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. Its combined price and yield feature assures producers that they will earn a minimum revenue. This program is attractive to producers whose farm yields closely track county yields and where crop disasters, such as drought, affect a wide area. Other programs are currently being offered on a pilot basis in limited geographical areas.