3 - E Crop_Revised
Yield Guarantee
(APH yield per acre) x (percentage of coverage)
Formula for determining indemnity
(Yield Guarantee - Actual Production) x percentage of crop price x Crop price (set by RMA) x Insured's share in the crop = Total indemnity
What losses does crop-revenue insurance protect from?
-Decline in prices during the growing seaso -Low crop yields -A combination of both
What are duties of the insured in the event of crop damage?
-FIle a claim within 72 hours -Protect crops from further damage -Leave samples of the damage crop intact in each field, so the adjuster can inspect them
Detail about Crop - Hail Insurance
-It is a type of crop-yield insurance -Rated on an acreage basis -Coverage can be a % of expected crop value -Policies sometimes have a minimum amount of losses required before they will pay anything.
What does an adjuster record during a claims site assessment?
-Location (longitude and latitude) -Plant samples -Soil samples -Normal yields for the region -Comparison with similar crops in the same area
What measures shoudl a farmer take to prevent crop damage?
-Plant correcty -Maintain the crop correctly -Use required fertilizers, pesticides, soil additives, etc. (does not apply to organic farming)
Rules for policy changes to MPCI policy
-Policy changes and increases only allowed before the sales closing date -Requires planting to be done by set planting dates -No changes during growing season -After 1st crop year, a farmer may change or cancel policy, but ONLY BEFORE the cancellation date
How are loss payments for crops made?
-Usually at ACV -Can be made in multiple payments
Crop insurance uses thresholds instead of deductibles. What is a threshold?
A threshold is a percentage of insured crops. Losses BELOW threshold are NOT paid. Losses ABOVE threshold have full policy coverage.
Half of Kevin's 100 acre corn farm was destroyed by wildfire. His MPCI policy has a yield guarantee of 60 bushels per acre per season, but due to the fire, he only actually produced 20 bushels per acre. Kevin's policy pays $3 per bushel. How much will his policy pay him for his loss? A. $12,000 B. $3,000 C. $9,000 D. $6,000
A. $12,000 (60 bushels/acre - 20 bushels/acre) x 100 acres = 4,000 bushels. Then multiply that by the price per bushel agreed upon when Kevin bought his policy: $3 x 4,000 bushels = $12,000
Which of the following crops is covered under a small grains provision? A. Barley B. Corn C. Grain sorghum D. Soybeans
A. Barley (Wheat and oats are also small grains)
Darren is new to the farming business and has just planted his second year of barley. He is currently applying for multi-peril crop insurance with his agent, but he doesn't have the 4 years of records needed to calculate his APH. Which of the following statements is true in Darren's case? A. Darren can use 80% of the county transitional yield for the missing 3 years of records B. Darren can use the county transitional yield as his APH until he has four years of records C. Darren can use 90% of the county transitional yield for the missing 2 years of records D. Darren can use 65% of the county transitional yield for the missing 3 years of records
A. Darren can use 80% of the county transitional yield for the missing 3 years of records. The next year, he will be able to use 90% of the transitional yield for the missing data, and the year after that he can use the full transitional yield.
