5 Reasons Why Your Small Farm Needs Crop Insurance
There are many types of farm insurance, but one that is very helpful for small farmers is crop insurance. Many smaller farms are only one or two failed harvests away from losing the farm. Insuring your crops can enable you to avoid that risk.
1. Shield Against Disaster
A natural disaster can occur to anyone. Hail storms, flooding, and drought are just some of the most common concerns. Crop insurance is designed to protect you against disasters. If all or part of your crop is lost to an act of nature, then the insurance will cover the loss. Typically these policies pay out either a pre-determined settlement or the settlement amount will be based on the value of the lost crop at the time of the market.
2. Cover Yield Shortages
Yields can be down without a disaster. Poor growing years sometimes occur, even for the most established and experienced farmer. A low-yield year can drive one to the brink of bankruptcy and inhibit the financial ability to invest in the next crop. Crop insurance that offers yield shortage coverage will cover the gap in any differences between what was originally planted and what was finally harvested for the market.
3. Avoid Crippling Debt
Debt is the most common destroyer of a small farm. It takes money to purchase seeds, maintain equipment, pay for the land, and hire help. If the final crop fails or doesn't produce as expected, all of those debts are still going to come due even if the money doesn't come in. Crop insurance will provide you with a settlement that can cover debts, ensuring loan payments and overhead are covered come what may.
4. Maintain a Stable Income
Another major risk faced by farmers is income instability. Much of the year has little income, with just a bit of payout at harvest times. Insurance covers risks to those harvests so you can rest assured that there will be enough money coming in even if a crop fails or the market for what you grow tanks.
5. Manage Price Risks
There are many reasons why the harvest doesn't always bring in the projected price when the time comes to sell. Revenue protection is a form of crop insurance that locks in the price of your crops at a pre-determined level, set by your insurance company. If the final selling price is below the revenue protection amount, then your policy will kick in and cover the difference.
Contact a farm insurance broker to learn more.