Wallaces Farmer

Crop insurance coverage in times of drought

Keep checking your fields, and stay in touch with your crop insurance agent.

Rod Swoboda

August 5, 2020

5 Min Read
Corn stalks and ears of corn
TAKING A TOLL: You can estimate potential corn yields by doing ear counts and kernel counts, and measuring ear length. Paul Kassel

In 2020, some Iowa farmers are suffering the extremes of drought. Losses due to drought are an insurable loss under multiple-peril crop insurance. Due to drought conditions, especially in western Iowa, crop insurance claims are expected to be large. These losses will likely result from both corn and soybean yield declines, in addition to a drop in the harvest prices used to calculate indemnity payments. 

Until you harvest those crops, you don’t know what your crop insurance claim will be. “But now is the time to start checking your fields, especially cornfields,” says Steve Johnson, Iowa State University Extension farm management specialist. “In some fields, even here in central Iowa where it’s dry, we are seeing ears with tip-back of kernels. Final yields won’t be known until the crops are harvested. It’s still important to keep good harvest records, and stay in touch with your crop insurance agent.”

Get out into your fields to estimate potential yield loss. Do some ear counts, measure ear length and count the number of kernels per ear. In the driest areas of Iowa, you are probably going to see ears that don’t have all the kernels developed. Especially on the lighter soils, crop prospects are declining significantly.

Frequently asked questions and answers

Iowa State University Extension is conducting 10 drought meetings in west-central and central Iowa this week. One of the topics addressed is crop insurance. Here are some frequently asked questions and answers provided by ISU’s Johnson:

How many of Iowa’s corn and soybean acres are covered by crop insurance? Iowa farmers planted 23.4 million acres of corn and soybeans in 2020. Approximately 90% of those acres have been insured using Revenue Protection (RP) multiple-peril crop insurance. These insurance policies can guarantee various levels of a percentage of the farm’s average yield times the higher of the projected prices (average December corn and November soybean futures prices in month of February) or the harvest price (average futures prices during October). The projected prices (futures average prices in February 2020) were $3.88 per bushel for corn and $9.17 per bushel for soybeans, respectively. Most farm operators, then, have a guarantee of their Actual Production History (APH), from 65% to 85% level of coverage. 

What should an insured farmer do once a crop loss is recognized? Notify your insurance agent within 72 hours of the discovery of damage, but not later than 15 days after the end of the insurance period. A notice of loss can be made by phone, in writing or in person. Although drought loss is not immediate, farmers should contact their agent as soon as they feel a loss is present.

Continue to care for the crop using good farming practices, and protect it from further damage, if possible.

Get permission from the insurance company, also referred to as your Approved Insurance Provider (AIP), before destroying or putting any crop to an alternative use.

Who will appraise crops and assess the loss? The crop insurance company will assign an adjuster to appraise the crop and assess the loss. The insured farmer must maintain the crop until the appraisal is complete. If the company can’t make an accurate appraisal, or the farmer disagrees with the appraisal, the company can have the farmer leave representative crop sample areas, also referred to as “check strips.”

These check strips are to be maintained — including normal spraying if economically justified — until the company conducts a final inspection. Failure to maintain these check strips could result in a determination that the cause of loss isn’t covered, and therefore, no claims payment to the producer.

Once appraised, the crop can be released by the company to be destroyed — through tillage, shredding, or chemical means; or used as silage or feed

Once released, may I harvest my corn as silage for feed? Check with your crop insurance company. In a county where corn can be insured as grain only, the corn will be released or harvested as silage, or sold as feed. Any grain will be counted as production for your claim. In a county where corn can be insured as silage, the harvested silage will be counted as production.

What is the difference among insurance units? Many farmers have chosen to insure their crops using enterprise units so that they might pay less expensive insurance premiums. Under enterprise units, losses are calculated by crop by county. Therefore, all the corn planted by a farmer is a given county would be added together to determine a loss. If a farmer has chosen optional units, then losses are calculated by crop by field unit. Premiums are typically higher if choosing optional units, but a good yield on one field doesn’t cancel out the loss on another field.

When will farmers be receiving indemnity payments for their crop insurance losses? Adjusters will be busy with the increase in crop insurance loss claims in western Iowa this fall. As soon as you are finished harvesting, notify your insurance agent and an adjuster will be assigned to you. Insurance companies can’t defer payments to the next tax year, but claims adjusted late in the year may not be paid out until the following year.

What is the maximum price that the harvesttime indemnity price (average October futures price) can reach? The maximum harvest indemnity price values for 2020 are twice of the projected price; or $7.76 per bushel for corn and $18.34 per bushel for soybeans, respectively. 

Can indemnity payments for drought be deferred for income tax purposes until 2020? Taxpayers using the cash method of accounting claim the income in the year they receive the payment. The insurance company will send the insured a 1099 form showing the amount and tax year to report the income.

Farmers, if they are using the cash method of accounting for reporting taxes, can elect to defer crop insurance payments if the loss is due to yield loss and they normally sell more than 50% of their crop the year following harvest. They can’t defer any loss that is due to price loss. Farmers using the accrual method of accounting for reporting taxes cannot defer crop insurance payments. 

Will I be asked to provide proof of my bushels this year for crop insurance verification? All multiple-peril crop insurance users are subject to production verification on a random basis. If a claim that exceeds $200,000 is filed for an individual crop and policy, verification of production is automatically required by regulation. This also requires a three-year audit.




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