To better understand Multiple Peril Crop Insurance it is necessary to understand a few definitions:
Unit Structure:
Basic- All insurable acreage of the insured crop in a county separated by share arrangement.
Optional- A Basic Unit may be sub-divided into Optional Units if each optional unit is located in a separate section or FSA Farm Serial Number (whichever applies,) and there is a discernable break in the planting pattern, and separate production records are proven.
Enterprise- All insurable acreage of the insured crop in a county. Some restrictions apply.
Actual Production History (APH)- The amount of production per acre computed and used to determine guarantees within the MPCI program. An APH may contain up to 10 consecutive APH crop years of actual and/or assigned yields.
Plans
Yield Protection (YP) provides protection against a loss in yield due to unavoidable, naturally occurring events. For most crops, that includes adverse weather, fire, insects, plant disease, wildlife, earthquake, volcanic eruption, and failure of the irrigation water supply due to a naturally occurring event. YP guarantees a production yield based on the individual producer's APH. A price for YP is established according to the crop's applicable commodity board of trade/exchange as defined in the Commodity Exchange Price Provisions (CEPP.) The projected price is used to determine the yield and to value the production to count less than the yield protection guarantee. See actuarial information for availability.
Revenue Protection (RP) provides protection against a loss of revenue caused by price increase or decrease, low yields or a combination of both. This coverage guarantees an amount based on the individual producer's APH and the greater of the projected price or harvest price. Both the projected price and harvest price are established according to the crop's applicable commodity board of trade/exchange as defined in the Commodity Exchange Price Provisions (CEPP.) While the revenue protection guarantee may increase, the premium will not. The projected price is used to calculate the premium and replant payment or prevented planting payment. An indemnity is due when the calculated revenue (production to count x harvest price) is less than the revenue protection guarantee for the crop acreage. See actuarial information for availability.
Revenue Protection with Harvested Price Exclusion (RP-HPE) is similar to RP, however RP-HPE coverage provides protection against loss of revenue caused by price decrease, low yields or a combination of both. Unlike RP, the revenue protection guarantee for RP HPE is based on the projected price only and it does not increase based on the harvest price. See actuarial information for availability.
Area Yield Protection (AYP) coverage is based on the experience of the county, rather than individual farms. Maintaining the insured's actual production history is mandatory and may be used by RMA as a data source to establish and maintain the area programs. AYP indemnifies the insured in the event the final county yield falls below the insured's trigger yield. The Federal Crop Insurance Corporation (FCIC) will issue the final county yield in the calendar year following the crop year insured. Since this plan is based on county yields and not individual yields, the insured may have a low yield on their farm and not receive payment under AYP. See actuarial information for availability.
Area Revenue Protection with Harvest Price Exclusion (ARP-HPE) like AYP, ARP-HPE is based on the experience of the county rather than individual farms. Maintaining the insured's actual production history is mandatory and may be used by RMA as a data source to establish and maintain the area programs. An ARP-HPE policy provides protection against loss of revenue due to a county level production loss, price decline, or a combination of both. This plan only uses the projected price and does not provide upside harvest price protection. An indemnity is due under ARP-HPE when the final county revenues published by FCIC are less than the trigger revenue. Since this plan is based on the county revenue and not the individual revenue, the insured may have a loss in revenue on their farm and not receive payment under ARP-HPE. See actuarial information for availability.
Area Revenue Protection (ARP) is based on the experience of the county rather than individual farms. Coverage is provided against loss of revenue due to a county level production loss, a price decline, or a combination of both. Upside harvest price protection is included, which increases the policy protection at the end of the insurance period if the harvest price is greater than the projected price and if there is a production loss. ARP will pay a loss when the final county revenue is less than the trigger revenue, which is calculated using the higher of the projected price or harvest price. See actuarial information for availability.
Actual Production History (APH) provides protection 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. Like YP, the APH plan guarantees a yield based on the individual producer's actual production history. Unlike YP, the available price elections are established by the Risk Management Agency. An indemnity is due when the value of the production to count is less than the liability. See actuarial information for availability.
Why purchase Multiple Peril Crop Insurance?
- Provides protection against production and revenue losses
- Acts as an excellent credit enhancement for agricultural loans
- Provides peace of mind
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