Crop insurance is a type of insurance that is normally only purchased by agricultural producers. These producers include farmers and ranchers. This type of insurance is crucial for these producers since it helps protect against losses of their crops from certain natural disasters including hail, flooding and drought. Crop insurance also helps to protect against any loss of revenue that is caused by vast declining prices of agricultural commodities.
Buying crop insurance is not an investment, but it is a risk management option. Farmers and ranchers need to assess how purchasing a crop insurance policy will tie in with any other risk management strategies they may have. This is done to make sure that these producers have the best outcome each and every crop year. There are knowledgeable crop insurance agents available that can assist farmers and ranchers in creating the best management plan for them.
In the United States, crop insurance was authorized in the 1930’s by Congress. It was intended at that time to help the agriculture industry recover from the Dust Bowl as well as the Great Depression. The Federal Crop Insurance Corporation began in 1938 to take charge of the program. In the beginning, it was mainly an experiment until the Federal Crop Insurance Act of 1980 was passed. This passage then allowed crop insurance to expand to more regions of the country. Crop insurance is also available in regions all over the world including Europe, Asia and South Africa.
One of the major benefits of crop insurance is that it allows the cash flow of agricultural producers to keep moving in the right direction. While there is nothing that will stop the bills from continuing to come in, with crop insurance, there is now a way to help the cash flow as well. With continuing crop inputs increasing, the risk that is put on farmers financially is increasing as well. By having crop insurance, it will allow the farmer to have the confidence that they will be able to continue paying their bills in the event that a production shortage does occur.
In most agencies, crop insurance policies can be cancelled by either party at the end of the crop year. If the policy is not cancelled, it will automatically be renewed for the following year. The farmer must have all of his eligible crop insured that is planted in a certain region, which is done by area and by type of crop as well. It is definitely worth the monthly premium and time to research your options.