Individual plans are based upon the insured’s production and for some coverage, revenue history.
Actual Production History (APH)
The APH plan of insurance provides the producer protection against a loss of production due to nearly all unavoidable, natural occurring events. For most crops, that includes drought, excess moisture, cold and frost, wind, flood and unavoidable damage from insects and disease. This plan of insurance guarantees the producer a yield based on their production history, which is why it is called the APH plan.
The guarantee is calculated by multiplying their average yield by the level of coverage elected for the producer’s share of the crop. An indemnity may be due if the production (harvested and appraised) is less than the guaranteed amount.
The pricing for most crops insured under the APH plan of insurance is established by RMA.
Many of our perennial crops such as apples, peaches and grapes fall under the APH plan, as well as crops that do not have revenue coverage available. Some grain crops such as oats, rye, flax and buckwheat are also covered under the APH plan of insurance.
Yield Protection (YP)
The Yield Protection plan is very similar to the APH plan, but is only available on crops that are eligible for Revenue Protection. The Yield Protection plan of insurance provides protection against a loss of production.
It works the same as the APH plan but instead of using a price election established by RMA, the price is established according to the applicable board of trade/exchange as defined in the policy document called the Commodity Exchange Price Provisions (CEPP). The price that is used is called the Projected Price. The Projected Price is used to calculate the guarantee, premium and loss payments.
The guarantee is established by multiplying the average yield by the coverage level and by the Projected Price, and an indemnity may be due when the value of the production to count is less than the yield protection guarantee plan.
Revenue Protection (RP)
The Revenue Protection Plan provides protection against a loss of revenue caused by price increase or decrease, loss of production, or a combination of both. It is available for the same crops where YP coverage is available.
The RP plan uses the Commodity Exchange Price Provisions (CEPP) to establish the pricing, however it is a different from the YP plan since it uses two different price discovery periods. The projected price is determined in the same manner as YP and is used to calculate the premium, replant and Prevented Planting payments. The harvest price is released near harvest time. This price is used to calculate an indemnity.
The revenue protection guarantee is established by: Average Yield X Coverage Level X Insured’s Share Percentage X Projected Price.
An indemnity may be due when the calculated revenue (insured’s production X harvest price) is less than the revenue protection guarantee for the crop acreage.
Note: When the harvest price is released, if it is greater than the projected price, the revenue guarantee will be recalculated using the harvest price as well.
While the revenue guarantee is increased, the insured is not charged any additional premium for this increase. If the harvest price is less than the projected price, the policy guarantee remains at the projected price.
Revenue Protection with Harvest Price Exclusion (HP-HPE)
The Revenue Protection Plan with Harvest Exclusion Plan (RP-HPE) is similar to the Revenue Protection (RP) plan, however it provides coverage against loss of revenue caused by price decrease, low yields or a combination of both – the price increase is not covered because the guarantee is not adjusted up by the harvest price for this plan.
The projected price is used to determine the revenue guarantee, the premium and any replant or prevented planting payment. The harvest price is only used to value the production to count in a production or revenue loss. It is not used to recalculate the guarantee if there is an increase.
The producer does not receive the benefit of price movement with the RP-HPE plan.
Dollar Plans of Insurance
Dollar Plans of Insurance are available for some commodities. Dollar Plans of Insurance are usually insured in dollar per acre or some other measurement applicable to the crop. The maximum dollar amount per acre or other measurement is established and published by RMA. The insured chooses a percentage of the maximum dollar amount to establish the guarantee. A loss occurs when the dollar to count per acre falls below the dollar amount of insurance.
Actual Revenue History (ARH)
The Actual Revenue History is based upon the insured’s revenue history for the crop insured. The guarantee is calculated based upon the insured’s production and revenue history. A loss occurs when the revenue to count for the current year falls below the insured’s guaranteed revenue.