Paul Sanchez
Federally subsidized multiple-peril crop insurance, also known as Multiple Peril Crop Insurance (MPCI), is a type of insurance policy that farmers can purchase to protect against a broad range of natural perils, including drought, hail, insects, and adverse weather conditions. It is the oldest and most common form of federal crop insurance in the United States, established in 1938 to aid the recovery of agriculture from the Great Depression and severe dust storms. MPCI is administered through private companies but reinsured by the federal government, specifically the Federal Crop Insurance Corporation (FCIC), which promotes economic stability in agriculture by establishing premium rates and insurance terms. MPCI policies are available for more than 120 different crops and provide protection against low yields, market changes, and revenue loss. The cost of MPCI is kept low due to farmer-paid premiums being subsidized, with approved insurance providers writing and handling the policies.
| Characteristics | Values |
|---|---|
| Type of Insurance | Multiple Peril Crop Insurance (MPCI) |
| Administered by | Private companies |
| Reinsured by | Federal Government through the Federal Crop Insurance Corporation (FCIC) |
| Coverage | More than 120 different crops |
| Protection | Against a broad range of natural perils (adverse weather, fire, insects, disease, wildlife, earthquake, volcanic eruption, failure of irrigation water supply, drought, hail, frost, etc.), loss of revenue due to price changes, and yield losses |
| Premium Rates and Insurance Terms | Established by the United States Department of Agriculture (USDA) |
| Premium Subsidies | 67% for a 50% coverage level, 38% for an 85% coverage level, 80% for enterprise units with 50%-70% coverage, 53% for enterprise units at 85% coverage, 80% for whole farm units with 50%-75% coverage, 56% for whole farm units at 85% coverage |
| Coverage Levels | 50%-85% in 5% increments |
| Available Plans | Actual Production History (APH), Yield Protection (YP), Revenue Protection (RP), Revenue Protection with Harvest Price Exclusion (RP-HPE), Dollar Plans of Insurance, Area Plans (County-based) |
| Endorsements | Enhanced Coverage Option (ECO), Supplemental Coverage Option (SCO) |
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What You'll Learn
Multiple Peril Crop Insurance (MPCI) endorsements and options
Multiple Peril Crop Insurance (MPCI) is an agricultural insurance policy that protects farmers and ranchers from a broad range of natural perils, including drought, excessive moisture, hail, wind, frost, insects, and disease. It also includes Livestock Risk Protection (LRP) and Dairy Revenue Protection (DRP) to safeguard farmers and ranchers against price declines. MPCI is administered by private companies, with the federal government reinsuring a portion of the risk through the Federal Crop Insurance Corporation (FCIC), making it an affordable option.
MPCI offers various endorsements and options to enhance coverage and protect against specific risks. Here are some of the key endorsements and options available:
Enhanced Coverage Option (ECO)
The Enhanced Coverage Option (ECO) provides additional area-based coverage for a portion of the producer's underlying crop insurance policy deductible. It increases the insurable percentage of the expected crop value, with triggers based on county-level loss. ECO can be purchased separately or in conjunction with other endorsements.
Supplemental Coverage Option (SCO)
The Supplemental Coverage Option (SCO) is a county-level revenue-based or yield-based endorsement that provides additional coverage for a portion of the underlying crop insurance policy deductible. It increases the insurable percentage of the expected crop value, similar to ECO.
Hurricane Insurance Protection – Wind Index (HIP-WI) Endorsement
The HIP-WI endorsement covers a portion of the deductible of the underlying crop insurance policy when the county or an adjacent county is within the area of sustained hurricane-force winds from a named hurricane.
Stacked Income Protection Plan (STAX)
The Stacked Income Protection Plan (STAX) is specifically designed for upland cotton producers, providing coverage for a portion of the expected revenue in their area.
Catastrophic Risk Protection Endorsement (CAT Policy)
The CAT Policy is designed for high-risk land, providing yield protection coverage that may be separate from the base policy. The coverage level is typically lower than the base policy's revenue protection.
Raisin Extra Expense Endorsement
This endorsement covers additional expenses incurred by producers of certain crops, such as slipping, additional turning, or rolling and unrolling, to minimize damage from excessive rain.
Prevented Planting Coverage
This option provides payment to growers when they are unable to plant their crops due to insurable causes, such as adverse weather conditions. The coverage can continue for up to two years for the same insured cause of loss.
