Harvest-time yield assessments dictate insurance indemnities

What is in this article?:

• Multiple peril crop insurance compares final production levels to a guarantee level determined by historical yield averages.

• There may be a complete loss on part of the insurance unit, but if the production or revenue for the entire unit is greater than the coverage level, there is no insurance indemnity.

Farmers with corn or other crops damaged by this summer's thunderstorms or dry weather will have to wait until harvest to know whether they will qualify for crop insurance indemnity payments.

Multiple peril crop insurance compares final production levels to a guarantee level determined by historical yield averages. So, whether growers chose individual farm or county-based policies, Purdue Extension agricultural economist George Patrick said it's impossible to know if an indemnity is due until this year's yields or revenues are known.

"For multiple peril crop insurance, it is the yield or revenue actually obtained relative to the coverage level that determines whether there is a loss for insurance purposes," he said.

"There may be a complete loss on part of the insurance unit, but if the production or revenue for the entire unit is greater than the coverage level, there is no insurance indemnity."

For example, if a farm is insured at a guaranteed level of 150 bushels of corn per acre and a disaster happens, but at harvest the yield still averages 150 bushels per acre, there would be no payment. An indemnity would not be triggered until the harvest yield average fell below150 bushels per acre.

Payments also depend on the type of insurance units farmers have selected.

Basic units cover individual farms and crop insurance payments are determined based on the individual farm's yields compared with the coverage level.

With optional units, growers can insure multiple farms either as one unit or as multiple, separate units. When individual units are selected, payments are determined by the yield and production history of each individual farm.

If multiple farms are insured as one unit, the combined harvest yield average of all of the farms will be compared with the guaranteed coverage level.

Some producers have insured using the county-based group yield or revenue coverage. In this system, growers with damaged fields may not receive an indemnity payment if the remainder of the county shows average yields.

Conversely, growers with high-yielding crops could still receive an indemnity if the rest of the county had below-average yields.

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