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Odds Favor Adding Crop-Hail Insurance

Fierce thunderstorms have crossed the nation's heartland with numerous tornadoes, large hail and damaging winds. Now with the corn crop emerging from the ground, farmers who may have not purchased crop-hail as an annual ritual, are thinking "Is this the year to add crop-hail insurance?"

The answer could be a resounding "Yes" for several reasons, explains Steve Griffin, a West Des Moines, Iowa, based crop insurance consultant.

Reasons to consider buying add-on crop hail coverage this year

* "First, we have never had as much crop value vulnerable to hail damage," he points out. "The 15% to 35% deductible on federal crop insurance has never represented more cash. Net returns to a harvested crop are at their highest. With net return, twice to three times average, it could be devastating to a farm's long term future to lose a crop this year more than usual."

* Second, many farmers may have upped their overall multi-peril crop insurance or MPCI coverage, but have also taken the "enterprise" unit discount that cuts MPCI farmer paid premiums approximately 50%. Rather than limiting the deductible to cropland in a single section or basic unit (determined by ownership split), the use of enterprise units potentially exposes such tracts to the full force of a hailstorm while the rest of the unit is untouched. "Protection from spotty loss events like hail is more important with this large pool of uninsured risk (the deductible) of enterprise units," advises Griffin.

* Third, crop insurance companies are providing hail insurance at historically low rates, he says. According to filings made to state insurance departments, crop-hail rates are significantly less than their expected losses based on 60 years of experience. Current crop-hail rates would have to be twice as high as current rates to cover claims and expenses in an "average" year.


Griffin, a quantitative economist himself, says "The 'odds' of coming out ahead with hail insurance this year favors the farmers instead of the insurance companies and that does not even count in the possible continuing effect of this year's beginning turbulent weather."

Griffin thinks crop insurers this year are using such teaser or fire-sale rates on crop-hail coverage in order to gain more multiple peril crop insurance business. Some insurers require farmers to transfer the MPCI policies to the insurer in order for the farmer to buy the insurer's crop-hail insurance coverage.

Sort various crop-hail insurance coverage choices before you decide

There are a number of choices in crop-hail insurance coverage, particularly for those farmers interested in dove-tailing coverage with their multiple peril crop insurance, he explains. Some companions call the products by different names, but traditional "companion" hail offers spot loss, top-down coverage of 25%, 35% and 50% of the expected crop with accelerated payouts. Note the expected crop may be greater than the APH yield so the coverage is not necessarily one minus the APH coverage level (50% to 85%).

"Production Plan" crop-hail offers coverage more precisely tied to the MPCI deductible, but with MPCI units (versus per acre coverage) and less payout if the unit production exceeds the estimated hail losses. Some companies allow coverage for crops expected to produce yields greater than the unit's actual production history by 10% to 20%. Deductibles and qualifying losses also vary by insurer.

In all cases, if this is the year to add crop-hail insurance to your risk management plan, consult a knowledgeable insurance agent to determine the best option and risk management value for you. Remember most crop-hail policies require a 24-hour waiting period before coverage begins so you can not wait until the thunderhead appears on the horizon.

Steve Griffin, AFIS, is a crop insurance consultant and expert witness in crop insurance disputes between farmers and their crop insurance companies and crop insurance companies and RMA. Griffin can be contacted through his website: www.aggiexpert.com and is based in West Des Moines, IA. Griffin has years of experience working in the crop insurance industry and now has his own crop insurance consulting business.


Published by Wallaces Farmer

Avoid This Crop Insurance Mistake!


Be sure to get your name and tax ID number correct when you sign up for crop insurance—or else! The new COMBO policy changes the rules and raises the bar against the applicant in the case of a mistake.

If you've purchased crop insurance, check you policy and paperwork now to make sure your name and Tax ID are correct. If you are still in the process of buying crop insurance (deadline is March 15) make sure you get this information filled out correctly.

This warning and advice comes from Steve Griffin, a crop insurance consultant based in West Des Moines, Iowa. He points out there are a number of changes in the rules governing crop insurance this year. One of the less-publicized changes in the new COMBO policy involves provisions and procedures for correcting mistakes made in submitting the applicant's name (e.g., farmer's name or farming corporation name) and tax identification number on the crop insurance application, transfer, or policy change form. Griffin offers the following explanation and recommendations regarding these new rules.

Crop Insurance: get your name and taxID right, or else!

Previously, an error made in the applicant's name (e.g., using a nickname, missing middle name, middle name used as a first name, an incomplete corporate name, or a misspelling) could be easily corrected if caught before the acreage reporting date after the crop is planted.  A mistake in the tax identification number could also be corrected (the applicant's signature is required) by the applicant before the acreage reporting date.

Both corrections (all other information on the application, except the mailing address, is not correctable) were allowed unless there was evidence of the intentional misrepresentation, a fairly high legal standard that requires proof of intent. The new COMBO policy changes those rules and raises the bar against the applicant. Under the new policy, if the name or tax identification is incorrect the applicant must now prove that the error was "inadvertent". The burden of proof is now on the farmer and the legal standard is less defined.

Farmers would be wise to double check their existing policies that will be renewing or their new policies that the full and complete legal name is on the policy form that exactly matches the SSN or EIN provided. If the applicant's name does not exactly match the reported tax identification number (e.g., social security number (SSN) or employer's identification number (EIN) on file with the Internal Revenue Service, the policy and its coverage can be voided. The penalty may be that the policy coverage will be voided when you really needed it, even if you paid the premium and followed all of the other rules.

Farmers and crop-share landlords have until March 15 to sign up

Farmers and crop-share landlords have until March 15th to signup for federal crop insurance or to make changes to their existing policies. This year's high crop prices, market volatility and potential to lock-in profits is causing many farmers to take high coverage options and revenue plans, even with high sticker-shock premiums that can cost over $100 per acre.


The USDA Risk Management Agency (RMA) has unveiled its COMBO policy that combines the past yield-based and revenue-based policies into a single policy with multiple options.


Bottomline is to bring your IRS documents and/or Social Security card(s) to your agent.

Steve Griffin, AFIS, is a crop insurance consultant and expert witness in crop insurance disputes between farmers and their crop insurance companies and crop insurance companies and RMA. Griffin can be contacted through his website: www.aggiexpert.com and is based in West Des Moines, IA. Griffin has years of experience working in the crop insurance industry and now has his own crop insurance consulting business.


Published by Wallaces Farmer