7 considerations for choosing the best crop insurance in 2016

7 considerations for choosing the best crop insurance in 2016

During the next few weeks, many farm operators will be finalizing crop insurance decisions for the 2016 crop year. March 15 is the deadline to purchase crop insurance for the 2016 crop year. Profit margins for crop production this year are the tightest they have been for several years, which makes the 2016 crop insurance decisions even more critical. Producers have several crop insurance policy options to choose from, including yield protection policies and revenue protection policies, as well as several other group insurance policy options. There are also decisions with using enterprise units versus optional units, and whether or not to take advantage of the trend adjusted APH yields for 2016.

In recent years, a high percentage of crop insurance policies for corn and soybeans in the Upper Midwest have been revenue protection policies, because of the combination of yield and price protection. As of Feb. 8, the 2016 estimated crop prices in the Upper Midwest for yield protection and revenue protection policies was $3.92 per bushel for corn, $8.90 per bushel for soybeans, and $5.18 per bushel for spring wheat. 2016 YP prices and RP base prices will be finalized on March 1.

Here are some considerations when making crop insurance choices for 2016.

Crop insurance premium reductions for 2016.

2016 Crop insurance premiums for most coverage levels of corn and soybeans in the Midwest should be the same, or slightly lower, than comparable 2015 premium levels, due to lower insurance guarantees for 2016, as well as RMA premium adjustments that are based on updated crop insurance actuarial data for several years.

There are a wide variety of crop insurance policies and coverage levels available.

Make sure you are comparing “apples to apples” when comparing crop insurance premium costs for various options or types of crop insurance policies, and recognize the limitations of the various crop insurance products.

View crop insurance decisions from a risk management perspective.

Given the tight profit margins for crop production in 2016, some producers may have a tendency to reduce their crop insurance coverage, in order to save a few dollars per acre. However, a producer must first consider: “How much financial risk can I handle if there are greatly reduced crop yields due to potential drought and weather problems in 2016, and/or lower than expected crop prices?” Revenue protection crop insurance policies serve as an excellent risk management tool for these situations, and 2016 may not be the year to reduce insurance coverage.

In most instances, use the trend adjusted endorsement for 2016.

Many producers in the Upper Midwest have been able to significantly enhance their insurance protection in recent years by utilizing the TA-APH option, with only slightly higher premium costs. Using the TA-APH endorsement is a very good crop insurance strategy for most eligible corn, soybeans, and wheat producers.

Using enterprise units is generally favorable, but know the limitations.

Enterprise units, which combine all acres of a crop in a given county into one crop insurance unit, are generally favorable to optional units, which allow producers to insure crops separately in each township section. Enterprise units usually have significantly lower premium costs compared to optional units for comparable revenue protection policies. However, enterprise units are based on larger coverage areas, and do not necessarily cover losses from isolated storms or crop damage that affect individual farm units, so additional insurance, such as hail insurance, may be required to insure against these type of losses.

Take a good look at the 85% coverage levels, especially when using enterprise units with revenue protection insurance policies. 

Most Midwest corn and soybean producers have been utilizing a minimum of 80% revenue protection coverage with enterprise units in recent years. 2016 may be the time to consider upgrading to the 85% coverage level. In many cases, the 85% coverage level offers considerably more protection, with a modest increase in premium costs. Many producers will be able to guarantee near $600-650 per acre for corn, and near $350-400 per acre for soybeans at the 85% coverage level for 2016, when also utilizing trend-adjusted APH yields.

Where to get more information on 2016 crop insurance alternatives.

A reputable crop insurance agent is the best source of information to find out more details of the various coverage plans, to learn more about the TA-APH yield endorsement, to get premium quotes, and to help finalize 2016 crop insurance decisions.

Following are some very good web sites with crop insurance information :

TAGS: Soybeans Corn
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