Did you know there are different crop insurance levels you can purchase?
In this post, we will learn more about the different coverage levels and go over common questions about coverage levels.
Question #1: What is coverage level in crop insurance?
Insurance policies offer various coverage levels for yield and revenue ranging from 50% to 85% in 5% increments. Farmers can also choose how to split their insurable acreage according to the basic unit, optional unit, and enterprise unit for yield and revenue insurance.
Coverage Levels and Premium Subsidiaries
Margin Protection provides coverage based on an expected margin for each applicable crop, type, and practice. Expected Margin = Expected Revenue – Expected Costs, where: Trigger Margin = Expected Margin – Deductible, where the deductible is 1.00 minus the coverage level multiplied by the expected revenue.
Expected revenue (per acre) is the expected county yield multiplied by a projected commodity price; and
Expected cost (per acre) is the dollar amount determined by multiplying the quantity of each allowed input by the input’s projected price.
Question #2: What is margin protection? NEW in 2024!
What it is:
Margin Protection provides coverage against an unexpected decrease in your operating margin (revenue less input costs). Margin Protection is area-based, using county-level estimates of average revenue and input costs to establish the amount of coverage and indemnity payments. Because Margin Protection is area-based (average for a county), it may not reflect your experience. For example, payment may be made when the harvest margin for the county is lower than the trigger margin due to a decrease in revenue and an increase in input costs. Margin Protection will cover a portion of that shortfall.
Question #3: What is the highest level of protection available under a federal crop insurance policy?
Coverage levels are offered from 70 to 95%. A higher level of coverage will have a higher premium rate. You may also purchase Margin Protection with the Harvest Price Option (MP-HPO). Under MP-HPO, if the harvest price exceeds the projected cost, the expected revenue for setting trigger margins is reset based on the harvest price.
More Information
For more information visit the USDA Site regarding Margin Protection and coverage levels here.
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