The past few years our family farm has taken 80% Revenue Protection (RP) Federal Crop Insurance from the Rain & Hail Company. We have also taken the Enterprise Option to help make the premium less expensive with the Production Hail endorsement included as well.
This year as you probably know the Production Hail Option has gotten more expensive, increasing from around 20$ per acre for us to 45$ per acre. Because of this increase we are electing to take an endorsement called Companion Plan (CP2+) with the wind and extra harvest endorsements to replace the Production Hail Option. The cost of the CP2+ is 7.80$ per 100$ insured. Using that math, 300$ of CP2+ is 23.40$ of premium which is close to the old cost of the Production Hail Option.
In our area, we seem to get a wind event most years BUT we haven’t had an RP claim in quite a few years with the low spring prices that have been established.
We have also made the decision to drop from 80% Revenue Protection (RP) to the 70% RP level. Doing this will save us 6$ per acre that I can put towards another 100$ of CP2+ option coverage. The CP2+ caps at 450$; we will be at 400$ level.
For example, on a 200 bushel APH at 80% with our 3.88$ Spring price we have 620.80$ of coverage. Add on 300$ of CP2+ you get to 920.80$. When we drop to 70% of RP, we are at 543.20$ of coverage. When you add on 400$ of CP2+ you are at 943.20$. We increased total coverage by 22.40$ for about 1.80$ of premium, as well as moving the coverage to an area (wind) that we historically use more than our RP.
The risk here is that if we have an RP claim I have lowered my coverage by 10%. At a 3.88$ Spring price I just don’t see much of a chance of receiving an RP payment happening. If we have a drought like 2012 then the fall price option will most likely increase and will come into play. In 2012, we were coming out of 2 dry years, this year our moisture profile is full. This makes me feel optimistic about our yield potential. In this tough economic environment, I research to get the best bang for my buck possible. I feel these crop insurance selections are the best decisions for our farm. I believe that other operators need to make their own decisions based on their premiums, APHs, and weather history and make choices that are best for their farms.
The following is a spreadsheet that compares a couple of different hail plans. The first is a flat 5% deductible plan, the second is a 0% deductible plan and the last a CP2+ which is a 0% deductible plan from 0-10% loss and anything over a 10% loss has a 5% deductible then multiplied by 2. Rates vary by state and county. A sample rate is there to compare the difference in price per $100 of coverage.
Hail Loss Comparison