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Why Some Face Higher Crop Insurance Premiums

High-risk areas may change your cost of buying coverage.

If you raise specialty crops, your local crop insurance agent can likely write you a policy. Premiums and amount of coverage will vary crop to crop. For example, those who raise tomatoes in Indiana or those orchard growers who raise apples can get federal crop insurance.

By the same token, farmers with land in the river bottoms can also get insurance for those areas. But not surprisingly, it's classified as high-risk land, which means higher premiums. "You're likely going to pay a higher price if you're farming land in the river bottoms and want to insure it through federal crop insurance," notes Jim Rink, director of farm and crop insurance fro Indiana Farm Bureau Insurance. "It's just simply considered to be a higher risk, so you're going to pay a higher price."

Jack Wagster, director for Top Land Risk Management, Seymour, says the high-risk question isn't as clear cut as it might seem. It's all based upon special actuarial maps issued by federal crop insurance folk, he notes.

Flood plains in some counties are considered as high risk land, he notes. He runs into that in south-central Indiana. Yet no land in an adjoining county may be considered high-risk if flood plain soils there aren't designated as high-risk areas on the map. While it causes frustration amongst farmers in the counties that are considered high-risk areas, it's federally controlled, not locally controlled, he emphasizes. The frustration comes in because premiums on high-risk areas can be up to or at least nearly double the rates for crop insurance on areas not considered to be high risk.

Companies can apply to have areas declared as non-high risk areas, so that farmers there would get the more beneficial, normal rate. But it's usually a 'year' by 'year' decision process, Wagster notes.

One option you have as a farmer is not choosing to insure high-risk land, Wagster adds. You can exclude those fields from your crop insurance program when you enroll your land each year.

However, that flexibility only goes so far, he adds. While you can exclude high-risk land in a river bottom if you don't want to pay the higher premium charged for it, you can't sign up for one type of coverage on the rest of your land, and a cheaper coverage on the high-risk land.

In other words, you can't guarantee revenue at 80% on all of your farm and at only 60% on the high-risk ground. If it was allowed, it would give you a total reduced premium overall. But it's not possible under federal crop insurance rules.

This series is independently produced by Indiana Prairie Farmer and brought to you through the support of Indiana Farm Bureau Insurance.

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