Which of these is a typical exclusion in a crop-hail policy? A. Failure to harvest mature crop B. Excessive moisture C. Fire D. Transit to storage after harvest
A. Failure to harvest mature crop
Which of the following best describes crop-revenue insurance? A. Insurance that guarantees a minimum amount of income from a crop B. Insurance that protects against physical damage to a crop due to any weather-related peril C. Insurance that guarantees a minimum amount of yield on a crop D. Insurance that protects against damage caused by poor farming practices
A. Insurance that guarantees a minimum amount of income from a crop
Jake grows soybeans and strawberries on his farm. He is currently applying for crop-hail insurance with his agent. Which of the following statements is true in Jake's case? A. Jake's coverage will be based on the amount of acreage he has B. Jake[s policy will provide coverage against flood damage to his crops C. Both of Jake's crops can be covered under this policy D. Part of Jake's policy premiums are subsidized by the federal government
A. Jake's coverage will be based on the amount of acreage he has
Farmer Ron wants to make some changes to the insurance policy covering his wheat crop, but he must do so before the: A. Sales closing date B. Production reporting date C. Final planting date D. Debt termination date
A. Sales closing date
Laura's corn crop is covered under a multi-peril crop insurance policy. Under this policy, Laura is covered for all of the following perils, except: A. Theft B. Low / poor crop yield C. Frost D. Flood
A. Theft
Bob works for a government agency that is dedicated to helping Alabama's farmers and ranchers get the most benefit from federal programs. He works in the department that regulates and controls the grading of Alabama's agricultural products. For which agency does Bob work? A.) Alabama Farm Service Agency B.) Risk Management Agency C.) Alabama Dept. of Agricultural and Industries D.) U.S. Dept. of Agriculture
A.) Alabama Farm Service Agency
Example of coverage for Crop - Hail Insurance
An insured with a $10K policy on 10K acres has a 5% minimum loss percentage before the insurer has to make a payment. So, if there is a 10% loss to the crop (which exceeds teh 5% minimum), the policy would pay $1,000 (10% of $10,000)
3,200 acres of Jonathan's 40,000 acre farm of green beans were destroyed by wildfire. Jonathan has crop-hail insurance with a $60,000 limit and a 10% minimum loss threshold. How much indemnification can Jonathan expect to receive when he files a claim for this loss? A. $6,000 B. $0 C. $4,800 D. $2,133
B. $0 (Because Jonathan's loss was under 10% of his total acreage)
Which of the following crops is covered under a coarse grains provision? A. Oats B. Corn C. Barley D. Wheat
B. Corn
Insurance that provides coverage against the loss of crop value is called: A. Crop-yield insurance B. Crop-revenue insurance C. Multi-peril crop insurance D. Crop-hail insurance
B. Crop-revenue insurance
Which government entity is responsible for subsidizing multi-peril crop insurance policies? A. US Department of agriculture B. Federal crop insurance corporation C. National crop insurance services D. Federal crop administration
B. Federal crop insurance corporation
The Risk Management Agency is responsible for all of the following, except: A. Assigning commodity prices B. Issuing crop assignments to farmers C. Reimbursing private crop insurers for administrative costs D. Setting critical production dates
B. Issuing crop assignments to farmers
Which of these statements about multi-peril crop insurance is true? A. MPCI is too expensive for most farmers B. MPCI cannot be purchased after the sales closing date C. MPCI must be run by the state D. MPCI does not cover earthquake
B. MPCI cannot be purchased after the sales closing date
A "transitional yield," or "T-yield" is: A. A supplemental crop planted between growing seasons of the farmer's primary crop B. The average yield of other farms in the county, used to calculate a farmer's APH when the farmer does not have 4 years of production records C. The threshold for the amount of damage sustained to a crop before insurance coverage will apply D. The average yield of an entire farm for at least the 4 previous years
B. The average yield of other farms in the county, used to calculate a farmer's APH when the farmer does not have 4 years of production records
Martin works for a government agency that initiates and supports economic development activities in Alabama and promotes consumption of the state's farming products. For which agency does Martin work? A.) Alabama Farm Service Agency B.) Alabama Department of Agriculture and Industries C.) Risk Management Agency D.) U.S. Department of Agriculture
B.) Alabama Department of Agriculture and Industries
Which of the following crops is covered under a Coarse Grains Provision? A.) Wheat B.) Corn C.) Barley D.) Oats
B.) Corn (Grain sorghum and soybeans are also coarse grains)
Linda is a statistical analyst who works for a non-profit organization that partners with the Federal Government to develop risk management standards for the crop insurance industry. The information that Linda's department gathers is used to create fair underwriting guidelines and accurate crop loss adjustment procedures. For which organization does Linda work? A.) EPA B.) National Crop Insurance Services C.) Risk Management Agency D.) Federal Crop Insurance Corporation
