THE STACKED INCOME 

PROTECTION PLAN (STAX)

Training Presentation

July 22, 2014

This presentation highlights features of Risk Management Agency Programs and is not intended to be comprehensive. The information presented neither modifies or replaces terms and 

conditions of the basic policy, the crop provisions, or the county actuarial documents. Consult a crop insurance agent for further details
OVERVIEW

2
What is STAX?

• STAX is a policy that provides area-based coverage for a portion of expected 

area revenue

• May be purchased with an individual or area crop policy (“companion policy”),

or can be stand-alone

• Yield Protection (YP), Revenue Protection (RP), Revenue Protection with the Harvest Price 

Exclusion (RP-HPE) or Area Risk Protection Insurance (ARPI)

• Or none of the above

• Only for producers of upland cotton

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What is STAX?

• STAX provides only revenue coverage and is not tied to the companion policy 

type

• Revenue or revenue with the Harvest Price Exclusion

• Liability (max payout) based on expected crop value for the area

• Area: generally county, but can be larger

• 80% premium subsidy

• Separate Premium and Administrative Fees for STAX

• In addition to fee for companion policy, if purchased

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Overview of STAX

• The amount of STAX coverage depends on the expected area yield and the 

higher of projected or harvest price (except for harvest price exclusion)

• Coverage may start at 90% of area revenue (or lower, if selected)

• Coverage ends at 70% of area revenue (or higher if selected, and cannot overlap coverage 

from a companion policy) 

• Maximum Coverage Range is 20%

• If there are multiple types or practices for the insured crop in the county, the 

policy protection for STAX will be determined separately for each coverage 

level, type, and practice

• Protection Factor – May choose from 80% - 120% 

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100% 100%

95% 95%

90% 90%

85% 85%

80% 80%

75% 75%

70% 70%

65% 65%

60% 60%

55% 55%

50% 50%

45% 45%

40% 40%

35% 35%

30% 30%

25% 25%

20% 20%

15% 15%

10% 10%

5% 5%

0% 0%

STAX Coverage

Percent of 

Expected 

County 

Revenue

Percent of 

Expected 

Grower 

Revenue

Individual Loss Area-Based Loss

Individual Policy 

(75% coverage) 

(Optional)

STAX 

(90% to 75%)

Example:

Grower purchases 

an individual 

revenue policy, 

75% coverage

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100% 100%

95% 95%

90% 90%

85% 85%

80% 80%

75% 75%

70% 70%

65% 65%

60% 60%

55% 55%

50% 50%

45% 45%

40% 40%

35% 35%

30% 30%

25% 25%

20% 20%

15% 15%

10% 10%

5% 5%

0% 0%

STAX 

(90% to 70%)

Individual Policy 

(60% coverage) 

(Optional)

STAX Coverage

Percent of 

Expected 

Grower 

Revenue

Individual Loss Area-Based Loss

Percent of 

Expected 

County 

Example: Revenue

Grower purchases 

an individual 

revenue policy, 

60% coverage

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100% 100%

95% 95%

90% 90%

85% 85%

80% 80%

75% 75%

70% 70%

65% 65%

60% 60%

55% 55%

50% 50%

45% 45%

40% 40%

35% 35%

30% 30%

25% 25%

20% 20%

15% 15%

10% 10%

5% 5%

0% 0%

STAX 

(90% to 80%)

Individual Policy 

(80% coverage) 

(Optional)

STAX Coverage

Percent of 

Expected 

Grower 

Revenue

Individual Loss Area-Based Loss

Percent of 

Expected 

County 

Example: Revenue

Grower purchases 

an individual 

revenue policy, 

80% coverage

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660 lbs/Acre x $0.78 per bushel = $515 Expected Crop Value

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$515 projected crop value x 70% coverage level

= $360.50 of revenue coverage

** Draft Final ** 10
660 lbs/Acre x $0.78 = $515 Expected County Revenue

(Same as Expected Crop Value for the grower in this 

case, but will generally be different)

Expected County Revenue x 20% STAX Coverage 

Range = $123.55 of STAX Protection

Coverage range

= 90% - 70% coverage level

= 20%

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When Final County Yield falls below 90% of Expected County Yield (in 

this case 90% of 660 lbs/acre = 594 lbs/acre), STAX starts to pay

When Final County Yield falls below 70% of Expected County Yield 

(or around 462 lbs/acre), the STAX payment max out at $123.55

Zero actual yield at harvest, resulting in a full 

payment of $360 from the underlying revenue policy

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When Final County Yield falls below 90% of Expected County 

