Insurance

Storm Lake Crop Insurance

Our philosophy on crop insurance is to examine each client’s situation regarding risk of crop loss and individual risk bearing ability before making an insurance recommendation. We do not take a blanket approach to crop insurance, but designate each plan to our client’s needs. With that in mind, the first step is choosing from reputable companies with whom we have had good experience over the years and then comparing rates from several companies to assure the best buy.

Crop Hail Insurance covers hail damage. Most hail damage does not significantly reduce income, but occasionally there are sever losses. Our recommendation on coverage is generally slightly more than production costs or $250 per acre on a 50-50 crop share and $400 per acre on a custom farming arrangement. The cost varies from $1.25 to $2.85 per $100 coverage on corn and $5.00 to $7.50 per $100 cover on soybeans.

Multi-peril Crop Insurance provides coverage for yield reduction from nearly all causes including drought, hail, wind, flooding, fire, insects, and plant disease. It differs from hail insurance as the level of coverage available and the premium is established for each individual farm based on average county yields.

There are two types of multi-peril insurance available:

Yield Protection (YP) and Revenue Protection (RP)

The YP plan of insurance is based strictly on yields. A loss is payable if production drops below the yield level established by the policy.

Following are examples of approximate coverage and cost:

Crop Guarantee Bu/Acre Price Election Per Bu. Coverage/Acre Premium/Acre
Corn 133.5 $6.01 $802.34 $10.28
Soybeans 32.3 $13.49 $435.73 $8.08

 

 

The RP plan of insurance provides coverage for a guaranteed amount of revenue. Coverage is provided to protect this amount of revenue from losses due to low price, low yield, or any combination of the two. The three key variables in RP are actual production, projected price, and harvest price.

RP is designed to be a dollar plan of insurance based on the greater of the minimum guarantee or the harvest guarantee. The greater of the minimum or harvest guarantee is considered the final guarantee. If the final guarantee is greater than the calculated revenue, then RP pays an indemnity equal to the difference.

Crop Projected Price Coverage Level Ave Yield Min Guarantee/Acre Premium Per Acre
Corn $6.01 75% 178 $802.34 $22.19
Soybeans $13.49 75% 48 $437.73 $13.68

 

 

The coverage and premiums quoted are for 100% interest in the crop on a custom farming basis. Coverage and premium for a share arrangement would be correlated to the share percentage.
There are two aspects to consider when evaluating multi-peril crop insurance:

  1. Your willingness and/or financial ability to assume the risk.
  2. The weather and crop production risk.

Generally, on good quality farms that are well managed, yields are well above the level where losses are payable, even in stress years. Coverage levels have increased significantly with higher grain prices allowing you to insure a larger revenue stream. Costs have increased with the protection with the coverage available to protect a lot more revenue than in the past. There are situations such as a custom operation or a farm with droughty soils where multi-peril insurance is advisable.