An Introduction to Insurance for Businesses

Farming is the most largely practiced businesses in the world. However, even with the rapid modernization of farming technology, the crops are still completely under the mercy of Mother Nature. Hail, flood, excessive rain, drought, and other sudden weather changes has the ability to completely destroy a farmer’s yearly produce. Apart from weather changes the prices of produced crop can also fall depending on various market conditions. This is exactly where crop insurances come in. It makes sure the farmers are financially compensated if their income is affected by weather or market conditions. However, not all crop insurances are the same. They differ in their coverage and features. No matter what they offer they all fall under two basic categories, crop yield insurance and crop revenue insurance.

Crop Yield Insurance: These insurances are designed to safeguard a farmer’s income if their yield is affected or destroyed due to weather changes. Most crop yield insurances provide a broad coverage, protecting the farmer’s revenue from a list of natural disasters. These are called Multi-peril Crop Insurance or MPCI and are usually offered by government insurers or private firms that are financially backed up by government agencies. This is a good things as a private firm might not have the financial capacity to effectively cover claims caused by a large scale disaster. Farmers can also go for a insurance plan with a narrow coverage, depending on the weather condition of a particular region. However, these insurance plans are typically offered by private firms.

Crop Revenue Insurance: This is a type of insurance that protects the farmer’s revenue from market conditions. Sudden price drops can severely lessen a farmer’s profit percentage. Story county crop insurance helps farmers achieve predetermined target revenue by compensating for low yields and price drops.

The Relationship Between Federal Government And Private Crop Insurance Firms:

Few isolated region wise claims can easily be handled by private insurance firms, but when a catastrophic disaster like Katrina hits it’s impossible to for a private firm to cover all the loses. This is exactly why the federal government has stepped in and has introduced the Standard Reinsurance Agreement. Through this agreement the government protects the private firms from yearly losses and enables them to provide effective coverage following a major natural disaster. In return however, the Federal government takes a portion of their yearly profits and gets to set some basic regulations. Here are some of the regulations that every farmer should know before taking or claiming a crop insurance policy.

No Refusals: Under the government regulations a private firm has to sell a crop policy to any farmer who requests for it. This regulation includes high risk farmers.

Standardized Premium Rates and Conditions: Companies cannot raise the premium rates under any circumstances. They also cannot alter the conditions or add special conditions to the existing policy.


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