However, diversification is becoming increasingly costly, as capital investment requirements become greater. Diversification can ensure adequate cash flow for meeting production costs, debt obligations, and family living needs. Crop Insurance Management of yield or price risk through the purchase of crop insurance transfers risk from you to others for a price which is stated as an insurance premium. Crop insurance is an example of a risk management tool that not only protects against losses but also offers the opportunity for more consistent gains. When used with a sound marketing program, crop insurance can stabilize revenues and potentially increase average annual profits.
Crop insurance provides two important benefits.
With the elimination of ad hoc disaster payments and deficiency payments, crop producers will no longer receive government aid during years of crop disasters or price support payments during low price years. Crop insurance provides partial replacement for the Federal safety net. Insurance companies offer a wide variety of crop insurance protection and coverage levels. The level of protection can be selected as a percentage of your historic yield. It is currently offered for corn, soybeans, grain sorghum, cotton, and wheat in selected states and counties.