What crop insurance does and who needs it

Crop insurance protects farmers against financial loss when weather, pests, disease, or market conditions damage or destroy their crops. The federal government subsidizes most crop insurance policies sold in the United States, which means the farmer pays a portion of the premium and the government covers the rest. When an insured loss occurs — a drought that kills corn, hail that strips wheat, or flooding that ruins soybeans — the insurance company pays the farmer a predetermined amount based on the policy terms.

You need crop insurance if you depend on crop income and cannot absorb a total loss in a single season. Most farmers who borrow money to plant also need it: lenders require crop insurance as a condition of the loan. Even farmers who own their land outright often buy it because one bad year can wipe out years of profit. Crop insurance is not required by law, but it is practically required by the economics of farming.

The federal crop insurance program is run by the Risk Management Agency (RMA), which is part of the U.S. Department of Agriculture. RMA does not sell insurance directly. Instead, it sets the rules and subsidies, and private insurance companies — called "approved insurers" — sell the actual policies to farmers. Your local crop insurance agent works for one of these private companies, not for the government.

Key Takeaways

  • Crop insurance is sold by private companies but subsidized by the federal government, so your out-of-pocket cost is lower than the full premium.
  • The two main types are yield insurance (pays if your crop produces less than expected) and revenue insurance (pays if yield or price drops).
  • You choose a coverage level — typically 50% to 85% of your expected yield or revenue — and pay a premium based on that choice and your crop history.
  • You must buy insurance before the sales closing date for your crop, which varies by crop and region and is set by the USDA each year.
  • When a loss occurs, you file a claim with your insurance agent, and an adjuster inspects the crop to verify the damage and calculate the payout.

Yield insurance versus revenue insurance

Yield insurance pays you when your crop produces less than your historical average yield — the number of bushels per acre you normally harvest. If you normally harvest 150 bushels of corn per acre and a drought cuts that to 100 bushels, yield insurance covers the shortfall. The payout depends on your coverage level (the percentage of your yield you insured), the price set by the insurance company at the time you bought the policy, and how much your actual yield fell short.

Revenue insurance covers both yield loss and price loss. It protects you if your crop produces less than normal, or if the market price of your crop drops, or both. Revenue insurance is more expensive than yield insurance because it covers more risk, but it also protects you against price swings you cannot control. A farmer who grows soybeans might see the yield hold steady but the price per bushel fall 20% — revenue insurance would cover that loss, but yield insurance would not.

Most farmers choose one or the other, not both. Yield insurance is simpler and cheaper. Revenue insurance makes sense if you sell into a volatile market or if you want broader protection. Your crop insurance agent can show you the premium difference for your specific situation and help you decide which fits your operation.

How coverage levels and premiums work

When you buy a crop insurance policy, you choose a coverage level — the percentage of your expected yield or revenue that the insurance will cover if a loss occurs. Coverage levels typically range from 50% to 85%, though some policies go higher. A higher coverage level means you are insured against a larger loss, but you pay a higher premium.

Your premium is calculated using several factors: your coverage level, your crop type, your location, your crop history (called your "actual production history" or APH), and the price of the crop at the time you buy the policy. A farmer with a strong yield history in a low-risk county will pay less than a farmer with a spotty history in a high-risk county, even if they grow the same crop. The federal government then pays a subsidy — typically 38% to 80% of the premium, depending on your coverage level — and you pay the rest.

The premium is due before the sales closing date for your crop. Sales closing dates vary by crop and region. For example, corn in Iowa might have a March 15 closing date, while spring wheat in Montana might close on March 31. If you miss the important date, you cannot buy insurance for that crop year. Your insurance agent will remind you of the important date, but it is your responsibility to know it and act in time.

Understanding actual production history and how it affects your rate

Your actual production history (APH) is the record of yields you have harvested on your farm over the past years. The RMA requires at least four years of yield records to establish an APH. If you have fewer than four years — because you are new to farming, or you just started growing a particular crop — the RMA uses a county average yield instead, which is usually higher than a new farmer's actual yield. This means your premium will be lower, but your coverage will be based on an inflated number, so your payout if a loss occurs will also be lower.

Once you have four years of records, your APH is calculated as the average of your yields over those years. The insurance company uses your APH to set your "expected yield" — the number they assume you will produce in the coming year. If your APH is 150 bushels per acre and you choose 75% coverage, the insurance company assumes you will harvest 150 bushels and covers you for 112.5 bushels. If you actually harvest only 90 bushels, the loss is 22.5 bushels, and you receive a payout based on that shortfall and the price in the policy.

