Multi Peril Crop Insurance (MPCI)
MPCI policies must be purchased prior to planting and cover loss of crop yields from all types of natural causes including drought, excessive moisture, freeze and disease. Newer coverage options combine yield protection and price protection to guard farmers against potential loss in revenue, whether due to low yields or changes in market price.
The RMA sets the rates that can be charged and determines which crops can be insured in different parts of the country. The federal government also subsidizes the farmer-paid premiums to reduce the cost to farmers. In addition, it provides reimbursement to the private insurance companies to offset operating and administrative costs that would otherwise be paid by farmers as part of their premium. Through this federal support, crop insurance remains affordable to a majority of America’s farmers and ranchers.
Two of the most common plans available:
- Revenue Protection plan (RP) is a policy that guarantees an amount of revenue (based on the individual producers actual production history (APH) x commodity price) called the final guarantee. The coverage and exclusions of RP are similar to those for the standard Yield Protection Plan (YP) policy. This guarantee is based on the greater of the spring-time generated price (projected price) or the harvest-time generated price (harvest price). While the guarantee may increase, the premium will not. Premium will be calculated using the projected price. Since the protection of producer revenue is the primary objective of RP, it contains provisions addressing both yield and price risks. RP covers revenue losses due to a low price, low yield, or any combination of the two. A loss is due when the calculated revenue (production to count x harvest price) is less than the final guarantee for the crop acreage.
- Yield Protection Plan (YP) protects against a loss in yield due to nearly all natural disasters. For most crops, that includes drought, excess moisture, cold and frost wind, flood, and unavoidable damage from insects and disease. YP guarantees a yield based on the individual producers annual production history (APH). If the production to count is less than the yield guarantee, the insured will be paid a loss.