As Sen. Debbie Stabenow (D-MN), then Ranking Member of the Senate Agriculture Committee, noted during the last farm bill debate: “The farmer gets a bill, not a check, with crop insurance…and they don’t get help unless they really need it.”
In other words, farmers do not use crop insurance to make a profit. Anyone who understands agriculture knows farmers benefit from good weather and bountiful harvests, not disasters.
And when they do receive an indemnity to help offset part of a loss, their insurance guarantees in the future may go down and their premium rates may go up. Furthermore, crop insurance, just like other forms of insurance, has deductibles so farmers must shoulder a considerable loss – typically around 25 percent – before indemnities begin. In 2012, for example, those deductible losses were more than $14.5 billion. In 2016, those deductible losses were $5.5 billion.
While most farmers purchase crop insurance annually, only a small portion of them collect indemnities in an average year. For example, while more than 1.2 million policies were purchased by farmers in 2017, only 302,307 were indemnified. Even in 2012, the year of the worst drought in 25 years, 1.17 million policies were purchased by farmers and only 494,000 (42 percent) were indemnified. In addition, according to Dr. Gary Schnitkey from the University of Illinois, in most years the indemnities from crop insurance do not cover a farmer’s cost of production, and they do not return a profit.
View a video of farmers responding to critics’ charge that they are “praying for drought, not praying for rain,” here.
* Updated August 2018