B.) National Crop Insurance Services
Congress first authorized federal crop insurance in the 1930s. IT remained experimental, covering only major crops in central producing areas, until the federal crop insurance act was passed in: A. 1978 B. 1994 C. 1980 D. 1996
C. 1980
What are the two main types of crop-yield insurance? A. Crop-yield and MPCI B. Crop-hail and RMA C. Crop-hail and MPCI D. Crop-yield and crop-revenue
C. Crop-hail and MPCI
Which of the following is NOT covered by an MPCI policy? A. Late planting B. Locusts C. Failure to reseed D. Volcanic eruption
C. Failure to reseed
Which of the following best describes crop-yield insurance? A. Insurance that protects against a loss of the value of the crop due to a decline in the market price B. Insurance that indemnifies if the producer chooses the wrong crop type C. Insurance that protects against physical loss of or damage to a crop D. Insurance that guarantees the revenue of the entire farm rather than an individual crop
C. Insurance that protects against physical loss of or damage to a crop
Which of the following statements about multi-peril crop insurance is FALSE? A. It is subsidized by the government B. It covers frost C. It covers losses caused by "poor farming practices" D. It covers hail
C. It covers losses caused by "poor farming practices"
Which of the following statements about federal crop insurance is FALSE? A. It was first authorized in the 1930s B. It is regulated by the Risk Management Agency under the USDA C. It is mandatory for all farmers who sell their produce for a profit on the open market D. It is supervised on a national level by the National Crop Insurance Services
C. It is mandatory for all farmers who sell their produce for a profit on the open market
Jason has an MPCI policy on his corn crop. All of the following statements could be true of Jason's policy, EXCEPT: A. Jason's policy covers him for damage to his crop caused by weather0related perils B. Jason's policy protects him against damage to his crop from wildlife and insects C. Jason's policy was rated per acre D. Jason's policy coverage is based on a percentage of his actual production history
C. Jason's policy was rated per acre
A crop-hail insurance policy would provide coverage for all of the following, except: A. Lucy's crop was destroyed by a wildfire started by a lightning strike B. Olivia's crop was destroyed by a hail storm C. Martin's crop was destroyed by caterpillars despite the fact that he used insecticide D. Tom's crop was destroyed when he crashed his truck while transporting his crop to the silo for storage
C. Martin's crop was destroyed by caterpillars despite the fact that he used insecticide
Congress authorized Federal Crop Insurance in response to problems caused by the Great Depression in the 1930s. It remained experimental, covering only major crops in central producing areas, until the Federal Crop Insurance Act was passed in _______________, followed by the Federal Crop Insurance Reform Act in ________________________. A.) 1978; 1980 B.) 1994; 2000 C.) 1980; 1994 D.) 1938; 1980
C.) 1980; 1994
Dexter is new to the farming business and has just planted his first year of oats. He is currently applying for MPCI with his agent, but he doesn't have the 4 years of records needed to calculate his APH. Which of the following statements is true to Dexter's case? A.) Dexter can use the county transitional yield as his APH until he has four years of records. B.) Dexter can use 90% of the county transitional yield for the missing 4 years of records. C.) Dexter can use 65% of the county transitional yield for the missing 4 years of records. D.) Dexter can use 80% of the county transitional yield for the missing 3 years of records.
C.) Dexter can use 65% of the county transitional yield for the missing 4 years of records.
Differences between crop-hail and MPCI
Crop-Hail: Private, Uses agreed-upon purchase times, Insurers can choose whom to insure, coverage based on acreage MPCI: Gov't subsidized, Has restricted purchase times, Gov't forces insurer to cover any farmer, coverage based on "units" (one unit = all of a farmer's acreage in one county)
If Farmer Brown sustains a 10% loss to his crop, and he has crop-hail insurance with a $10,000 limit and a 5% minimum loss percentage, how much will his policy pay him? A. $500 B. $10,000 C. $1,500 D. $1,000
D. $1,000
After a heavy rain, the river running through Randy's farm rose so high that it flooded part of his barley crop. The flood caused $3,000 in damage to his $20,000 crop. Randy's crop insurance policy has a 5% threshold. Based on this information, how much will Randy's insurer pay him for this loss? A. $1,000 B. $2,000 C. $2,850 D. $3,000
D. $3,000 ($20,000 x .05 = $1,000, so the policy will pay for the entire loss of $3,000)
Actual production history (APH) is based on farmer's previous crop yields. A farmer must provide how many years of records to determine the APH? A. 10 years B. 2 years C. 5 years D. 4 years
D. 4 years
