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What is Crop Insurance?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 16 November 2016
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Crop insurance is a form of insurance which is designed to protect farmers from economic damages caused by everything from a radical decline in crop prices to the inability to plant due to drought. Many governments subsidize their crop insurance, with private companies providing policies which are supported by the government. A variety of insurance products are available to farmers, depending on where they farm, what they grow, and what kind of coverage they need, with most services being provided by insurance companies which specialize in crop insurance and related insurance products.

Farming is a notoriously risky business. Adverse weather conditions such as a sudden frost, hail, tornado, thunderstorm, or drought can cost a farmer a season's crop, and crops are also vulnerable to pest infestations, damage from wildlife, and disease. In addition to all of these problems, farmers are often exposed to financial damage as a result of falling crop costs, rising costs for equipment and supplies, and rising transport expenses. Crop insurance is designed to reduce the financial risk of farming, so that farmers can focus on their work without fretting about a multitude of potential scenarios which could spell financial ruin.

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When a crop insurance policy is written, it establishes the specific crop being insured, such as wheat or corn, and describes the nature of the coverage. The most basic coverage usually provides payouts in the event that crops are damaged as a result of weather, disease, pests, or wildlife. More expansive policies can include insurance measures to protect farmers if they are forced to plant late or not at all by the weather.

Policies can also include measures which are designed to protect farmers from revenue fluctuations. When the policy is purchased, the insurer can determine a fair price for the crop, providing a payout if the farmer fails to obtain that price when the crop gets to market. Insurers can also provide coverage against revenue losses caused by a smaller than expected harvest and other problems. A good crop insurance policy will have few exclusions and a detailed discussion of all available coverage.

Crop insurance can get very complex. For this reason, farmers like to work with specialized crop insurance agents when they purchase a policy. The agent can discuss all of the options with the farmer, provide some estimates of premiums for insurance policies of various levels, and provide recommendations about the best insurance to purchase. As with any insurance policy, the buyer must balance the cost of the premium against the potential financial damages which might occur without insurance.

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Feryll
Post 2

I don't know much about farming, but I recently bought a house that is surrounded by a farm. There was wheat planted in the field near my house. It was growing great. Even though I know little about farming, I can recognize a healthy field of wheat when I see it.

Before the wheat was harvested we had a series of heavy hail storms. These were the largest hail stones I had ever seen. The wheat was beaten and destroyed. I felt really bad for the farmer. Then he told me that he had crop insurance. I had no idea what crop insurance was.

Drentel
Post 1

My father began farming as the primary wage earner for his family when he was only eleven years old. His father got sick and could not work the family farm anymore. My father was not the oldest son, but he was the one who took over the farm. My father loved farming and it was more than a job for him; it was a way of life.

When he started his own family he continued to farm. I think one of the worst days in his life was when he realized he had to quit farming and take a job in a mill in order to make enough money to support his family.

For my father and most

of the other farmers around him, the biggest reason they were not able to consistently make money on the farm was that there were too many years when there just was not enough rain for the crops to survive and produce good yields. He was always at the mercy of the weather.

If he had been able to get something like the crop insurance this article talks about then that would have probably made a big enough difference to let him continue to farm, but there was no crop insurance available to him back them.

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