Your APH improves over time as you add better years to the record and older, worse years drop off. Keeping accurate yield records — from your combine monitor, your elevator receipts, or your crop consultant — is essential. If you cannot document your yields, the insurance company will use the county average, which may not reflect your actual farming ability.

What losses are covered and what are not

Crop insurance covers losses from weather (drought, hail, flood, freeze, wind), pests (insects, disease), and in some policies, price declines. It does not cover losses from poor farming practices, neglect, or failure to follow label directions on pesticides or fertilizers. If you do not irrigate when irrigation is normal in your area, or if you plant too late and miss the optimal window, the insurance company may deny your claim or reduce your payout.

Most policies require you to follow "good farming practices" — a term the insurance company defines in your policy. This usually means planting on time, using approved varieties, controlling weeds and pests, and harvesting in a timely manner. If an adjuster finds that you did not follow these practices and it contributed to your loss, your claim may be reduced or denied.

Losses from war, civil unrest, or nuclear hazard are typically excluded. Losses from market price declines alone are covered only if you have revenue insurance, not yield insurance. Some policies offer coverage for specific perils like hail or fire, but these are less common than the broad "all-risk" policies that cover most causes of loss.

The claims process: what happens when a loss occurs

When you experience a crop loss, contact your crop insurance agent as soon as possible. The agent will file a notice of loss with the insurance company. You must file this notice within a set time frame — usually 72 hours to 30 days, depending on your policy — or you may lose your right to a claim. Do not harvest or destroy the damaged crop until the insurance company's adjuster has inspected it.

An adjuster will visit your farm to assess the damage. For yield losses, the adjuster will measure the crop in the field, count plants, weigh grain samples, or use other methods to estimate what you will harvest. For revenue losses, the adjuster will also note the market price at the time of loss. The adjuster prepares a report, and the insurance company uses that report to calculate your payout.

The payout is based on your coverage level, your expected yield or revenue, the actual yield or revenue you achieved, and the price in your policy. If you chose 75% coverage on corn with an expected yield of 150 bushels and a price of $5 per bushel, your coverage is 112.5 bushels at $5, or $562.50 per acre. If you harvested only 90 bushels, your loss is 22.5 bushels, and your payout is 22.5 × $5 = $112.50 per acre (before any deductible). The insurance company typically pays within 30 to 60 days of claim approval.

Where to buy crop insurance and how to get your free guide

Crop insurance is sold only by approved private insurance companies. You cannot buy it directly from the USDA or RMA. To find an agent, search the RMA website for "crop insurance agents" in your state, or ask your local Farm Service Agency (FSA) office, your lender, or neighboring farmers for a recommendation. Most agents represent one insurance company, so if you want to compare prices, you may need to contact agents from different companies.

When you contact an agent, bring your farm records: your yield history for the past four to ten years, your acreage by crop, your previous insurance policies if you have them, and information about your operation (irrigated or dryland, soil type, planting date). The agent will use this information to quote you a premium and explain your options. Many agents can bind your policy when ready, but you have until the sales closing date to finalize it.

If you are a beginning farmer or have limited resources, ask your agent about the Beginning Farmer and Rancher Program, which offers reduced premiums for farmers in their first five years. Some states also offer additional subsidies or programs for specific crops or regions. Your FSA office can tell you what programs are available in your area.

Frequently Asked Questions

What if I do not have four years of yield records?

The insurance company will use your county's average yield instead of your actual history. This is usually higher than a new farmer's real yield, so your premium will be lower but your coverage will be based on an inflated number. Once you have four years of records, your APH will be recalculated and your premium may change.

Can I change my coverage level or crop after I buy insurance?

No, not during the crop year. Your coverage level and crop are locked in at the time you buy the policy. You can change them the following year when you renew. If your situation changes dramatically — you sell land, or you decide to plant a different crop — talk to your agent about your options for next year.

What happens if I sell my farm or lease it to someone else?

Crop insurance is tied to the land and the person who owns or controls the farming operation. If you sell the farm, the new owner will need to buy their own insurance. If you lease the land to a tenant, the tenant typically buys the insurance and receives the payout if a loss occurs, because they are the one taking the risk and making the farming decisions.

Does crop insurance cover organic crops?

Yes, but the premium may be different. Organic crops are insured at their organic price, not the conventional price, which is usually higher. You will need to provide documentation that your land is certified organic or in transition. Some insurance companies offer policies specifically designed for organic operations.

What if the insurance company denies my claim?

You have the right to appeal. Contact your agent and ask for a written explanation of the denial. If you disagree, you can request a review by the insurance company's management, or you can file a complaint with your state's insurance commissioner. The RMA also has a process for disputes, and you can contact your state's FSA office for guidance on how to proceed.