Crop insurance in the United States
Policies under the Federal Crop Insurance Program in United States insure against crop losses, farm income, profit margins, aggregate farm income and other types of losses, in accordance with the World Trade Organization (WTO).
The USDA‘s Risk Management Agency (RMA) administers this Program, including setting premium rates and other provisions.
Insurance policies, sold by private insurance agents, are contracts between farmers and licensed insurance companies, and the Federal Crop Insurance Corporation (FCIC) provides reinsurance to licensed insurance companies.
A policy automatically renews each year unless the farmer cancels it within a prescribed period.
Under the Federal Crop Insurance Program, insurance policies, of which there are about 20 types, cover about 130 crops, including specialty crops.
Crop insurance
The four main crops –corn, soybeans, wheat and cotton- dominate in terms of enrolled acreage and indemnities paid.
In 2021, crops on 461.6 million acres were insured (net of acreage covered by more than one type of policy).
The most frequently purchased policy type is revenue protection.
Farmers can purchase policies with coverage levels ranging from minimum disaster crop loss coverage, in which case 100% of the insurance premium is subsidized but indemnities are only paid to cover losses in excess of 50%, to various types of additional («supplemental») coverage.
The most commonly purchased policies allow farmers to take out a level of coverage of up to 85%, i.e., a level always lower than the total value of their crops.
The premiums paid by farmers for supplemental coverage are also subsidized, and the Federal Crop Insurance Act stipulates the percentage subsidy on those premiums. Licensed insurance companies and FCIC share the underwriting risk.
In general, the licensed insurance companies retain 80-85% of insurance premiums and assume the risks associated with the retained proportion, and FCIC provides excess casualty reinsurance to these companies to cover the risk associated with the retained premiums in accordance with the provisions of the Federal Crop Insurance Act.
