Prevented Planting (PP)
As per policy language in Section 17(a)
for the 2005 Spring crop year a producer will be eligible
for a prevented planting payment if:
- You were prevented from planting
the insured crop by an insured cause that occurs on
or after the sales closing date contained in the Special
Provisions for the insured crop in the county for
the crop year the application for insurance is accepted.
Section 17(d) of the policy states that:
Drought or failure of the irrigation water supply will
be considered to be an insurable cause of loss for the
purposes of prevented planting only if, on the final
planting date (or within the late planting period if
you elect to try to plant the crop):
- For non-irrigated
acreage, the area that is prevented from being planted
has insufficient soil moisture for germination of
seed toward maturity due to a prolonged period of
dry weather.
- Prolonged precipitation deficiencies
must be verifiable using information collected by
sources whose business it is to record and study the
weather, but not limited to, local weather reporting
stations of the National Weather Service.
The total number of acres eligible for
prevented planting coverage for all crops cannot exceed
the number of acres of cropland acreage in your farming
operation for the crop year, unless you are eligible
for prevented planting coverage on double-cropped acreage
in accordance with section 17(f)(4).
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Excessive/Inconsistent Yields & Insured Acreage
Limitations
There are several policy changes for
the Spring 2005 crop year that can affect the number
put in the database in reference to production reporting.
As per policy language, if insureds can provide verifiable
records to support excessive actual yields that are
significantly different than other producers’
actual yields in the county or other actual yields reported
for the insured’s farming operation AND the insured
CAN prove there is a valid basis to
support the differences in the yields, Insurance Providers
may request an increase to the maximum yield edit level.
If the Risk Management Agency (RMA) increases the maximum
yield edit level to the actual yield, the actual yield
is used.
However, if the insureds provide verifiable
records to support actual yields AND the insured CANNOT
prove there is a valid basis to support the differences
in the yields, the approved APH yield will be reduced
by replacing excessive actual yields with the:
- Simple average of all actual yields
and assigned yields for the same crop year for the
Practice/Type/Variety and the T-Yield Map area for
the crop in the county. If the simple average of the
actual yields is greater than the maximum yield edit
level, limit the excessive actual yield to the maximum
yield edit level. Use a applicable actual yield descriptor
to identify the simple average actual yield used instead
of excessive actual yields; OR
- The applicable county T-Yield, as
indicated by Paragraph 5A(8) of this procedure, if
the insured has no other applicable actual yields.
If insureds DO NOT
provide verifiable records to support excessive actual
yields, the approved APH will be reduced by replacing
each excessive actual yield with an assigned yield
that is .75 times the approved
APH yield for the previous crop year; OR, if
an approved APH yield was not calculated for the previous
crop year, 75 percent of the
applicable county T-yield.
Inconsistent yields are slightly different
from excessive yields, but are still re-calculated when
found. Inconsistent approved APH yields are approved
APH yields, calculated for databases containing at least
one actual of assigned yield that exceeds
115 percent of:
- The simple average of ALL of the
insured’s approved yields for the crop whose
databases contain actual/assigned yields; OR,
- The applicable county T-yield if
no other applicable databases containing actual/assigned
yields exist for comparison
The reduced approved yields apply to
ALL insured acreage involved, not just the acreage that
exceeds the limits. Example, 320 acres exceed the approved
yield, but you farm 400 acres – the reduction
applies to all 400 acres.
Insured acreage limitations is the third
area that is being closely examined by companies to
determine if there are abnormalities. Insured acreage
exceeds the limitation permitted by the policy if the
current year’s insurable acreage is greater
than 400 percent of the average acreage with
actual/assigned yields reported for APH purposes for
the database.
Insured acreage also exceeds the limitation
permitted by the policy if the acres for two (2) or
more APH crop years with actual yields reported for
the database are each less than
10 percent of the insurable acreage for the current
crop year.
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Substantial Beneficial
Interest (SBI)
SBI’s include Social Security
Numbers (SSN), name, address and phone number. SBI rules
are now more extensive and specific. The following is
information about how SBI’s must now be broken
down and listed:
Corporation XYZ is made up of two
partnerships.
- Partnership A
- Partnership B
(Under the 2004
Basic Provisions the Tax ID numbers for Partnership
A & B and Corporation XYZ would only have to be
listed.)
