Your MPCI coverage has been set to your desired levels for the crop year. Now it’s time to start farming, or is it? In the high yielding, irrigated fields of central Nebraska, MPCI insurance only covers a portion of the revenue potential for your crop. So now the question is, how do we make up the difference.
The first step is to determine where the majority of the risk of loss is on your farming operation. In an area with primarily irrigated cropland, the risk of loss due to drought is lower than areas without irrigation or limited irrigation. In a non-irrigated or limited irrigation area, we would have explored increasing MPCI levels or adding additional revenue products to our MPCI policy prior to the federal sales closing deadline. In irrigated areas, the most common cause of loss on a crop is hail and wind. Hail and wind policies are highly customizable to meet your needs.
Hail and wind insurance are private products offered by the insurance companies. Every company has their own policies and prices, this is where the competition happens. Some companies offer 0% deductibles that pay out 100% of the policy at 25%, while others may have deductibles that pay out at higher percentages of loss with lower premiums.
The reason that hail and wind insurance is important to many growers is its ability to create additional dollars of coverage to a crop to cover the portion that the MPCI did not cover. Using our previous corn yields from an earlier post, a 250 APH insured at a 70% MPCI level with $5.90 corn provides $1032 of coverage per acre. However, when you calculate the value of that same 250 bushels, that is a value of $1475 per acre. Looking at those numbers, without any additional coverage on top of the MPCI, a grower is self-insuring $443 of the corn crop on every acre.
Are we suggesting a grower cover every bushel of corn on the operation? Not necessarily. We do recommend covering the crop to an amount the grower is comfortable with. When a grower expresses that they need $1250 coverage per acre to sleep at night, that is the number we shoot for in coverage. We then choose a policy that allows us to add roughly $220 of coverage on top of the $1032 provided by the MPCI policy. This would provide the grower with the total acre coverage of $1250.
Every operation is different. Some operations chose to self-insure more and not fully rely on insurance coverage, while others prefer to cover themselves for any loss that may occur. This can be the difference between $200/acre and $500/acre of coverage. The agents at ASA are more than just insurance salespeople. We help our clients analyze the risk on their farm and ensure that they have the correct coverage specific to their operation that also fits their budget.