It’s time to meet with your insurance agent to begin planning insurance coverage for the next growing season. Are you thinking to keep the status quo? Think again. Every farmer should assess a few factors as they as begin to plan for the future.
APH Calculated Correctly?
First, growers need to ensure that their Actual Product History (APH) has been updated properly by their agent. Step one is an accurate review of the procedural aspects of updating an APH when coming off a prevented planting growing season.
A grower may have been prevented from planting in part of a section or unit. For example, if a grower has 400 acres of ground within a given field and was prevented from planting on 200 acres of it, then 200 acres will be calculated with actual yield. The other 200 acres that was under Prevented Planting and the grower’s APH will be calculated using a blended yield. This can be tricky to evaluate, so be sure to ask how your APH was updated.
Risk Rating Updates
Next, consider any risk rating changes that may have occurred in your area. Due to the flooding in 2019, river bottom ground or low areas that are flood prone where levees might have been breached may now be considered high risk.
USDA’s Risk Management Agency (RMA) releases rates and actuarial tables every year. During 2019, several levies were breeched and destroyed that had previously protected farmland from flooding. That land could be rated high risk now because that levee no longer exists. If farming ground that might have switched to a high-risk rating, ask your agent and confirm if this information has changed in any fields for the coming crop year.
Ask Questions about your Coverage Level
Once you know your APH and your risk rating, it’s time to really consider how your policy performed the prior year. The best approach is to sit with your agent and start asking questions. Keep last year in mind but maintain your focus on the future and what you can do to make your coverage better.
Consider these questions to help get in the risk management mindset:
- If we were to have another year like 2019, how do you feel about the protection you’ve got in place?
- Were the correct options in place to maximize Prevented Plantings payments?
- Do you need more or less coverage in 2020?
- Is there a private product that could further minimize my risk?
- What are your eligible acres for the next growing season?
An easy trap a lot of farmers fall into is sticking with the status quo or doing what their neighbor does. Every farming operation is different, so what your neighbor does may not be right for you. Challenge your agent to customize a policy that manages your risk and makes your policy work for you.