmers have the funds to pay for their forward contract.

Revenue protection is great for farmers that have livestock on their farms and grow their own feed. If they are hit with a disaster that destroys their feed production capacity, they would have to buy feed at the going price. This means that they would have to lose lots of money buying the feed at higher crop prices. RP gives farmers the money needed to purchase feeds at higher market prices to sustain their animals. This will ensure that their farm thrives without the need to borrow from banks and get into debt. 

While insurance is a must-have for farmers, they should also know how to prevent frost damage on plants and other natural disasters that can significantly decrease their yield. This will save them the trouble of filing for claims which may be denied in some cases. 


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