The Basics on Crop Insurance

ImageFollowing Tropical Storm Irene, more farmers are interested in crop insurance and disaster protection.  Crop insurance can be confusing, with both federal programs and private insurance.  Last week, I attended Vern Grubinger’s meeting about flooded vegetable farms, and this week I was at a crop insurance meeting.  While this is fresh in my head, I thought I would try to write down my understanding about this for vegetable and crop farmers.  Livestock programs are different.

The basic level of protection is NAP.  This is offered through your local USDA Farm Service Agency Office (FSA).  The cost is low and so is the coverage.  It does make you eligible for other FSA programs, should the need arise.  There is an administrative fee of $250/ crop, up to a $750 maximum (if you have land in more than one counties this is different.)  The fee is waived for farmers with less than 10 years of farming.  The fee is also waived for ‘limited resource producers’ who have less than $163,200 in gross sales.  There is a 50% ‘deductible,’ so that you would begin receiving a benefit only when you lose more than 50% of the crop.   NAP stands for ‘Noninsured Crop Disaster Assistance Program.’  It provides catastrophic level coverage for weather-related crop losses.  

In order to be eligible for USDA natural disaster payments (through FSA’s Supplemental Revenue Assistance Payments Program) a producer must have all insurable crops enrolled in either NAP or federal crop insurance.  The program provides disaster payments for crop losses resulting from natural disasters, such as flooding, hail, frost, wind, drought, insect and wildlife damage. (There is fine print to this program.)

Here is the link for USDA FSA offices in Vermont,  http://offices.sc.egov.usda.gov/locator/app?state=vt&agency=fsa

And here is the link for more information about NAP, http://www.fsa.usda.gov/FSA/newsReleases?area=newsroom&subject=landing&topic=pfs&newstype=prfactsheet&type=detail&item=pf_20110830_distr_en_nap.html

Then, one step up would be the basic level of crop insurance, CAT, through the federal crop insurance program.  There is an administrative fee of $300, again this fee can be waived for limited resource farmers.  Once again, this is disaster protection for you from weather events.  The basic policy pays 55% of the established price of a crop on losses in excess of 50%.  CAT stands for ‘catastrophic.’  CAT is sold and serviced by private crop insurance agents.  There are several insurance agents in Vermont who sell this, USDA has a crop insurance agent finder at this location, http://www3.rma.usda.gov/apps/agents/index.cfm

Vermont farmers with 5 years of farm sales history shown on IRS Form 1040 Schedule F can try a policy called AGR-Lite.  This insures gross sales, not a particular crop.  This policy has a variety of coverage levels and loss payments rates- these are similar to the deductibles on our car policies.  More coverage costs more.  AGR stands for ‘Adjusted Gross Revenue.’  This is where more information on AGR-Lite can be found, http://www.rma.usda.gov/pubs/rme/agr-lite.pdf   Insurance agents who sell CAT also sell AGR-Lite.

It would be a good iImagedea to talk to your local FSA person early this winter (before the March deadline) about NAP and crop insurance.  You could also ask them if they think you would be a good candidate for a crop insurance policy.  Or you could contact Pam Smith, with UVM Extension to talk about crop disaster protection, 802-349-2966, Pamela.a.smith@uvm.edu


 
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About Dennis Kauppila

I work with farmers on finances. I started with UVM Extension in 1983, and have worked with hundreds of farmers on issues ranging from starting a farm, how to get a loan, leasing a farm, understanding farm finances, to retiring from farming. I teach 1 or 2 courses for farmers each winter. I am working with several farmers now on business plans, and I continue to work with many farmers on balance sheets and budgeting.
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