Under the 2005
Basic Provisions the individuals and their SSNs
that make up Partnerships A & B must now be listed,
along with the Tax ID’s for the Corporation and
the Partnerships. This is only applicable to the individuals
if they have at least a 10% interest in the partnership.
All SBI information must be provided
to the insurance agent by the applicable Sales Closing
Date (March 15th). Failure to provide correct SBI information
will result in:
- A reduction of your share, or
- Policy cancellation.
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Claims over $100,000
Claims over $100,000 now require a three
(3) year Actual Production History (APH) audit. This
should not be a problem for producers, as we and you,
should have hard copy evidence of your production. This
is not wholly uncommon, as claims this big in the past
have required a review; the three (3) year APH review
is just new.
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Forming of Partnerships
Partnerships and other group entities
must have paperwork completed and a Tax ID number to
us by Sales Closing Date
(March 15th). If we do not have the correct SBI information
on or with the application by March 15th the policy
will not be in effect. Bottom-line: If you are forming
a partnership, you must have the necessary paperwork
completed and a Tax ID number to us by March 15th.
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Changes via Telephone
*IMPORTANT* Changes, corrections or
additions to policies will no longer be submitted to
the company via a telephone message from the producer.
To protect you and us, we must speak with you in person
with regards to changes to a policy and the appropriate
forms will need to be signed by you before we will submit
the change.
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Double-checking Schedules
of Insurance
Due to new policy language in the 2005
Spring Crop Basic Provisions any errors on the schedule
of insurance must be identified and we must be notified
by you prior to the applicable Acreage Reporting date.
Errors found after the Acreage Reporting Date are very
difficult to correct and producers may incur penalties
from the company for the right to make the corrections.
REMEMBER: Liability can only be decreased
if a problem is found, liability may not be increased.
In either case, it will be the company’s decision
whether or not to allow these changes.
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Record Keeping
With the new Standard Reinsurance Agreement
between the companies/agents and the government and
the new policy language in the 2005 Basic Crop Provisions,
it is a necessity that the producer and the agent have
copies of three (3) years of APH history. To protect
you, the producer, it is a good idea for you to keep
at least ten (10) years of APH history. Although it
seems like a cumbersome exercise, random audits and
reviews are becoming more common in order for the companies
to remain in compliance with the new rules regarding
Fraud, Waste and Abuse.
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Premiums versus Claims
Although this is current and past policy
language, the companies are putting more emphasis into
premiums being paid timely with the risk of cancellation
greater regardless of claims status. It is just not
worth the risk of delaying premium payments because
of a pending loss. The risk of cancellation is becoming
too great to put your crop security at risk. Bottom-line:
Pay your premium timely regardless of a pending loss.
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Q. Why purchase
a Crop Insurance policy?
A.
Crop Insurance, like any insurance, is a risk management
tool. The premise behind Crop Insurance is not only
about protection in bad years, but it's also about providing
you with the ability and confidence to make decisions
that can yield more profit in the good years. In addition,
most financial lending institutions require some kind
of risk management tool on their investment. With the
most versatile risk management tool being Crop Insurance,
most financial lending institutions will require that
you specifically carry Crop Insurance.
The biggest difference between Crop
Insurance and any other type of insurance is the presence
of governmental influence. The government oversees Crop
Insurance and the Risk Management Agency (RMA) is the
operational arm of the government that controls and
oversees the Crop Insurance program. Crop Insurance
is subsidized directly by the Federal Government. Buy-up
levels of insurance are subsidized up to 65 percent.
ALL Crop Insurance is priced the
same, no company is cheaper than its competitors.
It is comfortability with the agent; the agent’s
knowledge of the business and the producer’s happiness
with customer service that should determines where they
carry their policy.
Crop Insurance policy provides a floor,
a guaranteed minimum yield. The policy then pays the
producer if harvested or appraised production falls
below the guaranteed yield . With Crop Insurance revenue
products you will be protected from low prices as well.
Crop Insurance policies cover most Natural Disasters
and any additional damage that occurs if the additional
damaged was caused by an insured cause of loss.
The bottom-line is this:
Crop Insurance is a risk management tool, and with inconsistent
markets, uncertain weather patterns and unforeseen events,
can you afford to farm without protection?