Replanting Coverage
Replanting coverage provides payment to growers to replant an insured crop that has been damaged by an insurable cause of loss.
These are just a few examples of the endorsements and options available with MPCI. Farmers can work with their local insurance providers to explore the specific coverage options that best suit their unique needs and crop types.
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MPCI coverage and protection
Multiple Peril Crop Insurance (MPCI) is an agricultural insurance policy that protects farmers against a wide range of natural perils, including drought, hail, insects, adverse weather conditions, and fire, if due to natural causes. It also covers revenue loss caused by price fluctuations. MPCI is federally subsidized and available through the Federal Crop Insurance Program, with approved insurance providers writing and handling the policies. The Federal Crop Insurance Corporation (FCIC), overseen by the United States Department of Agriculture (USDA), sets premium rates and insurance terms and conditions for MPCI policies, helping to keep protection costs low.
MPCI coverage includes protection against yield loss and market changes. For example, if a farmer experiences a low yield due to adverse weather conditions, MPCI can provide compensation. Additionally, MPCI offers revenue protection, triggering indemnities when prices are low, even if yields are high. This revenue protection is available for all crops unless otherwise specified.
MPCI policies provide flexibility by allowing farmers to choose the type of MPCI policy that best suits their needs. The Common Crop Insurance policy, for instance, offers four different options: Yield Protection (YP), Revenue Protection (RP), Revenue Protection with Harvest Price Exclusion (RPHPE), and others. YP insures yields, while RP and RPHPE insure revenue and trigger indemnities based on price fluctuations.
Furthermore, MPCI includes Area Plans, which insure against area-wide, typically county-wide, loss of production on a crop. This is based on the understanding that when an entire county's crop yield is low, most producers in that county will also experience low yields. Additionally, Pasture, Rangeland, and Forage (PRF) insurance are designed to provide coverage for grazing or haying purposes.
MPCI also offers Rainfall Index plans, which are considered group policies, and Whole-Farm Revenue Protection (WFRP), which provides a safety net for all commodities on the farm under a single insurance policy. These policies are available for specific crops and areas across the United States, with premiums subsidized by the FCIC to ensure affordability.
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MPCI policy options
Multiple Peril Crop Insurance (MPCI) is an agricultural insurance policy that protects against a wide range of natural disasters, including drought, hail, and insects. MPCI policies are federally subsidized and available through the Federal Crop Insurance Program, with approved insurance providers writing and handling the policies. The United States Department of Agriculture Risk Management Agency (USDA RMA) oversees the program, setting the annual rates and regulations that all private insurers must follow.
MPCI coverage must be established each year before federal deadlines. Farmer-paid premiums are subsidized, helping to keep the cost of protection low. There are several MPCI policy options available, including:
- Individual crop insurance plans, which are based on the insured's production and can protect against a loss of revenue caused by price fluctuations.
- Area Plans, which insure against an area-wide, typically county-wide, loss of production on a crop.
- Rainfall Index plans, which are group policies, meaning individual losses are not covered. The index associated with your crop and grid determines your indemnity.
- Whole-Farm Revenue Protection (WFRP), which provides a risk management safety net for all commodities on the farm under one insurance policy.
- The Common Crop Insurance policy, which provides four different options: Yield Protection (YP), Revenue Protection (RP), Revenue Protection with Harvest Price Exclusion (RPHPE), and Insuring revenue with the Harvest Price Exclusion (RP-HPE).
Additionally, there are various endorsements available that can be added to an MPCI policy to increase coverage, such as:
- A continuous endorsement that provides increased protection above the underlying MPCI program coverage.
- The Replant Extra endorsement, which covers the costs to replant above the amount provided in the underlying yield-based plan.
- The Raisin Extra Expense endorsement, which covers additional expenses associated with slipping, additional turning, or other expenses.
- YDP, a private endorsement product that provides coverage based on the insured's approved yield established for the underlying MPCI policy.
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MPCI premium subsidies
Multiple Peril Crop Insurance (MPCI) is an agriculture insurance policy designed to protect farmers from a broad range of natural perils, including drought, hail, insects, etc. MPCI policies are federally subsidized crop insurance policies available through the Federal Crop Insurance Program. This means that approved insurance providers write and handle the policies, while the Federal Crop Insurance Corporation (FCIC), a government corporation overseen by the United States Department of Agriculture (USDA), promotes economic stability in agriculture by establishing premium rates and insurance terms and conditions for MPCI policies.