Yield (or around 594 lbs/acre), the STAX payment begins

Yield of 230 lbs/Acre at harvest, resulting in a 

payment of $181 from the underlying revenue policy

Yield of 230 lbs/acre at $0.78 per 

Pound produces a return of $179

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AVAILABILITY AND COST

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STAX Data Source and Availability

• Use crop insurance yield data

• Allows for practice-specific (i.e. irrigated vs. non-irrigated) coverage in more areas

• General Guidelines to establish coverage for a county/practice:

• At least 10 most recent years of data available

• Most recent 5 years with 20 distinct producer reports per year and an average of 10,000 

acres or more

• Otherwise, combine counties to meet the standards:

• Combine target county with a qualifying neighboring county

• County group (target county plus surrounding counties)

• District or other groupings of counties

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STAX Data Source and Availability

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Cost

• STAX with a 90% area loss trigger and 20% coverage range, assuming 15% 

price volatility:

• Premium rate is likely to average around 40% with majority between 20% and 65%

• Covers ‘active range’ of losses

• Varies based on location and practice

• Assume expected yield of 850 lbs/acre, projected price of $0.75, productivity 

factor = 1.2

• Amount of coverage: $153 per acre

• Average grower premium: $12.24 per acre

• Will vary significantly based on location and practice

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INSURANCE CYCLE

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1) Application

2) SCD/Cancel/ 

Termination

3) Acceptance

4) Insurance 

Attaches

5) Acreage Reports

6) Summary of 

Coverage

7) Premium Billing

8) Notice of Loss or 

Damage

9) Inspection

10) Claim

11) Changes to the 

policy, actuarial 

documents, or 

Special Provisions STAX for the next year

Insurance 

Cycle

Program Changes Application Process

Claims Process Coverage and Billing

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2

3

4

5

6

8 7

9

10

11

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1) Policy Renewal/Change Options/Application 

• The Insurance Cycle begins each year with the insurance offer, and the 

actuarial documents published annually by the contract change date 

• STAX is available for upland cotton only, and will have its own actuarial 

documents 

• STAX will be identified in the Actuarial Information Browser by its own plan 

code

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2) Sales Closing/Cancellation/Termination Dates

• Insurance applications to add STAX must be completed and signed no later 

than the applicable sales closing date

• The policyholder can elect STAX as a stand alone policy for cotton or can 

have a companion policy under the Common Crop Insurance Provisions or 

Area Risk Protection Insurance

• Companion policy and STAX must be with the same AIP.

• If the companion policy has the Supplemental Coverage Option (SCO) it can’t 

be for the same cotton acres as STAX.

• Must designate STAX acres and SCO acres by sales closing date

• Done by providing production reports

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2) Sales Closing/Cancellation/Termination Dates

• The STAX coverage is continuous

• Can be cancelled by providing a written notice no later than the cancellation date

• Any changes a policyholder wishes to make to STAX coverage must be made by the 

applicable crop sales closing date

• STAX may be terminated by the insurance provider for the following crop year 

for nonpayment of outstanding debt by the termination date

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2) Sales Closing/Cancellation/Termination Dates

• Insurance choices

• Select a protection factor:

• 80 to 120 percent for each type/practice

• Select an area loss trigger and coverage range

• The area loss trigger may be 90%, 85%, 80%, or 75%

• This is the percent of expected revenue at which a loss is triggered

• The coverage range may from 5%, 10%, 15%, or 20%

• The range is limited by the difference between area loss trigger and 70% (or the coverage level of the 

companion policy if greater than 70%)

• Example: Area loss trigger selected is 90%, and a 75% companion policy is purchased. In this case the 

maximum coverage range is 90% - 75% = 15%.

• Available values will be shown in the actuarial documents

• Selected for each type/practice

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2) Sales Closing/Cancellation/Termination Dates

• STAX decision: Some factors to consider

• Area coverage aspect – how closely does grower’s yield move with county average yield 

(‘basis risk’)?

• If they do not move together, greater chance of not getting paid when there is a loss, vice-versa

• How much area risk can the grower tolerate?

