What Is Multi-Peril Crop Insurance? (And other FAQs)

Crop insurance helps protect your farm and your future — but we know there’s a lot to learn about the subject. Independent ProAg agents are ready to help you find the right policy for your operation, and we’re not stopping there. We’re answering some frequently asked questions to make sure you feel prepared for the seasons ahead.

How does crop insurance work?

Like other types of insurance, crop insurance is a risk management tool. Farmers and ranchers pay for crop insurance to create a financial safety net that can be deployed after a loss. Depending on coverage, that may include damage from severe weather, crop disease or insects. Some plans also offer protection against unexpected changes in the market.

Unlike many other types of insurance, crop insurance includes federally subsidized options like multi-peril crop insurance. This means the federal government shares premium costs with farmers and ranchers, helping stabilize the price.

What does Multi-Peril Crop Insurance cover?

Multi-peril crop insurance (MPCI) is a risk management option for more than 100 commodities. The federal government sets the regulations for MPCI plans. As a result, coverage options are the same across providers, including pricing.

Government-approved insurance companies sell and manage MPCI policies. These private companies collect premiums and pay approved claims.

Although the policies are administered through AIPs the federal government reinsures a portion of the risk through the Federal Crop Insurance Corporation (FCIC), making it an affordable option for risk management.

How does MPCI protect your operation?

MPCI is designed to protect your operation against a broad range of natural perils, including but not limited to drought, hail and insects. They can provide protection against low yields and/or the decline in price of the crop, depending on which type you choose.

MPCI policies can be supplemented with endorsements for additional protection. Two popular endorsements are the Enhanced Coverage Option (ECO) and the Supplemental Coverage Option (SCO).

Both ECO and SCO increase the insurable percentage of your expected crop value, and triggers are based on county-level loss. They can be elected separately or together. However, each must be purchased from the same company as your existing MPCI policy.

What is the difference between federal MPCI and private product crop insurance?

Private products are crop insurance options developed by and administered by AIPs to fill gaps in coverage and enhance existing federal options. ProAg offers a variety of innovative private products, ranging from crop hail to Supplemental Replant Coverage.

Your local independent ProAg agent can help determine which federal and private product options are a fit for your risk management goals.

What MPCI policies are available?

Let’s break down some of the available multi-peril crop insurance plans with federally subsidized premiums.

A range of individual plans fall under MPCI, including:

• Actual Production History (APH): Protects against a loss of production by guaranteeing a yield based on the actual production history of a farmer’s crops.
• Yield Protection (YP): Like APH, YP protects against a loss of production. In this case, coverage is determined by actual production history and a projected price for the crop.
• Revenue Protection (RP): Protects against loss of revenue caused by price increase or decrease, loss of production, or a combination of the two.
• Dollar plans of insurance: Protects against naturally occurring perils, with guarantees determined on values published in actuarial documents.
• Actual Revenue History: Has many parallels to the Actual Production History (APH) plan of crop insurance, with the primary difference being that instead of insuring historical yields, the plan insures historical revenues.

Farmers and ranchers can also choose from three area plans (also referred to as county-based plans) that protect against losses that affect an entire area, usually a county.

• Area Yield Protection (AYP): Protects against loss of production, as determined by county-level production.
• Area Revenue Protection (ARP): Protects against loss of revenue, as determined by county-level production loss, price increase or decrease, or a combination of both.
• Area Revenue with Harvest Price Exclusion (ARP-HPE): Much like ARP, this policy protects against loss of revenue. However, it does not adjust the revenue guarantee to reflect harvest prices that are higher than the projected price.

The federal livestock insurance program includes Livestock Risk Protection (LRP) and Dairy Revenue Protection (DRP) to protect ranchers against price declines.

What are the most common crop insurance plans?

Most crop insurance coverage today centers on a few core plans designed to protect yield, revenue or both. Revenue Protection (RP) leads the way for many row crop producers, offering protection against both production losses and revenue changes. Yield Protection (YP) is important for those focused strictly on production risk. Area-based plans like Area Risk Protection Insurance (ARPI), along with Supplemental Coverage Option (SCO) and Enhanced Coverage Option (ECO), allow producers to extend and customize their protection.

For more specialized operations, Whole-Farm Revenue Protection (WFRP) supports diversified farms, and Pasture, Rangeland, Forage (PRF) coverage helps manage rainfall risk on grazing acres.

How do Revenue Protection (RP) crop insurance plans work?

RP plans take your actual production history, the projected price for your insured commodity (as determined by the Commodity Exchange Price Provisions [CEPP]), and your chosen coverage level to create a revenue guarantee. An indemnity payment is triggered when your revenue-to-count is lower than your revenue guarantee. RP protects against both increases and decreases in price. The revenue guarantee is decided based on either the projected price or the harvest price — whichever is higher.

Revenue Protection with Harvest Price Exclusion (RP-HPE) is similar to the RP policy, but the revenue guarantee does not increase if the harvest price is higher than the projected price. However, a benefit to the policy, is that it generally has a lower premium than an RP policy.

Which crop insurance plans require a notice of loss?

Whether or not you are required to report a notice of loss will depend on which crop insurance plan you select. Individual plans — like RP, RP-HPE, APH, and YP — require a notice of loss. That’s because coverage is based exclusively on your operation.

Other coverage options — like area plans or PRF policies — are based on factors outside your operation. As a result, indemnities are paid out when previously agreed-upon conditions are triggered.

No matter which policies you choose for your operation, it’s important to review the actuarial documents and consult with your crop insurance agent to understand reporting requirements.

How does ProAg make crop insurance easy?

It all starts with finding the right agent. We’ve built a network of local independent agents who understand what agriculture is like where you live and work — and a tool to help you find your nearest ProAg agent. It’s just one way we’re committed to making crop insurance easier.