NCIS President Tom Zacharias discussed the growing role of crop insurance as the primary risk management tool for farmers in a recent radio interview with Courtnay Doyle of Dignity Farm Network in southwestern Minnesota. “The 2014 Farm Bill solidified crop insurance as the primary tool for farmers in dealing with production and price swings,” said Zacharias.
Zacharias noted that farmers purchase crop insurance to protect their crops from both volatile weather conditions and uncertain market conditions, which can fluctuate daily. “It gives farmers and lenders a peace of mind and ensures financial stability, which is important in the agricultural sector,” he said.
He explained that multi-peril crop insurance protects farmers from a whole host of natural disasters, including hail, freeze, drought, disease and loss of revenue due to drops in prices. “There are roughly 128 crops covered by crop insurance,” he said.
Zacharias also pointed out that in order to enjoy the protection of crop insurance, farmers must first purchase policies. “Farmers spend about $4 billion each year to purchase crop insurance. This means that they have significant skin in the game, and they assume a good deal of the risk as well,” he said.
He also pointed out that in addition to paying premiums, farmers have deductibles on these policies ranging from 15 to 35 percent. “So when a farmer receives an indemnity, it’s after this deductible has been met and the premium has been paid,” he said.