• Decision on companion policy

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3) Acceptance

• Upon receipt of the insurance application to add STAX, the insurance provider 

issues a confirmation of insurance 

• The appropriate STAX policy documents will be issued to the applicant

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4) Insurance Attaches

• STAX insurance attaches annually when planting begins 

• STAX only covers planted acreage of the crop

• STAX does not provide payments for replanting or prevented planting 

• No late planting period, all acreage must be planted by the final planting date

• FPD similar to ARPI

• Written agreements are not available for STAX

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5) Acreage and Production Reports

• All insurable planted acreage of the crop in the county will be insured by STAX 

• EXCEPTION: Acreage designated for SCO can’t be covered by STAX 

• Acreage report will establish the amount of coverage and premium for STAX

• Production report required for STAX

• Date specified in the actuarial documents if stand alone

• Covered by companion policy, if applicable

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6) Summary of Coverage

• After the acreage report is processed, the policyholder is issued a summary of 

coverage that specifies:

• Insured crop, acres, and amount of insurance or guarantee (policy protection)

• Amounts are shown separately for STAX and any companion policy if applicable

• STAX policy protection is calculated for each type and practice for all the 

planted acreage of upland cotton in the county

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7) Premium Billing

• The annual premium is earned and payable at the time insurance coverage 

begins and is due by the premium billing date specified in the crop actuarial 

documents

• All information needed to calculate a STAX premium rate will be contained in the actuarial 

documents

• A separate administrative fee is owed for STAX

• Waivers of the STAX administrative fee are applicable for insureds who qualify as a limited 

resource farmer or a beginning farmer/rancher

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8) Notice of Damage or Loss of Production

For Individual Companion Policy

• A written notice of damage or loss 

of production filed by the 

policyholder within 72 hours of the 

policyholder's initial discovery of 

damage or loss of production

• But not later than 15 days after the 

end of the insurance period unless 

otherwise stated in the individual 

crop policy.

For STAX

• Notice of loss provisions contained

in the CCIP BP are not applicable to 

STAX

• Individual farm yields or revenues 

are not considered under STAX for 

determination of any indemnity

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9) Inspection

For Individual Companion Policy

• After the insurance provider 

receives the written notice of 

damage or loss, it will be processed 

and, if necessary, a loss adjuster 

will be sent to inspect the damaged 

crop and gather pertinent 

information concerning the damage

For STAX

• The inspection has no impact on 

the STAX coverage

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10) Indemnity Claim

For Individual Companion Policy

• After the claim for indemnity is 

processed for the underlying policy, 

an indemnity check and a summary 

of indemnity payment will be issued 

showing any deductions to the 

amount of indemnity for outstanding 

premium, interest, or administrative 

fees

For STAX

• Any indemnity for STAX will be 

determined later than the indemnity 

process for the individual 

companion policy

• STAX indemnities are calculated 

following the release by FCIC of the 

Final Area Yields 

• Will likely be in the summer of the 

subsequent year

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10) Indemnity Claim

• The actuarial documents will specify the data source for the Final Area Yields 

and the release dates

• Payment factors will be calculated and published by RMA

• Occurs later, after area yield data becomes available, similar to ARPI

• If an indemnity is due for STAX then the loss will be paid within 30 days after 

FCIC releases the Final Area Yields

• 1st crop 2nd crop premium and indemnity reductions apply for STAX 

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10) Indemnity Claim

• Indemnities for STAX are not included in the calculation and notification 

process for AIP’s on large claims ($500,000 or greater). 

• The 2015 Large Claim Handbook states:

• For the purposes of a LC Review, ECIC claims that the AIP must forward to the RO for 

review include:

• *****; 

• (4) For Actual Revenue History, Nursery, Whole Farm Revenue Protection, Dollar plan, and any 

other plans of insurance, any ECIC claim that exceeds the large claim threshold. However, area 

and index based plans of insurance are not included in policies subject to Large Claims Reviews.

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11) Program Changes

• RMA changes to STAX are made no later than the contract change date 11/30

• The policyholder will have the opportunity to review the changes and, if 

desired:

• Continue the insurance coverage for the following crop year

• Change the policy coverage:

