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The Basics of Crop Insurance

We all know what insurance is, but not many people discuss crop insurance. In this video, you will learn the basics of what crop insurance is and how it works.

Crop insurance is purchased by agricultural producers, including farmers, ranchers, and others to protect against either the loss of their crops due to natural disasters, or the loss of revenue due to declines in the prices of agricultural commodities. There are two major types of crop insurance: multiple peril crop insurance (MPCI) and crop-hail insurance.

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MPCI covers crop losses, including lower yields, caused by natural events, such as destructive weather (hail, frost, damaging wind), disease, drought, fire, flooding, and insect damage. More than 90 percent of farmers who buy crop insurance opt for MPCI. Both the cost of insurance and the amount an insurer will pay for losses are tied to the value of the specific crop.

In areas of the country where hail is a frequent event, farmers often purchase crop-hail policies to protect high-yielding crops. Crop-hail policies often have a low or even no deductible. Because, unlike drought or blight, hail can completely destroy a portion of crops in one area of a farm but leave other crops undamaged, a hail claim may be less than the amount of the deductible on an MPCI policy.


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