What is 'Crop-Hail Insurance'
Crop-hail insurance is a type of insurance that insures against crop damage caused by hail, as well as damage caused to crops from fires. Crop-hail insurance is purchased by farmers, and is designed to protect crops while they are still in the field and have yet to be harvested.
BREAKING DOWN 'Crop-Hail Insurance'
Crop-hail insurance protects the livelihood of farmers, who are often at the mercy of the weather. Sudden events, such as a winter storm or a fire, can wipe out a harvest. In the United States, farmers can purchase crop insurance from Federal Crop Insurance Corporation (FCIC), a government program. This type of policy is called Multiple Peril Crop Insurance (MPCI), and generally covers losses due to changes in the price of farm commodities.
Crop-hail insurance is a type of private insurance and 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.
How Crop-Hail Insurance Works
According to the United States Department of Agriculture Risk Management Agency, hail typically comprises six percent of all crop losses in any given year. But a crop-hail policy goes beyond simply protecting against the physical damages of hail. In addition to fire, 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 like frost, drought or excess moisture, and it will not cover price risk (which is covered by MPCI).
With a crop-hail policy, you’ll 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 farm may be eligible for payment when the rest of the field remains unaffected.
This type of insurance is sold on an acre-by-acre basis, meaning that a farmer does not have to purchase a policy for an entire farm. This allows the farmer to cover more at-risk areas. Because the policy is purchased for a specific acre it cannot be moved to cover another area once it is finalized.
The policy insures up to the expected value of the crop covered under the policy, provided that damage to the crops is caused by events that are considered covered. The expected value is calculated on a dollar per acre basis, with this value chosen by the farmer leading up to the policy purchase.
Farmers may also find they are operating in areas that are prone to other types of weather-related risks, such as wind or sudden frosts. Protection from these types of events may often be purchased as policy add-ons. Some policies may also allow farmers to purchase coverage from theft.