• Protection factor, area loss trigger, and coverage range

• Cancel the insurance coverage by the sales closing date

• If the policyholder wishes to cancel STAX, then a written notice must be 

submitted to the insurance provider on or before the crop cancellation date

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EXAMPLES

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Example Scenario 

100 Acres of Irrigated Cotton

• Share - 100%

STAX Policy Protection

• Area Loss Trigger - 90% 

• Coverage Range - 20% 

• Protection Factor - 1.20

• Expected Area Yield - 690

• Policy Protection = $12,917 

Premium

• Projected Price - $0.78

• STAX Premium Rate - 0.4363

• Producer Premium Rate ≈ 0.0873

• STAX Premium = $5,636

• Subsidy Amount = $4,509

• Producer Premium = $1,127

Indemnity

• Final Area Yield - 520

• Harvest Price - $0.78

• Final Area Revenue - $405.60 

• Area Performance ≈ 75.36%

• Payment Factor = 0.732 

• Indemnity = $9,455

Companion Policy

• Insurance Plan - RP 

• Coverage Level - 70%

• APH - 660

• Companion Liability = $36,036

Total Liability = $48,953
STAX Terminology

From the policy

Area Loss Trigger 

• STAX indemnities are only due if the 

county revenue is below the trigger

• Selected by producer – max 90%

Coverage Range

• Different from Coverage Level, but 

serves a similar purpose

• Selected by producer – max 20%

Companion Policy

• A CCIP or ARPI policy for the same crop

For example purposes

Producer Premium Rate

• Estimated cost per dollar of STAX 

coverage paid by the producer

Area Performance

• Estimate of actual outcome relative to 

expected outcome

Total Liability

• STAX liability added to the liability of a 

companion policy.
STAX Calculations – Policy Protection

• The calculation for Policy Protection uses 

the higher of the Projected or Harvest price

• Protection Factor allows producer to 

customize STAX coverage

• The Policy Protection is Expected Area Yield 

times (higher of Projected or Harvest) Price 

times Coverage Range times Protection 

Factor times Acres times Share

Price for Policy Protection = $0.78

• (Higher of Projected or Harvest)

Protection Factor = 1.20

Policy Protection = $12,917 • (690 x $0.78 x 20% x 1.20 x 100 x 100%)
STAX Calculations – Premium

• STAX Premium Rates are separate from 

ARPI rates (and usually much higher)

• Subsidy Factor for STAX is 80%

• To calculate STAX Premium: 

1. Same steps as Policy Protection using 

the projected price, then

2. multiply by the Premium Rate

• Producer owes about 20% of the total 

STAX Premium

STAX Premium Rate - 0.4363

Subsidy Factor - 80%

STAX Premium = $5,636 

1. (690 x $0.78 x 20% x 1.20 x 100 x 100%)

2. (1. x 0.4363)

Subsidy Amount = $4,509 

• ($5,636 x 80%)

Producer Premium = $1,127 

• ($5,636 - $4,509)
STAX Calculations – Indemnity

• STAX indemnities are driven by the 

Area Performance

• Producer’s individual experience is not 

considered

• Payment Factor is based on area 

performance and Coverage Range

• Measures how far into the Coverage 

Range the Area Performance fell

• Limited to 1.000

• Indemnity is Policy Protection times 

the Payment Factor

Expected Area Yield - 690

Final Area Revenue - $405.60

Area Performance ≈ 75.36%

• ($405.60 ÷ (690 x $0.78))

Payment Factor = 0.732 

• (90% - ($405.60 ÷ (690 x $0.78))) ÷ 20%

• (90% - 75.36%) ÷ 20%

Indemnity = $9,455

• ($12,917 x 0.732)
STAX Calculations – Indemnity (Continued)

$0.83 Harvest Price (▲ $0.05)

Policy Protection ▲ $13,745 

• (690 x $0.83 x 20% x 1.20 x 100 x 100%)

Final Area Revenue ▲ $431.60 

Payment Factor ► 0.732 

• (90% - ($431.60 ÷ (690 x $0.83))) ÷ 20%) 

Indemnity ▲ $10,061 

$0.73 Harvest Price (▼ $0.05)

Policy Protection ► $12,917

• (690 x $0.78 x 20% x 1.20 x 100 x 100%)

Final Area Revenue ▼ $379.60 

Payment Factor ▲ 0.973 

• (90% - ($379.60 ÷ (690 X $0.78))) ÷ 20%)

Indemnity ▲ $12,568 
What if... Changes to Protection Factor

• The Protection Factor is used to 

calculate the Policy Protection

• Changes to the Protection Factor are 

reflected in the Policy Protection, 

Producer Premium, and Indemnity

Protection Factor ▼ 1.10

Policy Protection▼ $11,840 • (690 x 20% x 1.10 x $0.78 x 100 x 100%)

Producer Premium ▼ $1,034

Indemnity ▼ $8,667 • (Payment Factor ► 0.732)
What if... Changes to Share Arrangement

• Like Protection Factor, the 

producer’s Share is used to calculate 

the Policy Protection

• Note that changes to Protection 

Factor or the producer’s Share do 

not affect the Payment Factor

Share ▼ 50%

Policy Protection▼ $6,458 • (690 x 20% x 1.20 x $0.78 x 100 x 50%)

