Myths and Facts

In preparation for the new Congress and upcoming farm bill debate, the Crop Insurance and Reinsurance Bureau and coalition partners collaborated to create a “Crop Insurance Myths vs Facts” resource guide that debunks common misconceptions about the crop insurance program.

CIRB will update this page weekly with a new resource sheet. Contact Kerry Lynch to receive the weekly email communications regarding the Myths and Facts resources.


Myth v Fact 1.18 – Market Distortions

MYTH: Crop insurance is market-distorting and discourages farmers from following market signals.

FACT:  Crop insurance uses current-season market prices to determine coverage, losses, indemnities and premiums.  Some form of crop insurance is also available on every single crop, so crop insurance does not create incentives to grow one product over another because of the availability of crop insurance for one crop and not another.  

Myth v Fact 1.15Reducing participation from any group of farmers will change the premiums for ALL farmers because it will change the risk pool

MYTH: Means testing such as adjusted gross income (AGI) limits and premium assistance caps will keep large, wealthy farmers from receiving assistance they do not need.     

FACT:  Reducing participation from any group of farmers will change the premiums for ALL farmers because it will change the risk pool. Crop insurance is, by statute, an actuarially sound program, which means the more participants and more acres in the program, the more the risk will be spread – keeping premiums and costs down for all participants.

Myth v Fact 1.14 – Prices of the commodities produced on the land primarily determine property values

MYTH: Crop Insurance inflates property values in a way that biases against small farmers.  

FACT: The prices of the commodities produced on the land primarily determine property values, not crop insurance.

Myth v Fact 1.13 – Farm Bill expanded the conservation compliance provisions and Sodsaver provisions.

MYTH: Crop insurance encourages farmers to tear up ground.

FACT:  The 2014 Farm Bill expanded the conservation compliance provisions and Sodsaver provisions. In addition, acres in production and erosion have decreased.

Myth v Fact – 1.12 Farmers Use a Variety of Risk Management Strategies 

MYTH: Crop insurance discourages farmers from using other risk management tools such as market hedging, crop rotation, and off-farm income. The use of these other risk management tools without crop insurance would be enough risk management for farmers.

FACT:  Farming is a risky business, so farmers utilize a multitude of risk management strategies to manage the enormous hazards they face every year when they plant a crop. However, crop insurance is the only risk management tool that farmers can literally take to the bank to prove their ability to pay back annual operating loans required to keep the farm going.

Myth v Fact 1.11 – Crop Insurance Provides Certainty to Farmers

MYTH: Disaster assistance would be better and cheaper than crop insurance.  

FACT: Crop insurance provides a certainty to farmers (and their lenders) that ad hoc disaster assistance can never provide. Crop insurance payments are also timely, unlike ad hoc disaster payments which often come years after a loss.

Myth v Fact 1.10 – Crop Insurance Covers Many Crops

MYTH: Crop insurance is only for big corn, soybean, wheat and cotton farmers.      

FACT:  Crop insurance is available for more than 100 crops and to farmers of all sizes and in all 50 states.

Myth v Fact 1.9 – Crop Insurance is an Actuarially Sound Program

MYTH: Means testing such as adjusted gross income (AGI) limits and premium assistance caps will keep large, wealthy farmers from receiving assistance they do not need.     

FACT:  Reducing participation from any group of farmers will change the premiums for ALL farmers because it will change the risk pool. Crop insurance is, by statute, an actuarially sound program, which means the more participants and more acres in the program, the more the risk will be spread – keeping premiums and costs down for all participants.

Myth v Fact 1.8 – Farm Income

Myth: Most ag production comes from large farms that can manage their own risk. Besides, farm household income is up and crop insurance payments are only a small portion of total farm household income so they must not matter.

FACT:Farmers of all sizes utilize crop insurance, and crop insurance provides meaningful collateral to lenders when farmers seek operating capital.

Myth v Fact 1.7- Harvest Price Option

Myth: The harvest price option eliminates all risk from farming and is unnecessary.

Fact: Even with the harvest price option, farmers must meet a deductible for loss and pay a premium for coverage. Risk still exists for these farmers. The harvest price option simply provides these farmers with the replacement value for their lost crop. 

Myth v Fact 1.6 – Crop Insurance requires a deductible to be met before a payment is made.

Myth: Crop insurance doesn’t even require a farmer to have a loss.

Fact: Crop insurance requires a deductible to be met before a payment is made. Losses must be verified by certified adjusters before payments are made, and these payments are subject to audits. 

Myth v Fact 1.5 – Crop Insurance Costs are Well Below Budget

Myth: Crop insurance is over budget

Fact: Crop insurance costs are currently well below budget. Crop insurance costs were $2.7B under budget in 2014 & 2015.  

Myth v Fact 1.4 – Crop Insurance For Beginning Farmers and Ranchers

MYTH:Crop insurance makes it more difficult for beginning farmers and ranchers to enter the farming business. 

FACT: The 2014 Farm Bill included provisions to make crop insurance an even better risk management tool for beginning farmers and ranchers.  These provisions have only been implemented for one full year, yet have had a meaningful impact.

Myth v Fact 1.3 – Farmers of all sizes use crop insurance

Myth v Fact- Farmers of all sizes use crop insuranceMYTH: Most ag production comes from large farms that can manage their own risk. Besides, farm household income is up and crop insurance payments are only a small portion of total farm household income so they must not matter.

FACT: Farmers of all sizes utilize crop insurance, and crop insurance provides meaningful collateral to lenders when farmers seek operating capital.

 

 

Myth v Fact 1.2 – Detecting and eliminating fraud, waste and abuse in the program.

Myth v Fact- Detecting and eliminating fraud, waste and abuse in the programMYTH: Waste, fraud and abuse are rampant in crop insurance.

FACT: According to the Risk Management Agency (RMA) at USDA, the improper payment rate for crop insurance for fiscal year 2015 was 2.2 percent, which is almost half of the average rate for all government programs (4.39 percent).

 

 

 

Myth v Fact 1.1 – Crop Insurance Is Not Only for Big Crops.

Myth v Fact - Only for Big Crops

MYTH:  Crop insurance is only for big corn, soybean, wheat and cotton farmers. 

FACT:  Crop insurance is available for more than 100 crops and to farmers of all sizes and in all 50 states.