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crop insurance

Contributor(s): Matthew Haughn

Crop insurance is a type of protection policy that covers agricultural producers against unexpected loss of projected crop yields or profits from produce sales at market.

Crop insurance is divided into two categories: crop-yield and crop-revenue. Crop-yield insurance protects the expected revenue due to unexpected yields, which is the volume of a crop’s harvest. Crop-revenue insurance covers expected revenue from loss owing to market fluctuations of crop selling prices. Both types of insurance are a means to aid in disaster recovery for producers due to unexpected events.

Causal factors covered under crop-yield insurance could include natural disasters like fire, drought, or flooding with the intention of protecting producers against yield or entire crop loss. Crop-revenue insurance can cover a producer from unexpected fluctuations in the selling price resulting from reduced demand, bad publicity or a bumper crop resulting in a flooded market that reduces selling prices. However, technological advances in agri-tech like precision agriculture and agbots have begun to transform the crop insurance industry as producers are able to collect data and monitor their crops better than ever before.

In 1938, the United States passed the Federal Crop Insurance Act and created the Federal Crop Insurance Program. Initial offerings for crop insurance were too costly for many farmers. This resulted in the inability of insurers to cover losses claimed owing to not having built sufficient reserves. Though conditions were improved with government and insurer cooperation in the 1980s, it was after the Federal Crop Insurance Reform Act of 1994 that numbers of insured farms went up dramatically. By 1998, the amount of agricultural land insured was three times greater than it had been in 1988, having reached coverage of up to 180 million acres nationwide.

This was last updated in May 2018

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