Producer Premium ▼ $564

Indemnity ▼ $4,727 • (Payment Factor ► 0.732)
What if... Changes to Coverage Range

• Policy Protection is based on the 

lower Coverage Range

• Total Liability is lower

• Premium Rate is higher, reflecting a 

higher likelihood of full payment

• Producer Premium is lower, even 

with the higher Premium Rate

Coverage Range ▼ 10%

Policy Protection ▼ $6,458 • (690 x 10% x 1.20 x $0.78 x 100 x 100%)

Total Liability ▼ $42,494

Premium Rate ▲ 0.5326

Producer Premium Rate ▲ ≈ 0.1065

Producer Premium ▼ $688 • ( $6,458 x 0.1065)
What if... Changes to Coverage Range (Continued)

• A change to Coverage Range affects 

the Payment Factor

• Coverage Range corresponds to Area 

Performance between 90% & 80%

• Area Performance is below 80%, so 

indemnity is the full Policy Protection

• Some area loss falls in a ‘donut hole’

• STAX Coverage Range ends at 80%

• Companion coverage begins at 70%

• No coverage for loss between the two

Coverage Range ▼ 10%

Area Performance = 75.36%

Payment Factor ▲ 1.000 • ((90% - ($405.60 ÷ (690 X $0.78))) ÷ 10%)

• Capped at 1.000

Indemnity ▼ $6,458 
What if... Changes to Area Loss Trigger

• Coverage Range must be entirely 

within the 70%-90% range

• Lower Area Loss Trigger limits the 

maximum Coverage Range

• Policy Protection is based on the 

lower Coverage Range

• Premium Rate is lower, reflecting a 

lower likelihood of full payment

Area Loss Trigger ▼ 80%

Coverage Range ▼ 10%

Policy Protection ▼ $6,458 • (690 x 10% x 1.20 x $0.78 x 100 x 100%)

Premium Rate ▼ 0.3399

Producer Premium Rate ▼ ≈ 0.0680

Producer Premium ▼ $439 • ( $6,458 x 0.0680)
What if... Changes to Area Loss Trigger (Continued)

• A change to Area Loss Trigger 

affects the Payment Factor

• Coverage Range corresponds to Area 

Performance between 80% & 70%

• No ‘donut hole’

• STAX coverage ends where Companion 

coverage begins

Area Loss Trigger ▼ 80%

Area Performance = 75.36%

Payment Factor ▼ 0.464 • ((80% - ($405.60 ÷ (690 X $0.78))) ÷ 10%)

Indemnity ▼ $2,997 
What if... Changes to a Companion Policy

• Coverage Range + Coverage Level 

cannot exceed Area Loss Trigger

• Higher Coverage Levels limit maximum 

Coverage Range

• Policy Protection lower

and...

• Companion Liability higher

but...

• Total Liability is lower

• Dependent on Producer’s APH and 

Protection Factor

Coverage Level ▲ 80%

Coverage Range ▼ 10%

Policy Protection ▼ $6,458 • (690 x 10% x 1.20 x $0.78 x 100 x 100%)

Companion Liability ▲ $41,184

• (660 x $0.78 x 80% x 100 x 100%)

Total Liability ▼ $47,642
What if... 1st Crop / 2nd Crop Reduction

• If the premium and indemnity of the 

underlying policy are limited to 35 

percent because the producer 

planted and insured a second crop, 

the STAX premium and indemnity 

will be subject to the same limit

• Remaining STAX premium and 

indemnity can be collected and paid 

as normal

1st Crop Limit = 35%

2nd crop planted...

Producer Premium Owed ▼ $394

Indemnity Payable ▼ $3,309

No loss on 2nd crop...

Remaining Premium = $733 • ($1,127 - $394)

Remaining Indemnity = $6,146 • ($9,455 - $3,309)
What if... Beginning Farmer

• If a producer qualifies as a beginning 

farmer, all authorized benefits apply 

to STAX

• STAX admin fee is waived and 

producer premium is reduced

Beginning Farmer Premium

STAX Premium ► $5,636

Subsidy rate ▲ 90%

Subsidy ▲ $5,072

Producer Premium ▼ $564
ADDITIONAL INFORMATION

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Additional Information

• See RMA’s website www.rma.usda.gov

• Policy and handbook

• Web and mobile app

• Quick way to calculate coverage amounts, approximate premium cost and show when county 

losses will trigger an STAX payment. 

• Cost estimator

• Availability maps

• Fact sheets

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