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crop insurance

Insurance that protects farmers from crop losses due to natural hazards. Hail and fire insurance are offered through private companies without federal subsidy. A subsidized multiperil federal insurance program, administered by the Risk Management Agency, also is available to most farmers. The program is authorized by the Federal Crop Insurance Act (which is actually title V of the Agricultural Adjustment Act of 1938), as amended. Federal crop insurance is available for about 60 different crops, although not all insurable crops are covered in every county. With the amendments to the Federal Crop Insurance Act made by the Federal Crop Insurance Reform Act of 1994, USDA is authorized to offer basically "free" catastrophic (CAT) coverage to producers who grow an insurable crop. Farmers must sign a waiver foregoing any federal disaster assistance if they decline CAT coverage. For an additional premium, farmers can buy additional coverage beyond the CAT level. Crops for which insurance is not available are protected under the Noninsured Assistance Program (NAP). Federal crop insurance is sold and serviced through private insurance companies. A portion of the premium is subsidized by the federal government, as well as the administrative and operating expenses of the private companies. The Federal Crop Insurance Corporation reinsures the companies by absorbing the losses of the program when indemnities exceed total premiums. Several revenue insurance products are available on major crops as a form of additional coverage.

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