Understand Insurance Policy Provisions

As the deadline for purchasing crop insurance looms, producers need to be aware of their options and what they are really buying before they make any decisions.

Jim Mintert, director of the Purdue University Center for Commercial Agriculture, said that with the March 15 deadline for purchasing crop insurance only a week away, producers need to make sure they are getting the correct coverage their operation needs, and at a fair price.

“Producers need to get adequate protection at a reasonable cost,” he said.

Despite lower commodity prices this year, Mintert advises producers not to reduce their amount of crop coverage.

“Crop insurance is an important element in crop producers’ risk management strategy. Opting for a lower coverage level will expose them to a larger loss, and in an environment where working capital has already declined sharply the last several year, a larger loss could pull their working capital down to a dangerously low level,” he said.

Mintert said producers who are not using enterprise units, which is the addition of all basic units in one county for a single crop, may find that switching from basic units to enterprise units will substantially lower their crop insurance premiums without reducing their coverage level.

The director also cautioned crop producers from only buying optional unit coverage, which is division of basic units based on township sections where the farm is located.

“Optional units allow you to insure farms individually. Each farm and crop are insured separately. For example, if you farm three different farms in a county, each farm has its own coverage. This is more expensive than the basic unit coverage. Essentially, this is because the probability of experiencing a loss increases when you insure each farm separately,” Mintert said.

Source: Ashley Langreck, Agrinews

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