Crop Insurance 101

April 30, 2012

Earlier this week, National Crop Insurance Services (NCIS) released the first of what is to be a series of educational videos explaining the importance of crop insurance and its functionality among American agriculture.

In this video, aptly titled “Crop Insurance 101,” Tom Zacharias, president of NCIS, reviews the history of the program, why it was created, and why Congress should “do no harm” to it in the upcoming Farm Bill.

Before crop insurance existed, Zacharias explains, disaster would strike and farmers would be forced to go to Congress for help. Congress would then have to pass disaster legislation and appropriate funds, which would then be passed on to the USDA where a program would be put in place to finally, pay the farmers whose crop had been destroyed.

But this whole process would take anywhere from one to three years, Zacharias explained, burdening not only the farmers who waited for the money to start planting again, but the taxpayers who had to pick up the pieces. And so, the public-private crop insurance program was born.

Today, farmers purchase crop insurance and, when disaster strikes, private insurance companies pay out indemnities within 30 days.

In 2011, Zacharias said, crop insurance companies had 265 million acres insured, 1.15 million policies issued and more than 125 different crops covered—resulting in $114 billion worth of protection for U.S. farmers.

This program allowed farmers who, in 2011 for example, sustained one of the worst weather years in history to bounce back and plant again this spring—receiving $10.4 billion in indemnities in 2011 alone.

“Crop insurance is at the forefront of modern-day farm policy,” Zacharias said in a statement released with the video. “For the vast majority of Americans who have very little to do with agriculture, this video could be their introduction to crop insurance.”