What are the most effective crop insurance practices for agribusiness?

1 Assess your needs

Before you shop for crop insurance, you need to have a clear idea of your goals, risks, and resources. Start by analyzing your production history, projected yields, costs, and revenues for each crop and location. Then, identify the main sources of uncertainty and potential losses that could affect your operations, such as drought, hail, frost, fire, pests, diseases, or price changes. Finally, evaluate your financial capacity and risk tolerance, and decide how much you can afford to pay for premiums and deductibles, and how much you are willing to self-insure.

2 Compare your options

Once you have assessed your needs, you can compare the different types of crop insurance available for your agribusiness. There are two main categories: yield-based and revenue-based. Yield-based insurance pays you if your actual yield falls below a guaranteed level, based on your historical average or an area index. Revenue-based insurance pays you if your actual revenue falls below a guaranteed level, based on your expected yield and price or a market benchmark. Within each category, there are various plans and levels of coverage to choose from, depending on your crops, locations, and preferences.

3 Optimize your coverage

After you have compared your options, you can optimize your coverage by selecting the best plan and level for each crop and location, and adjusting them according to your changing circumstances. To optimize your coverage, you should consider the following factors: the correlation between your yields and prices, the variability of your yields and prices, the availability and accuracy of data, the timing and frequency of payments, and the compatibility with other risk management tools. You should also review your coverage annually and update it as needed to reflect your current situation and expectations.

4 Monitor your performance

Another effective crop insurance practice for agribusiness is to monitor your performance and compliance throughout the crop year. This means keeping accurate and timely records of your planting, harvesting, marketing, and insurance activities, and reporting them to your insurer as required. It also means following the good farming practices and conservation measures that are specified in your policy, and notifying your insurer of any changes or losses that may affect your coverage. By monitoring your performance and compliance, you can avoid disputes, penalties, or gaps in your protection.

5 Evaluate your outcomes

At the end of the crop year, you should evaluate your outcomes and learn from your experience. This means comparing your actual yields and revenues with your expected and guaranteed levels, and calculating your net returns and losses. It also means assessing how well your crop insurance policy met your goals and needs, and identifying any strengths or weaknesses in your risk management strategy. By evaluating your outcomes, you can measure your performance, improve your decision making, and prepare for the next crop year.

6 Seek professional advice

The last effective crop insurance practice for agribusiness is to seek professional advice from qualified and trusted sources. Crop insurance can be complex and confusing, and you may not have the time or expertise to navigate it on your own. Therefore, you should consult with an experienced and licensed crop insurance agent who can help you understand your options, select your coverage, and manage your claims. You should also seek advice from other experts, such as agronomists, economists, accountants, or lawyers, who can provide you with relevant and reliable information and guidance.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?