Insurance Options for Small and Beginning Farmers

Small and beginning farmers qualify for several programs that can provide a much needed safety net.
Insurance Options for Small and Beginning Farmers - News


Hail damaged apples which now have no value. Photo: Lynn Kime, Penn State

These programs include traditional crop insurance, whole farm revenue protection, and Noninsured Assistance Program (NAP). Many small and beginning farmers do not take advantage of available crop insurance programs because they may think they do not need or quality for these programs however; they usually do need and qualify for at least one of the programs.

Crop Insurance

The Federal Crop Insurance Program was established in the 1930s to protect producers from yield losses from most natural causes. The program was used on a limited basis (mostly in the Midwest) for its first 50 years, till the early 1980s when coverages were expanded and producer premium subsidies were increased, making the program more appealing to all producers. The traditional disaster relief programs have been phased out to the point where crop insurance and NAP from FSA are now the only method of protecting growing crops in the United States.

The program is administered by Crop Insurance Commission (FCIC), a department within the United States Department of Agriculture (USDA)’s Risk Management Agency (RMA). Crop insurance is sold by independent companies with oversight by the FCIC. Premium subsidies are provided by the USDA through the 2014 Farm Bill. Because crop insurance is a federally subsidized program, your premium will be the same as any other producer with the exact same yields and elections as you. Because the cost remains consistent, the only variable will be the service provided by the company from whom it is purchased, so interviewing several agencies and companies before settling on where you will buy coverage will serve you well.

A qualified crop insurance sales person will be able to provide understandable information about the rather complicated crop insurance program. By providing information about, and asking questions pertaining to, your specific operation, you can make an informed decision about coverage levels and price elections. Policies are renewable annually, requiring you to provide documentation of yields after a harvest season ends. Coverage and premiums for the coming year will be based the producers (5 years for perennials, minimum of 4 years building to 10 for most other crops) production history (APH). Transitional yields (or T yields) are available for producers of most crops that do not have the minimum years of history.

There are different sign-up deadlines for different crops. For example, the sign-up deadline for most spring seeded crops is March 15th of the crop year and the sign-up deadline for perennials including tree fruit crops is November 20th of the preceding crop year. The deadline for most fall seeded annual crops is September 30th. Please contact your crop insurance sales person for additional crop sign- up deadlines that may impact on what you produce. As you cannot sign-up after the deadline for your specific crop(s), it is essential that you comply with the schedule.

Hail damaged corn. Photo: Lynn Kime, Penn State

The most recent farm bill provided several variations of the crop insurance program for grain and oil seed crops for farms with base acres at the FSA office. The following programs are available at no cost to the producer, however there was a onetime enrollment in early 2015 that is binding through 2018. If you have made changes to your operation by adding a farm or rented land, you will need to make these elections for these additions.

Contact your local FSA office for more information and deadlines covering the following:

  • Price Loss Coverage (PLC)
  • Agricultural Risk Coverage (ARC)
  • Supplemental Coverage Option (SCO)

Additional New or Improved Programs

Several additional new or improved programs are also provided with annual enrollment deadlines. They include:

Whole Farm Revenue Protection (WFRP)

WFRP is available, providing a risk management safety net for all commodities on the farm under one insurance policy. Protection can selected from 50-85% of the producers revenue history and the premium subsidy varies from 55-80%. You will need five years of Internal Revenue Service (IRS) Schedule F documents. For this reason, as soon as you begin producing crops and operating as a business, you should begin to file your income taxes as a farm and use the Schedule F document.

Noninsured Assistance Program (NAP)

The Noninsured Assistance Program (NAP) is available for those crops not covered by an existing crop insurance program for your county. For example, strawberries are not covered by a crop insurance program in Pennsylvania, so if you wish to provide protection for your strawberry production, NAP is available for this protection. If you are a small-scale farmer, you can purchase protection for crops produced on less than an acre. You may need to provide documentation of previous production levels and income so you can determine adequate protection. You will need to visit your local Farm Service Agency (FSA) office and discuss this product. Many of the crops covered by NAP follow the same sign-up deadlines as crop insurance programs, but may vary by area so contacting your FSA office to find the sign-up date is good practice.

The covered losses for NAP are the same as other crop insurance programs except it will not cover wildlife damage, and so you will need very similar information as you provided to your insurance sales person, when visiting your FSA office. A checklist appears at the end of this document to assist you in collecting this information. The program has recently changed and now offers buy-up protection to 65% of your production and 100% of the average market price. You cannot cover the same crop through both crop insurance and NAP.

Premiums for the crop covered will be calculated based on the lesser of:

  • The product of multiplying the producer’s share, the number of eligible acres devoted to the crop, the approved yield, the coverage level, the average market price, and a 5.25 percent premium fee; or
  • $6,562.50 (the product of the applicable payment limitation of $125,000 and at maximum a 5.25 percent premium fee).

Beginning, limited resource, and socially disadvantaged producers may be eligible for premium reductions of up to 50 percent. This results in a cost of less than 3 cents per dollar of protection. If you believe you may be eligible, ask your FSA office for more information regarding qualifications.

Checklist for Noninsured Assistance Program Discussions

Be prepared to provide FSA personnel with:

  • Name of the crop
  • Crop type or variety
  • Intended use and final use of the commodity (fresh, processed, etc.)
  • Type of practice used to grow the crop (irrigated or non-irrigated)
  • Location and acreage of the crop (field, sub-field, etc.)
  • Share of the crop and the names of other producers with an interest in the crop
  • Date the crop was planted in each field

In addition, the following production information must be provided:

  • The total quantity of all production harvested during the previous harvest season for the crop.
  • The disposition of the harvested crop, such as whether it was marketable, unmarketable salvaged or used differently than intended.
  • Verifiable or reliable crop production records as required by FSA.
  • A copy of the grower contract if the producer is a contract grower For tree fruits.
  • Tree spacing and row spacing.
  • The age of the trees.

Certified crop insurance sales agent locator

Prepared by Lynn F. Kime, senior extension associate; Winifred W. McGee, extension educator; Robert Faubel, independent insurance agent, Danner’ s Insurance; Maggie Garcia-Taylor, insurance agent, Garcia-Taylor Insurance Agency; Eugene E. Gantz retired, and William Ferris, U. S. Department of Agriculture, Risk Management Agency. This document is based on work supported by USDA, Risk Management Agency, Promoting Proactive Farm Risk Management for Women, Hispanic and Next-Generation Farmers in Pennsylvania, USDA North Carolina Risk Management Agency Region Community Partnerships Program, Award Number RM16RMEPP522C012.