Farms are a vital part of the economy. They provide the food and natural textiles on which the national supply chain is built. However, growing crops out of the ground is one of the most potentially unstable business models from year to year. The weather and the market can both be fickle when it comes to ensuring a profitable harvest.
Crop insurance exists to ensure that farmers are able to maintain a reliable cash flow each year even when changing conditions can put your entire crop profitability at risk. One of the most recognizable risks to your crops is a hailstorm. Hail can ravage the land, bruising and destroying delicate crops in just one flurry of icy weather. Crop hail insurance is one of several crop insurance coverage types that every farmer, especially Nebraska farmers, should plan for.
Different Types of Crop Insurance
There are several types of crop insurance that can protect your farm as a business to minimize loss when weather or market conditions are not in your favor.
- Yield Protection (YP)
- Protect you from yield loss due to weather, pests, and blight.
- Actual Production History (APH)
- A type of yield protection that uses your past production to determine your insured yield amount.
- Revenue Protection (RP)
- Protects against losses in gross revenue caused by lower yields and/or lower market prices.
- Revenue Protection with Harvest Price Exclusion (RP-HPE)
- Variation of RP that excludes a portion of harvest prices for different coverage levels.
- Crop Revenue Coverage (CRC)
- Protects you when the projected price at planting differs from the price at harvesting.
How Crop Insurance Works
Farmers purchase insurance that protects predicted revenue or yield. If actual revenue or yield falls below the insured threshold, the insurance will pay the difference. In other words, crop insurance pays out if you make less than anticipated (at planting or based on yearly calculations) by the time of harvest. This includes protection against natural phenomena such as droughts, pests, blight, and, of course, hail damage.
The crop insurance policy you choose determines how much is covered and whether the coverage includes natural conditions, market conditions, or both. This is often referred to as revenue vs yield. Natural risks to your crops tend to impact yield. Market risks impact revenue even when your yield is complete and undamaged.
Benefits of Crop Insurance
Crop insurance was designed with the necessity and challenges of the agricultural sector in mind. The right crop insurance policy can provide numerous benefits both to individual farms and to the sector as a whole.
Risk Management
Crop insurance is a practical way to navigate the risks of running a farm. This includes unforeseen weather events and market fluctuations. Farmers don’t have to worry as much about forces outside their control, which allows for continuous farm operation without a roller coaster of profit and loss from year to year.
Financial Security
Crop insurance provides financial security in the face of disasters and changing processes. Farmers can make financial plans like replacing equipment and making upgrades. With the right coverage, annual revenue cannot drop below a threshold level.
Access to Credit
Lenders typically require crop insurance in order to offer a farmer a loan. This means already having crop insurance opens the way to requests for business credit.
Facilitate Farm Upgrades
Lastly, the financial security and the potential for saving on insurance costs have inspired farmers to make sustainable and yield-improving upgrades to farms across the country.
The Crop Insurance You Need
What is the best crop insurance for your Nebraska farm? How can you protect your revenue and yield each year while planning for the risk of unexpected weather and market fluctuations? Northeast Nebraska Insurance can help. Call NE Nebraska Insurance for more information on crop insurance for your farm or ranch.