APH policies insure producers against yield losses due to natural causes such as drought, excessive moisture, hail, wind, frost, insects, and disease. The producer selects the amount of average yield to insure; from 50-75 percent (in some areas to 85 percent). The producer also selects the percent of the predicted price to insure; between 55 and 100 percent of the crop price established annually by RMA. If the harvested plus any appraised production is less than the yield insured, the producer is paid an indemnity based on the difference. Indemnities are calculated by multiplying this difference by the insured percentage of the price selected when crop insurance was purchased and by the insured share.
The ARH plan of insurance has many parallels to the APH plan of insurance, with the primary difference being that instead of insuring historical yields, the plan insures historical revenues. The policy is structured as an endorsement to the Common Crop Insurance Policy Basic Provisions. It restates many of the APH yield procedures to reflect a revenue product. Each crop insured under ARH has unique crop provisions. Like current revenue coverage plans, the ARH pilot program protects growers against losses from low yields, low prices, low quality, or any combination of these events.
ARPI is an insurance plan that provides coverage based on the experience of an entire area, generally a county. ARPI replaces the Group Risk Plan (GRP) and the Group Risk Income Protection Plan (GRIP).
The Commodity Exchange Price Provisions (CEPP) are used in conjunction with either the Common Crop Insurance Policy Basic Provisions or the Area Risk Protection Insurance Basic Provisions, along with the Crop Provisions for the following crops: barley, canola (including rapeseed), corn, cotton, grain sorghum, rice, soybeans, sunflowers, and wheat.In accordance with section 1 of either the Common Crop Insurance Policy Basic Provisions or the Area Risk Protection Insurance Basic Provisions, the CEPP specifies how and when the projected and harvest price components will be determined by crop. There are two sections contained in the CEPP:
- Section I: General Information. This section contains information relevant for all applicable crops, including definitions and common policy material.
- Section II: Price Definitions. This section contains crop-specific projected and harvest price definitions and specifications, including commodity exchanges, contracts, and discovery periods.
For CEPP documents that are not updated, the prior year’s documents carry to the current year.
Dollar Plan policies provide protection against declining value due to damage that causes a yield shortfall. The amount of insurance is based on the cost of growing a crop in a specific area. A loss occurs when the annual crop value is less than the amount of insurance. The maximum dollar amount of insurance is stated on the actuarial document. The insured may select a percent of the maximum dollar amount equal to CAT (catastrophic level of coverage), or purchase additional coverage levels.
Livestock policies are designed to insure against declining market prices of livestock and not any other peril. Coverage is determined using futures and options prices from the Chicago Mercantile Exchange Group. Price insurance is available for swine, cattle, lambs and milk. Producers decide the number of head (cwt of milk) to insure and the length of the coverage period. There are two types of plans available: Livestock Risk Protection, provides coverage against market price decline, if the ending price is less than the producer determined beginning price and indemnity is due; and Livestock Gross Margin, provides coverage for the difference between the commodity and feeding costs. If the producer determined expected gross margin is greater than the actual gross margin, an indemnity is due.
RI is based on weather data collected and maintained by the National Oceanic and Atmospheric Administration’s Climate Prediction Center. The index reflects how much precipitation is received relative to the long-term average for a specified area and timeframe. The program divides the country into six regions due to different weather patterns, with pilots available in select counties.
RP policies insure producers against yield losses due to natural causes such as drought, excessive moisture, hail, wind, frost, insects, and disease, and revenue losses caused by a change in the harvest price from the projected price. The producer selects the amount of average yield he or she wishes to insure; from 50-75 percent (in some areas to 85 percent). The projected price and the harvest price are 100 percent of the amounts determined in accordance with the Commodity Exchange Price Provisions and are based on daily settlement prices for certain futures contracts. The amount of insurance protection is based on the greater of the projected price or the harvest price. If the harvested plus any appraised production multiplied by the harvest price is less than the amount of insurance protection, the producer is paid an indemnity based on the difference.
WFRP provides a risk management safety net for all commodities on the farm under one insurance policy. This insurance plan is tailored for any farm with up to $8.5 million in insured revenue, including farms with specialty or organic commodities (both crops and livestock), or those marketing to local, regional, farm-identity preserved, specialty, or direct markets.
YP policies insure producers in the same manner as APH polices, except a projected price is used to determine insurance coverage. The projected price is determined in accordance with the Commodity Exchange Price Provisions and is based on daily settlement prices for certain futures contracts. The producer selects the percent of the projected price he or she wants to insure, between 55 and 100 percent.