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Don't Fret About Crop Insurance PaymentsDon't Fret About Crop Insurance Payments

Claims will get paid, it's just a question of when.

Tom Bechman 1

September 13, 2012

2 Min Read

The first question farmers ask Purdue Extension Economist Chris Hurt these days is if crop insurance companies will pay off or go broke. He reminds these farmers that this is exactly the type of year that federally-backed crop insurance was designed to cover.

The final guarantor on crop insurance is the U.S. Treasury. The Risk Management Agency provides guidelines for private crop insurance companies to follow.


Based on payout ratios in 1988, farmers could collect about $30 million in crop insurance for this year’s crop. However, if you subtract roughly $12 billion in insurance payments paid in, the gap will be about $18 billion. Hurt expects companies will be asked to cover $4 to $5 billion, and the government will pick up the tab for the rest.

It could reopen debates about whether the government should back crop insurance among the urban public. But Hurt is confident farmers with crop insurance will get paid.

When the government first initiated federally-backed crop insurance, the logic offered by Congress was that if farmers bought crop insurance, they wouldn’t need extra money that wasn’t budgeted for during natural disasters. It should also be possible to wean them off of other USDA payments, the logic went.

That very debate was and is going on during the 2012 farm bill debate. So far Congress has not passed a farm bill.

Hurt is not the only one reassuring farmers that if they have crop insurance, they will get paid. It’s estimated that about 75% of the corn acres and 65% of the soybean acres in Indiana are covered by some form of crop insurance. There are varying types and levels of coverage that farmers carry, depending on how much they were willing to pay.

Officials from Diversified Services, an Illinois-based company that sells federally-backed crop insurance, assured farmers at meetings last month that whether or not they would get paid was not an issue. How long it takes to process claims may be a different matter, since there will be so many claims to process.  

About the Author(s)

Tom Bechman 1

Editor, Indiana Prairie Farm

Tom Bechman is an important cog in the Farm Progress machinery. In addition to serving as editor of Indiana Prairie Farmer, Tom is nationally known for his coverage of Midwest agronomy, conservation, no-till farming, farm management, farm safety, high-tech farming and personal property tax relief. His byline appears monthly in many of the 18 state and regional farm magazines published by Farm Progress.

"I consider it my responsibility and opportunity as a farm magazine editor to supply useful information that will help today's farm families survive and thrive," the veteran editor says.

Tom graduated from Whiteland (Ind.) High School, earned his B.S. in animal science and agricultural education from Purdue University in 1975 and an M.S. in dairy nutrition two years later. He first joined the magazine as a field editor in 1981 after four years as a vocational agriculture teacher.

Tom enjoys interacting with farm families, university specialists and industry leaders, gathering and sifting through loads of information available in agriculture today. "Whenever I find a new idea or a new thought that could either improve someone's life or their income, I consider it a personal challenge to discover how to present it in the most useful form, " he says.

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