The 2021 Guide To Multiple Peril Crop Insurance

In 2020, over 380 million acres of farmland were protected through the Federal Crop Insurance Program, helping ranchers and farmers throughout America manage the numerous risks facing them and their livelihood. Multiple peril crop insurance (MPCI) is one insurance product that helps farmers manage the risks facing their crops and livelihood each day.

As any grower knows, crops are highly vulnerable to loss, making crop insurance a necessity for any farmer. After all, your crop production and crop yield are key factors that determine your farm’s success.

A quick introduction to multiple peril crop insurance

In the early 1930s, the agricultural industry struggled to recover from the combined impacts of the Great Depression and the severe dust storms of the Dust Bowl. 

Crop insurance was only available through private insurance companies and only for named perils (like hail and fire), which made it hard for growers to obtain crop insurance plans that were affordable or adequate for their crop coverage needs.

With limited cash reserves, private insurance companies writing policies during this period often had to prorate claims. This caused dissatisfaction among policyholders and eventually led to the liquidation of these private insurance companies.

In 1938, however, Congress passed the Federal Crop Insurance Act (FCIA), managed by the Federal Crop Insurance Corporation (FCIC), and later, the Risk Management Agency (RMA). This program became the first federal crop insurance program, starting as an experiment, but reformed in 1980 to provide subsidized assistance to farmers. 

Over time, the scope of the Federal Crop Insurance Corporation has expanded to encourage participation and add coverage for additional crops and regions throughout the United States (Federal Crop Insurance Act of 1980). 

What is multiple peril crop insurance?

Multiple peril crop insurance (MPCI) is an insurance product federally regulated and subsidized by the federal government and sold through private crop insurance agents. MPCI policies cover crop losses and lower yields due to natural causes like adverse weather, insect damage, and disease.

Multiple peril crop insurance policies are sometimes referred to as “all-risk” crop insurance policies because they cover the most economically significant crops within the United States. However, insurance for a specific crop may not be available in all states or counties within a state.

Crop-Hail insurance vs. Multiple Peril Crop Insurance (MPCI)

The differences between crop-hail insurance and MPCI policies can be challenging to pick out for those new to crop insurance. Still, growers must understand the differences, benefits, and limits of these two crop insurance types so they can work with their crop insurance agent to insure their crop.

Crop-hail insurance

A hailstorm can destroy the crucial parts of a planted field while leaving the rest of the area unharmed. As a named peril crop insurance plan, crop-hail insurance offers specific insurance protection against damage and loss caused by hail and fire. Sold and serviced through private crop insurance agents and companies, crop-hail insurance policies can be purchased at any point in the growing season. Farmers who choose crop-hail policies can insure crops that have been planted but are not yet harvested. 

Crop-hail insurance is sold on an acre-by-acre basis, reimbursing farmers for products lost to hail or fire while in the field. Depending on the region, crop-hail insurance may also provide coverage for loss caused by lightning, wind, vandalism, or malicious acts. However, crop-hail insurance policies will not cover risks like sudden frost, excess moisture, drought, or price fluctuations.

Multiple-peril crop insurance

Unlike crop-hail insurance, multiple peril crop insurance policies are only available through crop insurance agents in the Federal Crop Insurance Program. As the name implies, MPCI provides coverage against lower yield and crop loss due to natural events, including:

  • Fire
  • Flooding
  • Insect damage 
  • Hail
  • Frost
  • Damaging wind
  • Disease

More than 90 percent of farmers who purchase crop insurance choose multiple peril crop insurance policies. Available for over 120 different crops, MPCI must be bought each growing season within the deadlines set by the federal government – before crops have been planted.

MPCI products cover crop and yield losses by allowing producers to insure a specific percentage of historical crop production.

Multiple Peril Crop Insurance vs. Crop-Hail Insurance Comparison

Below is a table comparing multiple peril crop insurance vs. crop-hail insurance, including coverage, protection, rate structure, and loss adjustment methods.

Crop InsuranceCoverageProtectionRate StructureLoss Adjustment
Multiple PerilProduction BasedAll Natural PerilsActual Production History (APH)Fact finder
Crop-HailDollar Value CoverageNamed PerilHistorical FrequencyRandom judgement

Types Of Multiple Peril Crop Insurance Products

Individual Plans

Individual MPCI plans are based on individual yield loss, and, in some plans, price declines due to a number of perils. These MPCI policies include the following types of revenue and yield protection plans:

  • Yield Protection (YP)
  • Revenue Protection (RP)
  • Revenue Protection with Harvest Price Exclusion (RP-HPE)
  • Actual Production History (APH)
  • Actual Revenue History (ARH)

Area Plans

These MPCI plans offer farmers coverage based on the average experience of a region or area, like a county. Plans included under this umbrella are:

  • Area Revenue Protection (ARP)
  • Area Revenue Protection with Harvest Price Exclusion (ARP-HPE)
  • Area Yield Protection (AYP)

Rainfall Index (RI)

Considered as group policies, this type of insurance plan determines your indemnity using the rainfall index associated with your crop and grid. Rainfall indices are based on data gathered from the National Oceanic and Atmospheric Administration’s (NOAA) Climate Prediction Center.

Rainfall Index (RI) policies include the following plans:

Whole-Farm Revenue Protection (WFRP)

This type of insurance plan acts as a risk management safety net for all of a farm’s commodities, covering all assets under a single insurance policy. You can learn more about Whole-Farm Revenue Protection (WFRP) here.

Margin Protection (MP)

With this area-based plan, farmers are insured against unexpected decreases in operating margin, which is calculated by subtracting input costs from revenue.

Dairy Revenue Protection

This is another area-based revenue protection product that offers farmers coverage for unexpected declines in quarterly milk sales, relative to the guaranteed coverage level.

Livestock Protection

With this insurance plan, farmers obtain coverage against future declines in market values, increases in feed costs , and milk price declines.

Choose Crop Insurance Services By AMS!

The goal of crop insurance has always been to preserve the profitability of farmers and ranchers throughout the United States who serve as the backbone of our nation.

Since our start in 1995, our crop insurance agents have embodied our passion, community, and integrity throughout each interaction with the farmers and ranchers we’re proud to call clients. 

We are passionate about our industry, dedicated to our clients, proud of our success, and focused on protecting the livelihoods of America’s farmers.

If you’d like to learn more about our crop insurance services, browse our website or give us a call! We’d love to speak with you and develop a tailored crop insurance plan that fits your needs. Contact us by phone or through our website today!

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