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Q. Why isn't insurance
available for the same crop in every county and state?
A. Because
the development of Crop Insurance policies depends upon
the demand for them, RMA does not initiate policies
or expand existing programs to areas where there are
no requests. In areas where an established crop policy
is not available, farmers may request that their RMA
Regional Office expand the program to their county the
next crop year. They may also contact their local Crop
Insurance agent and inquire as to the availability of
submitting a written agreement for the current crop
year. Check with your local Crop Insurance agent to
determine which crops are insurable and in which counties.
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Q. What if I am told I
have water now but I run out of water during the crop
year?
A.
The proper procedure for this kind of situation is to
keep a consistent, detailed ledger of notes detailing
any meetings you have attended, any discussions with
your Ditch Company, the Reservoir Company, GASP or any
other entities or individuals with whom you deal regarding
water issues. Operating under this premise will assist
and help you in the creation of a plan of what to plant
and where to plant it. If the lack of sufficient soil
moisture necessary to sustain a crop to harvest remains
during the planting period and your decision to file
Prevented Planting is the final decision, the Adjuster
that works your claim will ask for your documentation
that supports your decision not to plant. As producers,
the burden of proof will be on you, and with new rules
and regulations it is a direct violation for we, as
agents, to gather documentation for you. If you can
prove you had reasonable expectation that there would
be enough water to sustain the crop from initial planting
to harvest and the crop fails, that is a covered peril
under your crop insurance policy. REMEMBER:
Documentation is essential.
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Q. What if I have prior
year's production in the bin and I want to add this
year's crop to the bin?
A. The bin must first be measured by
the Farm Service Agency (FSA), OR by a crop adjuster
prior to this year’s crop entering the bin. The
bin must also be marked to distinguish the different
crop years’ harvest. This is applicable for ALL
crops.
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Q. What is the connection
between the Farm Service Agency (FSA) and Crop Insurance?
A.
Crop Insurance is delivered to the individual producers
via independent crop insurance agents. The independent
agents represent companies who have been given permission
and signed contracts with RMA to administer the Crop
Insurance program to the individual producers.
The FSA on the other hand, is a direct
branch of the government that in all actuality is a
collection agency for the government. The FSA does offer
Limited Disaster Payments (LDP’s) and various
other payments and services. But to digress, the FSA
and the crop insurance companies and agents are being
tied together more closely by the government and misreporting
at one can result in problems at the other. Make
sure that all information given to the FSA is consistent
with all the information you report to your crop insurance
agent, and vice versa.
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Q. How is my Crop Insurance
guarantee calculated?
A. Your
guarantee is calculated by multiplying your Actual Production
History (APH) times the level of coverage you select.
Levels are available in 5 percent increments from 50
% to 75%; even 80% is available for certain crops in
certain counties. The following is an arithmetic example
of how a guarantee is calculated:
- (APH) of 100 bu x .65 level = Guarantee
of 65 bu. This is calculated
per unit, separate units may have different APH’s.
REMEMBER: After you
have set up units for Crop Insurance, you must harvest
each unit separately, DO NOT commingle production –
it will be extremely harmful to your Crop Insurance
APH and the companies have some strict rules regarding
the recalculation of APH’s once commingling has
occurred.
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Q. What crop insurance
papers should I keep?
A. There
are several papers you should keep for the current crop
year:
- Policy confirmation
- Production & yield report
- Acreage report
- Your schedule of insurance
- Maps and 578s from the FSA
For ALL previous years you should keep
your:
- Production & yield reports
- Maps and 578s from the FSA
- Schedules of insurance
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Q. Is insurance available
for organically grown crops?
A.
Crop Insurance is available for organically grown crops,
but it is not available on all crops in all counties.
Checking with your local Crop Insurance agent is the
best method for gaining information regarding organic
insurance.
A producer must use organic farming
methods for three (3) years before they will be registered
as a Certified Organic Producer. During the three (3)
year transition period the Crop Insurance APH will reflect
the change in practice and yields and will be coded
as Transitional Yields. Papers verifying the Certified
Organic Practice must be on file with your Crop Insurance
agent and must be submitted with the company before
the organic practice will be recognized.
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