Working the land as a farmer or rancher is challenging and rewarding. These types of workers face unique and significant risks. Any number of events outside of the farmer's control could cause a crop to fail or plummet in value. So how do farmers guard against this possibility? Read on to learn more about the protections provided by crop insurance.
Legal History of Crop Insurance
Crop insurance has elements in the private insurance sector as well as in the federal government. Crop insurance has an interesting legal history, and was first authorized by Congress in the 1930s in an attempt to help agriculture recover from the Great Depression and the Dust Bowl. The Federal Crop Insurance Corporation (FCIC) was created in 1938 to carry out this program.
In 1980, Congress passed the Federal Crop Insurance Act of 1980 to expand the program by allowing private insurance companies to sell in crop insurance. In the 1980s and 1990s, a series of droughts and other catastrophic weather events significantly impacted several types of agricultural production. In response, Congress passed the Federal Crop Insurance Reform Act of 1994 with the hope that a federally regulated crop insurance program would shelter taxpayers from the full costs of agricultural disasters following major catastrophic events.
In the years that followed, federal crop insurance programs evolved. For example, in 1994 participation in the federal insurance program was made mandatory, but this requirement was repealed in 1996. Then, in 2000, Congress expanded the role of the private sector by allowing entities to participate in conducting research and development of new insurance products and features. The 2014 Farm Bill substantially strengthened crop insurance by adding new products and options for farmers and ranchers. This bill also introduced Beginning Farmer and Rancher Benefits, which made crop insurance more affordable for new farmers just starting out.
Federal Crop Insurance Program
Multi-peril crop insurance (MPCI) is federally supported and regulated insurance that helps farmers manage the risk of natural disasters. This type of insurance is carried out by the Risk Management Agency of the USDA. Through MPCI, farmers are protected from common crop-loss causes, including:
- Extreme weather like hail, frost, and strong winds
- Crop disease
- Insect damage
MPCI crop insurance premiums are directly tied to the value of the specific crop. The federal government sets a deadline each growing season before which farmers must purchase MPCI insurance in order to be covered for that year. Insurance must be purchased before the crop is planted. In the event that damage occurs early in the growing season, there may be incentives for farmers to re-plant or penalties for failing to do so.
Private Crop Insurance Policies
In parts of the country where hail is common, many farmers carry crop-hail policies to protect against hail damage. Many farmers buy crop-hail policies as a supplement to MPCI coverage, because crop-hail policies have a low or even no deductible. Unlike drought and other extreme weather conditions that impact crops, hail has the unique ability to completely destroy a significant part of a planted field while leaving the rest undamaged. As a result, a hail claim may be less than the amount of the deductible for MPCI insurance policies.
Crop-hail policies are not part of the Federal Crop Insurance Program, instead they are sold by private insurance companies to farmers and ranchers. However, the crop-hail insurance industry is regulated by individual state insurance departments.
Crop Revenue Insurance
Another type of insurance that can be beneficial to farmers is crop revenue insurance, which helps out when a farmer experiences a particularly low crop yield or if the price of a particular crop is lower than average. An insurer will make a pay-out to an insured farmer based on how much lower a year's revenues are compared to previous years. Crop revenue insurance can help farmers protect their livelihood against drastic changes in crop prices, regardless of the cause.
Get Legal Help with Crop Insurance Issues
If you are in the farming or ranching industry, it's important that you have the appropriate measures in place to protect your livelihood against unexpected natural and market conditions. If you need help with the legal aspects of crop insurance, a great first step is to speak with an experienced insurance law attorney.