Crop insurance in America can trace it roots all the way back to 1880, when private insurance companies first sold policies to protect farmers against the effects of hail storms. These Crop-Hail policies are still sold today by crop insurance companies and are regulated by individual state insurance departments. In 2017, farmers spent $956 million on Crop-Hail insurance to protect $36 billion worth of crops.
In addition, farmers may also purchase Federal Crop Insurance, also known as multi-peril crop insurance, a risk management tool that protects against the loss of their crops due to natural disasters such as drought, freezes, floods, fire, insects, disease and wildlife, or the loss of revenue due to a decline in price. This form of crop insurance is federally supported and regulated and is sold and serviced by private-sector crop insurance companies and agents.
Participation in multi-peril crop insurance has grown rapidly since the private sector began delivering it in 1981. Back then, only 45 million acres and $6 billion worth of crops were insured. By 2017, 1.1 million policies were sold protecting more than 130 different crops covering 311 million acres, with an insured value of $106 billion.
The Federal program came to prominence following years of costly, inefficient ad hoc disaster bills as a way to speed assistance to farmers when they need it most, while reducing taxpayer risk exposure. Today, crop insurance is the cornerstone of U.S. farm policy.
* Updated August 2018