Types of Crop Insurance Policies Explained
Crop insurance is a type of insurance policy that provides coverage to farmers in case of loss of crops due to natural calamities such as floods, drought, pest attacks, etc. These losses can have a significant impact on the farmer's livelihood if not covered adequately.
There are various types of crop insurance policies available in the market. In this article, we will discuss in detail the different types of crop insurance policies available and how they work.
1. Yield Protection
Yield Protection is a crop insurance policy that provides protection against a loss in yield due to natural calamities. This policy is made available for most crops, and the coverage level is set at a percentage of the expected yield.
The premium for this policy is calculated based on the insured crop's expected yield, coverage level, and current market prices. If the actual yield falls below the coverage level, the insurance company will pay out the difference.
2. Revenue Protection
Revenue Protection is a crop insurance policy that combines yield protection with price protection. This policy protects against loss in yield due to natural calamities and loss in revenue due to changes in market prices.
Under this policy, the insured's coverage level is set as a percentage of the expected revenue. The premium for this policy is calculated based on the insured crop's expected yield, coverage level, and current market prices.
If the actual yield falls below the coverage level, the insurance company will pay out the difference. If the market price drops below the expected revenue, the insurance company will also pay out the difference.
3. Actual Production History (APH)
Actual Production History (APH) is a crop insurance policy that uses the insured's historical yield data to determine coverage. This policy provides protection against loss due to natural calamities that result in a yield loss below the insured's average yield.
Under this policy, the farmer's expected yield is calculated using the average yield from the past four to ten years, depending on the crop. The insured can choose their coverage level, which is a percentage of their expected yield.
The premium for this policy is calculated based on the insured crop's historical yield data, coverage level, and current market prices. If the actual yield falls below the insured's expected yield, the insurance company will pay out the difference.
4. Crop Revenue Coverage (CRC)
Crop Revenue Coverage is a crop insurance policy that provides protection against a loss in revenue due to natural calamities that result in a yield loss and a drop in market prices. This policy is available for major crops such as corn, wheat, barley, soybeans, cotton, etc.
Under this policy, the insured's expected revenue is calculated using the insured's expected yield and current market prices. The coverage level is set as a percentage of the expected revenue. The premium for this policy is calculated based on the insured's expected revenue, coverage level, and current market prices.
If the actual revenue falls below the insured's expected revenue, the insurance company will pay out the difference.
In conclusion, crop insurance policies provide protection to farmers against loss due to natural calamities. Farmers should choose a policy based on their crop type, historical yield data, market prices, and coverage level. It is essential to understand the policy's terms and conditions before purchasing to ensure that the farmer is adequately protected.