MPCI policies are unique in that they combine the regulatory authority and financial support of the federal government with the efficiencies of the private sector. Private insurance companies that sell crop insurance are responsible for administering and operating the program, while the federal government oversees, regulates, and subsidises it. This arrangement helps keep premium costs affordable for farmers, with the federal government allocating significant premium subsidies to farmers, generally between 50% and 80% of the total premium cost. For example, for basic and optional units, subsidies range from a 67% premium subsidy for a 50% coverage level to a 38% premium subsidy for an 85% coverage level.
The FCIC reinsures a portion of the risk, making MPCI an affordable option for farmers. Farmer-paid premiums are subsidised for MPCI policies, and the prices for federally subsidized policies are the same regardless of the chosen insurance provider or local agent. The United States Department of Agriculture Risk Management Agency (USDA RMA) oversees the program, setting the annual rates and regulations that all private insurers must follow when writing policies.
MPCI coverage must be established each year before federal deadlines. MPCI policies offer several options to protect farmers from the impact of yield loss, market changes, or revenue loss. These policies provide a safety net for farmers by protecting them from various naturally occurring perils and hazards, such as adverse weather conditions, failure of irrigation water supply, and fire, if due to natural causes.
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MPCI compared to other crop insurance
Multiple Peril Crop Insurance (MPCI) is an agricultural insurance policy that protects against a wide range of natural perils, including drought, hail, insects, adverse weather conditions, and so on. It also covers losses in revenue due to price fluctuations. MPCI is federally subsidized and regulated, with the Federal Crop Insurance Corporation (FCIC) reinsuring a portion of the risk, making it an affordable option. The FCIC, overseen by the United States Department of Agriculture (USDA), sets premium rates and insurance terms and conditions for MPCI policies, promoting economic stability in agriculture.
MPCI is available for over 120 different crops, though crop insurance options vary by region. Farmers can choose from several MPCI policy options, including Whole-Farm Revenue Protection (WFRP), which insures against revenue loss for all commodities on the farm under a single policy. The Rainfall Index plan is another option, though it is considered a group policy, meaning individual losses are not covered.
Compared to other crop insurance policies, MPCI offers comprehensive coverage against multiple perils, hence the name "multiple-peril." Other crop insurance options include the Common Crop Insurance policy, which offers four choices: Yield Protection (YP), Revenue Protection (RP), Revenue Protection with Harvest Price Exclusion (RPHPE), and Area Yield Protection (AYP). YP and RP plans differ in that yield protection only triggers indemnities when yields are low, whereas revenue protection can trigger indemnities even with high yields if prices are low enough. AYP protects against county-level production loss and uses county yields for indemnity calculation.
Crop-hail insurance is another option, often purchased as a supplement to MPCI. It covers losses caused by hail, which can destroy crops in a specific area while leaving others undamaged. Crop-hail insurance can be purchased at any time during the growing season, whereas MPCI coverage must be established before federal deadlines. However, MPCI is more popular, with over 90% of farmers who buy crop insurance opting for it.
In summary, MPCI offers broader coverage against natural perils and revenue losses compared to other crop insurance policies. It is federally subsidized, making it more affordable, and it is tailored to the specific needs of individual farms.
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Frequently asked questions
Federally subsidized multiple-peril crop insurance, also known as Multiple Peril Crop Insurance (MPCI), is an insurance policy that protects farmers and ranchers from losses due to natural disasters and adverse weather conditions. It is subsidized by the Federal Crop Insurance Corporation (FCIC) and promoted by the United States Department of Agriculture (USDA).
Multiple-peril crop insurance covers losses caused by natural events such as hail, frost, drought, excess moisture, destructive weather, and insect damage. It also covers failure of irrigation water supply and fire, if due to natural causes.
Multiple-peril crop insurance allows farmers to insure a certain percentage of their historical crop production. In the event of a loss, the insurance provides a payout based on the value of the specific crop. The amount paid out reflects how much lower a year's revenues are compared to previous years' earnings.
Multiple-peril crop insurance is available for over 120 different crops, although the availability varies by geographic area. It is purchased by agricultural producers, including farmers, ranchers, and others. A crop insurance specialist can help determine the appropriate insurance for a specific farming or ranch business.
