Crop Insurance

Crop insurance provides protection for a farmer’s income in case bad weather or other unavoidable hazards cause crop losses. There are two main types of crop insurance sold in the United States—multiperil insurance and hail insurance. Both types are designed to provide coverage for only a fraction of a farmer’s crop.

Multiperil insurance is sold by private agents. However, the Farm Service Agency of the U.S. Department of Agriculture guarantees the availability of money for the payment of claims. Multiperil insurance covers losses due to almost all natural causes, including disease, drought, flood, and insects. It is available for corn, cotton, tobacco, wheat, and about 50 other crops. In some areas, multiperil insurance also protects farmers against large drops in the market price of a crop.

Hail insurance is sold by private agents, whose companies also pay the claims on crop losses. Its coverage is limited to losses caused by hail, wind, or fire. This insurance is restricted to only a few causes in order to offer some protection for the insurer. A private insurer, unlike a government agency, could be ruined if crop losses occurred over a wide area.