Understanding Crop Insurance as a Vital Tool for Farmers and Ranchers

Crop insurance is a critical risk management tool that helps farmers and ranchers safeguard their livelihoods against unpredictable events, from severe weather to market fluctuations. As agriculture remains the backbone of rural economies, understanding how crop insurance works can ensure financial stability and resilience in challenging times.

What is Crop Insurance?

Crop insurance is designed to protect farmers from various risks, including:

· Adverse weather conditions (e.g., drought, flood, frost, hail)

· Fire due to natural causes

· Plant diseases and pest infestations (provided proper control measures are followed)

· Market price declines (for specific policies)

Administered through a public-private partnership, the U.S. Department of Agriculture (USDA) oversees the program, while private Approved Insurance Providers (AIPs) sell and service policies.

Types of Crop Insurance Policies

Farmers have flexibility in selecting crop insurance based on their farm's specific needs. Coverage options include:

• Yield Protection (YP): Covers losses when a farm’s actual yield falls below its insured yield.

• Revenue Protection (RP): Provides coverage when revenue drops due to yield loss or price fluctuations.

• Catastrophic Coverage (CAT): Offers minimum coverage, only paying out when losses exceed 50% of expected yields.

• Whole Farm Revenue Protection (WFRP): Covers revenue losses for all commodities on the farm.

  
  

How is Crop Insurance Funded?

The federal government subsidizes a portion of farmers’ crop insurance premiums to encourage participation. In 2024, the Congressional Budget Office estimated the total program cost at $12.37 billion. Farmers still bear a significant portion of costs, with premium rates varying based on coverage levels, risk factors, and historical farm performance.

Selecting the Right Coverage

Choosing the right policy involves evaluating:

• The percentage of the commodity value to insure (coverage level)

• Farm-level versus county-level risk assessment

• Supplemental endorsements for added protection

For example, higher coverage levels offer more protection but come with increased premium costs. Farmers should work with a licensed crop insurance agent to tailor their policy to their unique operational needs.

Compliance and Conservation Requirements

To remain eligible for federal crop insurance, farmers must adhere to USDA’s Good Farming Practices (GFPs), which ensure proper land management, pest control, and conservation efforts. Additionally, the Federal Crop Insurance Program enforces conservation compliance, requiring participants to maintain sustainable practices on highly erodible land and wetlands.

Why Crop Insurance Matters

Crop insurance is more than a financial safety net—it’s an investment in the long-term stability of America’s food system. By mitigating risks, it allows farmers and ranchers to:

• Recover quickly from natural disasters

• Secure financing from lenders

• Maintain consistent production levels

As discussions continue on the next farm bill, maintaining and improving crop insurance programs will be essential to supporting U.S. agriculture. If you have questions about your policy or need legal guidance on insurance disputes, our firm is here to help. Our partner Chuck Lee is the former general counsel for National Crop Insurance Services which is the sole organization that comprehensively supports both state-regulated and federally regulated sectors of the crop insurance industry.

For more information on navigating crop insurance policies and legal considerations, contact our team today.