Chuck's field of corn usually produces $20,000 per year. After a wildfire wipes out half of his field, the other half's yield does exceptionally well and brings in twice as much revenue. If Chuck files a claim against his crop-hail policy, which of the following statements would most likely be true? A. Chuck would receive an amount equal to half of the damaged portion of the corn field B. Chuck would not receive anything, because the yield from the undamaged half made up for the loss C. Chuck's claim would be denied because crop-hail insurance does not protect against wildfire D. Chuck would receive full indemnification for the damaged half of the corn field
D. Chuck would receive full indemnification for the damaged half of the corn field
Typical crop-hail insurance provides coverage for all of the following perils, EXCEPT: A. Wildfire B. Transit to storage after harvest C. Hail D. Flood
D. Flood
Which of the following is true for crop-hail insurance? A. It does not cover fire B. It is subsidized by the government C. It cannot be added during the growing season D. Generally it is available from private insurers
D. Generally it is available from private insurers
After a loss, the insured farmer will typically have to do all of the following, EXCEPT: A. Notify the insurer immediately B. Protect the crop from further damage C. Leave samples of the damaged crop for the adjuster to inspect D. Plant a replacement crop within 72 hours
D. Plant a replacement crop within 72 hours
Which statement about the catastrophic risk protection endorsement is FALSE? A. It pays 55% of the price of the commodity B. It pays on crop losses in excess of 50% C. It is an optional coverage of MPCI D. The premiums are paid by the insured
D. The premiums are paid by the insured
When would a farmer receive an indemnity payment under an area yield protection policy? A. Only after the governor declares a state of emergency for the county in which the farm is located B. Any time the farmer has damage to his crops C. Only after the actual county revenue decreases by at least 50% because of a disastrous loss D. When the farmer suffers loss of yield and production is low for the entire county
D. When the farmer suffers loss of yield and production is low for the entire county
This government entity helps farmers take advantage of programs such as farm loans, commodity price support, disaster relief, conservation, and other available resources. A.) Alabama Dept. of Agriculture and Industries B.) National Resources Conservation Service C.) National Crop Insurance Service D.) Alabama Farm Service Agency
D.) Alabama Farm Service Agency
In 1994, Congress passed this piece of legislation to introduce government subsidies for federal crop insurance premiums, which helped many more farmers participate in the program. A.) Agricultural Risk Management Act B.) Agricultural Risk Protection C.) Federal Crop Insurance Act D.) Federal Crop Insurance Reform Act
D.) Federal Crop Insurance Reform Act
This federal agency works with private land owners to help them protect their natural resources. A.) Environmental Protection Agency B.) Nat'l Assn of State Depts of Agriculture Research Foundation C.) Dept. of Agriculture and Industries D.) Natural Resources Conservation Services
D.) Natural Resources Conservation Services
Exclusion of crop-hail insurance?
Failure to harvest a mature crop, Unit normal visible stand (i.e., crop must be up to be covered), Before effective hour (i.e. damage prior to start of policy), crops that can be recovered by harvesting, crop not owned by the insured (e.g., share crops), damage to trees bushes fruit or nut crops, damage to leaves or plants, unless affecting the actual crop
Define: MPCI
Government subsidized and regulated ,offering wide coverage for many perils
What are covered perils or crop-hail insurance?
Hail, fire, lightning, wind (by endorsement), transit to storage after harvest, wildfire
When does a farmer get indemnity from a crop-reveue insurance policy?
If crop-yield multiplied by the selling price produces a number that is less than guarantee* (*The guarantee is a number based on a farmer's production history)
Can crop policies be canceled during the first crop year?
No
Define: Crop-hail insurance
Privately sold, offering coverage for a few specified perils
Define: Crop-yield insurance
Provides coverage for physical loss to the crops
Define: Government support
Subsidized by the Federal Crop Insurance Corporation (FCIC) and regulated by the U.S. Department of Agriculture (USDA)
With which agency is MPCI subsidized?
The Federal Crop Insurance Corporation (FCIC)
By which agency is MPCI regulated?
The U.S. Department of Agriculture (USDA)
How is crop insurance renewed?
The coverage is continuous. Cancellation is only allowed in writing and before the cancellation date specified in the policy.
What are covered perils of Multi-Peril Crop Insurance (MPCI)?
Weather - related: Wind, drought, excessive moisture, frost, flood, lightning, tornado, hurrican, hail (by endorsement) Other perils: volcano, earthquake, disease, insects & wildlife, insect infestations (if unavoidable), irrigation failure (if unavoidable), low/poor quailty yields, prevented planting, late planting/replanting
MPCI excludes losses caused by
● Neglect or malfeasance ● Failure to reseed ● Failure to follow good farming practices
