Selecting crop insurance is an important operational decision. In a year where there’s little rain (or too much), late planting (or late harvest), or scorching heat (or an unseasonably cool early season), many farmers are thankful to have a layer of protection that makes the gamble of farming a little more comfortable. But it can be a lot for you to review and sort through—a lot of confusing terminology to re-learn, a lot of numbers, and a lot of paperwork.Let’s cover the basics of multi-peril crop insurance to make thinking about your crop insurance options a little easier.
What is Multi-Peril Crop Insurance?
Multi-peril crop insurance (MPCI) is part of a unique partnership between government and private business. While private companies manage the services based side of the program, the federal government, through the USDA Risk Management Agency (RMA), oversees the program, determining rates and establishing which crops are covered, while also subsidizing the cost of premiums for farmers.
What does MPCI protect you from?
MPCI protects farmers from financial loss by allowing them to insure a portion of their crop (based on historical yield data) against a wide variety of crop failures, including weather, wildfire, disease and more. MPCI policies, however, are purchased prior to planting, before a farmer knows what the season will hold.
MPCI need-to-know terminology
There isn’t a quick list for crop insurance terms you should know and be familiar with… OK, actually there is a list, but it’s not exactly quick. It’s more than 200 terms and acronyms long.
Instead, we’re focusing on the top four acronyms you might not know, but that should be on your radar:
- Trend-Adjusted Actual Production History (TA-APH): You’re probably familiar with Actual Production History (APH), which is based on the actual yield history of the insured unit. It uses up to 10 years of averages, and if more years are available, it takes into account the most recent 10. Trend-adjusted APH adds in an adjustment factor, developed utilizing increasing trends in county and crop data from the National Agricultural Statistics Service (NASS), which helps account for the annual expected crop improvement. This bumps up the approved APH yield, giving you a higher guarantee.
- Beginning Farmer Rancher (BFR) Benefit: Newer farmers, this is one to watch for. Those who have been farming for fewer than five years may be eligible for BFR benefits, which includes exemption from some administrative fees, ability to use production history from other operations where they have been involved in decision making, and an additional 10 percentage points on some premium subsidies.
- Yield Exclusion (YE): This option was added in the 2014 Farm Bill. It protects your Actual Production History (APH) by allowing you to exclude yield numbers from an eligible crop year for the county, which are used to establish coverage levels (see TA-APH above). For example, in a year when a natural disaster or other extreme weather event occurs, you can exclude the yield from your production history if the county yield was less than 50 percent of the prior 10-year average county yield. (Because the level of insurance coverage available to you is based on your average yields over the four to 10 most recent crop years, excluding a lower yielding eligible crop year can increase your approved APH yield.)
- Supplemental Coverage Option (SCO): Supplemental coverage accounts for a portion of a farmer’s deductible based on county yield or revenue levels. Only crops and farms covered under the Price Loss Coverage (PLC) program from the 2014 Farm Bill are eligible for SCO. (PLC is a USDA disaster assistance option which uses a reference price for each crop to set a price floor. If the Marketing Year Average (MYA) price comes in lower, the farmer gets paid on a percentage of their eligible PLC-enrolled program acres.)
MPCI Coverage Levels
There are no hard and fast rules around MPCI coverage levels. While many farmers in the Corn Belt often insure at 80-85 percent levels, other parts of the country may find that 70 or 75 percent is a more economical choice. It’s about making the best decision for your operation with the information you have available.
Getting a second opinion on your coverage
You might be used to thinking about your crop insurance options once a year around deadline time, but reanalyzing your coverage every year is smart when you think of choosing MPCI as part of the big picture for your operation, just like you would any other input.
Don’t make a decision based simply on premium and payout without knowing what all is available to you and if it matches your personal and operational level of acceptable risk.
Why FBN for Your Crop Insurance?
If MPCI is a commodity in a government subsidized market, what does FBN bring to the table in crop insurance? Glad you asked.
- A Team Solely Dedicated to Crop Insurance: The person who sells you crop insurance may be wearing a lot of hats (for example, selling you other retail products and services, farming their own crop, or focusing on higher-margin products that are part of their business). With FBN, you get agents whose full focus is on making sure you have access to the coverage you need.
- An Easier Way to Report Data: Reporting planting and yield data can be incredibly time consuming. If you’re already using FBN tools to benchmark and track your performance, cut out the extra step of having to organize and report it to your crop insurance agent.
- Tools that Make the Difference: FBN has developed a suite of tools that can help you visualize what your operation’s risk looks like. From a 30-year analysis on trends and price across a 20-state region, to yield and price matrices based on your input data, FBN lets you utilize the data to make your best decisions on crop insurance.
We are an Equal Opportunity Provider. FBN Crop Insurance is only available in states where FBN Insurance is licensed to operate. FBN membership not required. FBN Insurance services are offered by FBN Insurance LLC (dba FBN Insurance Solutions Services LLC in Texas, and FBN Insurance Solutions LLC in California and Michigan) and are only available where FBN Insurance LLC is licensed. FBN membership is not required to purchase through FBN Insurance. FBN Insurance is currently offered in the following states: AR, IA, IL, IN, KS, MI, MN, MO, MS, MT, ND, NE, OH, OK, SD, TX. Additional states pending.