09 Dec 2020
I like options, it means we have choices. Options in crop insurance allows us to make your policy more detailed and tailored to your specific farm needs. As AgCountry insurance specialists, we like to analyze all the options that are available to find ways to enhance your crop insurance coverage.
New for the 2021 crop year is the Enhanced Coverage Option (ECO). This is an area-based coverage option that we can use in combination with your underlying Revenue Protection (RP) or Yield Protection (YP) multi-peril policy to add another band of coverage from 86% up to 90% or 95%, and in turn lessen your deductible. If you have RP, you will have added revenue protection with ECO. If you have YP, you will have added production coverage with ECO. The amount of ECO coverage does depend on your insured crop value of your underlying multi-peril policy. However, it is different in how a loss is triggered. An ECO loss will be triggered when the county for the crop insured under is at a yield or revenue loss.
Let’s run through an example to show how this works:
Let’s say farmer Joe purchases a RP Plan for corn with a 75% coverage level. His APH on corn is 180 bu and the crop insurance price came in at $4.00. By calculating 180 bu APH X $4.00, this gives him an expected value of $720/acre for his corn crop. On his underlying MPCI policy he would be covered at $540/acre ($720 / 75% coverage level). This leaves him with a $180 deductible, or what’s left of his expected value of his crop, which is unprotected. With ECO, we can narrow this unprotected window, and even more so if he has an SCO policy or is in the ARC program with the Farm Service Agency. With ECO, farmer Joe decides to take the 86-95% band, which will allow him to add 9% more coverage. That’s $64.80 of coverage narrowing his deductible down to $115.20.
New for the 2021 crop year is the Enhanced Coverage Option (ECO). This is an area-based coverage option that we can use in combination with your underlying Revenue Protection (RP) or Yield Protection (YP) multi-peril policy to add another band of coverage from 86% up to 90% or 95%, and in turn lessen your deductible. If you have RP, you will have added revenue protection with ECO. If you have YP, you will have added production coverage with ECO. The amount of ECO coverage does depend on your insured crop value of your underlying multi-peril policy. However, it is different in how a loss is triggered. An ECO loss will be triggered when the county for the crop insured under is at a yield or revenue loss.
Let’s run through an example to show how this works:
Let’s say farmer Joe purchases a RP Plan for corn with a 75% coverage level. His APH on corn is 180 bu and the crop insurance price came in at $4.00. By calculating 180 bu APH X $4.00, this gives him an expected value of $720/acre for his corn crop. On his underlying MPCI policy he would be covered at $540/acre ($720 / 75% coverage level). This leaves him with a $180 deductible, or what’s left of his expected value of his crop, which is unprotected. With ECO, we can narrow this unprotected window, and even more so if he has an SCO policy or is in the ARC program with the Farm Service Agency. With ECO, farmer Joe decides to take the 86-95% band, which will allow him to add 9% more coverage. That’s $64.80 of coverage narrowing his deductible down to $115.20.
Again, a claim with the ECO option is only determined when the county average revenue or yield falls below the 95% or 90% level. It is possible to have a loss on your underlying MPCI policy and not receive and ECO payment, or vice-versa. If you already have another area based plan - like Margin Protection (MP), Area Risk Protection Insurance (ARPI), or Hurricane Insurance Protection-Wind Index (HIP-WI) - you cannot have ECO because these products cover the same layer of the expected value of your crop. Rates for this product have not been formulated yet. We are anticipating rates to be released mid-December.
For more information about ECO, contact your local AgCountry insurance specialist to find out more!