There are basically two kinds of crop insurance in the market: the crop-yield insurance and the crop-revenue insurance. How are these two types of crop insurance different?
Agricultural Insurance is what makes most farmers successful these days. It is an insurance taken to protect crops against natural disasters and against the price fluctuations. Crop Insurance gives farmers the surety that in the case of a calamity they can continue to farm and plant their crops for the next growing season.
Main classes in agricultural insurance
There are two main classes of crop-yield insurance. The first one is crop-hail insurance which is purchased from private insurance companies. The other class is the multi-peril crop insurance (MPCI) which protects the farmer against floods, drought, insects, plant disease and so on.
Crop-revenue insurance has the features of both crop-yield insurance and price insurance. This crop insurance policy would pay an indemnity if the actual yield and the cash settlement price in the futures market are lower than the guarantee. It basically covers the decline in prices during the growing season but it does not cover the declines from one season to another.
Though farmer's operations may vary, most farm programmes are similar. Crop insurance will help the farmer to customise this operation to cover losses, different yielding patterns and risk.
Farmers can also use crop insurance as collateral for further loans to increase production capacity. Since the crop insurance programme is designed according to the needs of the farmers, the farmer has to take the responsibility for various risk management measures. This ensures that farmers meet the requirements of farming standards as this is necessary to be eligible for payments in case of loss.
Crop insurance subsidies
Crop insurance give the farmer the financial back-up required for agricultural marketing. When yields drop, crop-revenue insurance products are available which will enable the farmer to deal with the forward contracts and with the futures and options positions.
Farmers often get their crop insurance indemnities at a time when the loss occurs. For instance, the payment could come before harvest in case of prevented planting and replant payment or it could come after harvest if there is a reduction in the yield or revenue.
Crop insurance is often related to loss caused by price fluctuations or natural disaster. Crop insurance premium subsidies and indemnities are not limited, nor are there income caps to purchase crop insurance. Agricultural producers must share in the program cost in order to receive crop insurance. Though crop insurance is subsidized in part by the federal government, the contributions from the producer reduce the costs to the taxpayers.
In many countries, especially the US, the crop insurance products can be tailored to the needs of the farmers without it going through a lengthy legislative session.
Crop insurance companies
There are several companies offering agricultural insurance. The best way to get a good deal is to get quotes from each of them and compare. The differences you'll find make it worth spending time comparing insurance providers.