What Is Crop-Hail Insurance?

Crop-hail insurance is a type of insurance that provides coverage for damage and destruction by hail and fire. Purchased by farmers, it is designed to protect agricultural products while they are still in the field and have yet to be harvested.

Crop-hail insurance protects the livelihood of farmers, who are often at the mercy of sudden weather events. Hail is singled out because it has the unique ability to totally destroy a significant part of a planted field while leaving the rest undamaged.

Key Takeaways

  • Crop-hail insurance is a type of private insurance that provides coverage for agricultural products destroyed or damaged by hail and fire.
  • Sold on an acre-by-acre basis, crop-hail insurance reimburses the farmer for the value of the products lost while in the field.
  • Crop-hail insurance is not to be confused with Multiple Peril Crop Insurance (MPCI), which is federally subsidized coverage against disease, natural disasters, and changes in commodity prices.

How Crop-Hail Insurance Works

According to the United States Department of Agriculture Risk Management Agency, hail typically causes 6% of all crop losses in any given year. But a crop-hail policy goes beyond simply protecting against the physical damages of hail. It also routinely covers fire. And, depending on the crop and the region of the country, this type of policy may also provide coverage for loss caused by lightning, wind, vandalism, and malicious mischief. However, these policies will never cover other weather-related risks such as sudden frost, drought, or excess moisture. Nor does crop-hail insurance cover the risk of changes in the prices of crops (see the section on crop insurance, below).

With a crop-hail policy, you first select a dollar amount of coverage. Then, you can select options with different deductibles to allow you to partially self-insure for lower premium costs. Coverage is provided on an acre-by-acre basis, so that damage that occurs on only part of your land may be eligible for payment when the rest of the field remains unaffected.

Farmers can purchase crop-hail insurance at any time during the growing season.

Being sold on an acre-by-acre basis means that a farmer does not have to purchase a policy for an entire farm. This allows the farmer to concentrate on at-risk areas. Because the policy is purchased for specific acres, its coverage cannot be extended or transferred to another area once it is finalized, however.

The policy insures up to the expected value of the crop covered under the policy, provided that damage to the crops is caused by applicable events. The expected value is calculated on a dollar-per-acre basis, with this value chosen by the farmer before completing the policy purchase.

Crop-Hail Insurance vs. Crop Insurance

Crop-hail insurance is not to be confused with crop insurance, though the two sound highly similar.

In the United States, farmers can purchase crop insurance from the Federal Crop Insurance Corporation (FCIC), a government program. This type of policy, which is officially known as Multiple Peril Crop Insurance (MPCI), generally covers losses due to other natural causes, including drought and disease. It can also cover changes in the price of farm commodities. Although the policies are written and administered by private insurers, the FCIC sets the rates and subsidizes the premiums.

In contrast, crop-hail insurance is a type of private insurance; it is not offered as part of a federal insurance program. This type of policy covers a loss caused by a specific event, just as flood insurance protects against damages caused by floods. Farmers can have both MPCI and crop-hail insurance policies, as they cover different types of losses.

$1M

Amount in premiums written for private crop insurance in 2018

Special Considerations for Crop-Hail Insurance

Farmers operating in areas that are prone to hailstorms often find themselves subject to other types of weather-related risks, such as wind or sudden frosts. Protection from these types of events may often be purchased as crop-hail policy add-ons if the farmer doesn't wish to purchase MPCI. Some policies may also allow farmers to purchase coverage from theft.