Hail
Insurance Remains an Integral Part of a Comprehensive Risk
Management
Recently, Multi-Peril Crop
Insurance (MPCI) has gained popularity with agricultural
producers. In fact, 70 percent of the corn acres and 63
percent of the soybean acres in Illinois were insured with
MPCI in 2003.
In some cases, the
increased emphasis on MPCI has caused hail insurance and its
continued importance to be overlooked. There are some risks
a hail policy covers that an MPCI doesn’t. Depending upon
the type of MPCI product and coverage level, hail insurance
could be a very important part of your risk-management
program.
All hail insurance is not
alike. Basic hail policies typically cover loss to crops
from direct damage by hail. Policies may include some
automatic endorsements for replant, on-farm stored grain and
transit coverage. Your crop insurance specialist can assess
your needs, determine the potential benefits of hail
insurance and advise you about what options will work best
with the MPCI policies you have chosen.
Many hail policies include
automatic replant endorsements that give policyholders a
choice. They can either take a total loss and start over or
receive the actual cost of the replant and yield reduction.
The flexibility of such policies is extremely beneficial
when facing a replant decision.
A hail insurance policy
often can be an economical way to get additional coverage on
stored grain. Most stored grain endorsements provide
coverage against perils named in the policy (e.g., fire) up
to a specified liability amount. However, some companies
treat stored grain coverage as “excess,” meaning that it
will insure against damages that exceed the coverage
provided by another policy (e.g., farm blanket coverage).
An additional benefit is
that many hail insurance policies provide coverage against
losses arising from a grain wagon or truck being overturned
while in transit from the field to the first point of
storage.
Wind damage is another
consideration. Unfortunately, in 2003 many Illinois farmers
learned from experience that their hail policy did not
include wind coverage. A wind endorsement provides
additional coverage over and above the basics included in a
hail coverage policy.
Keep in mind no two wind
endorsements are the same. Read the endorsements carefully
to determine the appropriate coverage for your operation.
Look for when the policy attaches to the crop and when it
ends. Finally, watch for when the coverage expires. The span
of 30 to 45 days can make a significant difference.
Ultimately, hail insurance
can provide you with additional risk management coverage.
When used in conjunction with MPCI, hail insurance can
effectively help you limit MPCI coverage gaps.
The likelihood is low that
an entire county would receive enough hail to trigger a loss
under a county-based group MPCI policy like GRP or GRIP.
Producers who carry GRP or GRIP MPCI policies should
strongly consider mitigating their hail risk with an
individual hail policy.
When coordinating your
hail coverage with other MPCI policies, keep in mind those
policies cover only a portion of your crop production. In
some cases, both a hail and an MPCI policy will pay an
indemnity for the same crop.
What’s more, MPCI policies
cover only fires started by natural causes. If a spark from
your combine starts a fire and burns off your field, the
resulting damage will not be covered by your MPCI policy.
Most hail policies provide some coverage for such losses.
In recent years, hail
insurance has become more complex. It’s a challenge to keep
up with the various options regarding coverage available to
producers today. If hail insurance is something you want to
integrate into your operation’s risk management plan, take a
few minutes to visit with your local 1st FCS crop insurance
specialist to discuss how coverage may benefit your farming
operation. |
