Four policy types are available for most crops. There are 2 pairs of options within the policy decision. There are exceptions for regionally minor crops.
Yield vs Revenue Protection
Yield Protection crop insurance policies protect against low yields. Period.
Revenue Protection crop insurance policies protect against reduced revenue, whether brought about by lower yields, lower crop prices, or any combination of lower yields and lower crop prices.
Both policy types utilize your farm’s actual production as the base of calculations regarding guarantees and losses. Revenue Protection policies add in a national per bushel price based on the Chicago Board of Trade. In other words, the price you receive when you sell a commodity doesn’t impact your crop insurance calculations.
Revenue Protection Coverage
As you may guess, because Revenue Protection policies protect against more possible poor outcomes than Yield Protection policies, their associated premiums are a little bit higher. There are some ways to manage per acre premiums within Revenue Protection policies that are discussed in the article Crop Insurance Coverage Levels and Insurance Units.
Area vs Individual Policies
In addition to selecting Revenue Protection vs. Yield Protection, a farm must also decide whether to purchase farm-specific policies or area-wide policies. Area policies have essentially the same coverage, but average yields for the entire County are used to calculate guarantees and indemnities.
Area policies may have lower premiums than Individual policies, but there are some distinct issues that make their use somewhat riskier for most farms.
Yield Protection Example
Jones Farm is located in Wood County, WI. Rented land is non-irrigated and has an actual production history (APH) of 151. County-wide APH is 132 on non-irrigated land. If the rented land corn fields got hail, how would a farm-specific Yield Protection (YP) policy compare to an Area Yield Protection (AYP) policy, both at 75% yield protection?
| Policy | Base Price $/bu | Guarantee bu/ac | Farm Yield bu/ac | County Yield bu/ac | Indemnity $/ac |
| YP | $5.91 | 113 | 70 | 120 | $5.91 x (113-70) = $254 |
| AYP | $5.91 | 99 | 70 | 120 | $0 |
The previous examples in this lesson detail the reality for nearly all grain crops. Farms which raise forages, fruits, vegetables, or minor crops have other crop insurance opportunities. These additional types of policies are described in the article Crop Insurance: Additional Rules, Opportunities, and Resources.
Summary
This article was focused on policy types, which is the first decision point within a crop insurance selection process. Once you have selected Yield vs. Revenue and Individual vs. Area Protection, there are still some important decisions to make and opportunities available within crop insurance.
