When the word crop is mentioned, what is your first thing thought? Corn? Wheat? Or other types of agriculture? If yes, you're certainly not wrong because crops are plants grown and harvested to produce different forms of food. The act of cropping can be practiced domestically or commercially depending on the purpose of the planter.
But there are quite a few risks present when one is seeking to conduct these activities. It is these many different risks that range from crop hail and other factors due to natural disasters in the growing season that makes many farmers reach out to take advantage of insurance.
It helps to conduct risk management with a risk management agency in the growing season and other seasons so that farmers can minimize their overall problems.
Whether these farmers and ranchers are catering their prices in the private sector or the public sector, they still need to have overall protection. Their business earnings and overall revenue stem from their yield, their agricultural involvement, the health of their livestock, acceptance in the markets, and other relevant factors in the U.S.
As such, farmers and companies must have crop insurance to ensure that they have a good season. Here is what those in the agriculture industry and companies in the crop production business know about in the U.S today.
What is Crop Insurance?
Now, crop insurance can simply be defined as an agreement between three parties: the government, the approved insurance provider, and agricultural producers.
These policies are set to reduce losses during crop production or dip in the agricultural stock market. It also provides farmers with financial relief for events of natural disasters such as floods, hurricanes, droughts, earthquakes, and tornadoes that might occur.
Crop insurance can further be defined as an agreement an industry undertakes with hopes of being compensated when a loss is incurred. And in the death of the farmer, payment is also made. This part of the policy is widely known as a special premium.
As you can see this is a key part of your set of tools to have major risk or downside protection in the planting and farming sector. Whether you want to protect your company or acres of property from issues that stem from drought, planting issues, harvest-related aspects, and other instances, a risk management agency like the Thumann Insurance Agency can help.
How Does Crop Insurance Work?
For commercial farmers, there are various things you need to be aware of before acquiring an insurance policy for your crops.
While planting for domestic use, fewer factors are considered, unlike when planting for commercial purposes.
Below is a list of some factors that are associated with commercial farming:
i) Higher manual labor or use of higher machinery such as tractors and bulldozers, which will cost more.
ii) Employment of technical experts.
iii) Differences in growing conditions
iv) Damaging/spoiling of crops and so on.
Individuals or groups involved in commercial farming must weigh their options and consider insuring their crops to be on the safer side, saving them more cost in the long run.
Now, it is essential to recall that crop insurance is of two types. Multiple Peril Crop Insurance (MPCI) and Crop-Hail Insurance.
Multiple Peril Crop Insurance
As the name implies, it is a type of crop insurance or agreement that involves multiple persons. Unlike crop hail insurance, this is an indirect form of crop insurance. It all began in the early 1900s through a program called the Federal Crop Insurance Act Passage (FCIP) which the federal government solely organizes. This involves an interaction as well as an agreement between two firms, a public firm and a private firm that happens to be the insurer.
Also, it is anchored by a part of USDA, which is popularly known as the Risk Management Agency.
Before selling off Multiple Peril Crop Insurance policies, certain conditions are to be met. They are listed as follows:
i) An agreement showing the consent of at least 15 insurers who have consented to participate in the federal programs approved by the USDA.
ii) There must be proper distribution of policies through independent bodies who are in charge of issuing policies, payment of claims as well as the collection of premiums.
iii) Any loss encountered during the course of production is to be paid 30 days after the farmer has filed a claim.
Generally, not all agricultural products are covered by Multiple Peril Insurance. This decision on the crop is made yearly by the risk management agency but varies in different countries after analysis has been conducted on the losses incurred in the previous year as well as the coverage demand.
This type of insurance began in the early twentieth century. It is a direct service commonly practiced in private sectors, and it doesn't involve the government's support.
Unlike the Multiple Peril Crop Insurance that requires the involvement of a federal party, this policy is solely between private insurers. Once the crops begin to grow, the insurance can be purchased by the crop owners.
While this policy (crop-hail) covers other risks such as fire, lightning, earthquakes, flood, wind, or vandalism and does not include payment for damages caused by hail, it may cover the costs of replanting crops.
Is Crop Insurance Mandatory?
Yes. It is.
Over time, agriculture has proven to be affected by natural disasters. Notwithstanding, efforts and policies have been put in place to ensure profits are still realized, bringing about crop insurance.
For any agricultural owner or farmer, it is mandatory to have crop insurance because, in crop farming, farmers are prone to risks of either natural or chemical disasters, which will end up becoming a liability rather than an asset to them.
In a bid to avoid that, farmers or agricultural owners purchase crop insurances that match the liability insurance coverage needs of the farmers.
Benefits of Crop Insurance
Agriculture, crop production, and other related companies are essential sectors of the US economy. Everyone relies on it for food, clothing, and other elements like CBD or hemp, as noted by the farm bill.
Indeed, it also accounts for a small percentage of the US employment and Gross Domestic Product (GDP).
For these reasons, it will be in the public's great interest to have a financially balanced agricultural sector that allows for the production of affordable food, supply of fiber, and support of the nation's rural economy.
To do this, governments and insurance companies like the Thumann Insurance Agency must support those farmers working hard to produce food for the nation by providing them with safety nets.
One of these safety nets is crop insurance. The benefits of this insurance policy have been demonstrated in the aspects like droughts and other weather extremes of previous years, that is, 2011, 2012, and 2015.
This insurance is the farmer's key to financial recovery from natural disasters, explosive and unpredictable market inconsistencies. This policy guarantees them the ability to pay their bank and other bills to landowners, equipment providers with enough funds left to purchase production seeds for the next planting season and make investments to increase efficiency.
Reach Out to Thumann Insurance Agency For Crop Insurance in Dallas
Farm failures can cause the loss of jobs of both farmers and their employees, put financial strains on rural banks, and reduce crop investment. To have a stable financial crop production region, a financially healthy economy is required for rural areas.
Global expansion, increased customer demands, climate change, and other factors will put additional pressure on the crop production sector. And when this happens, farmers need to be prepared by purchasing the right crop insurance from the best agents at the Thumann Insurance Agency in Dallas, TX. Reach out to us today to learn more about how we can help with questions that you may have about crop insurance and how it can improve your situation.