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Texas Agriculture Archive

March 5, 2004

RMA clarifies new
crop insurance rules

The USDA Risk Management Agency has issued an expanded explanation of new insurance rules for 2004.

The clarification notes that new rules are final implementation of double insurance provisions first approved by Congress in the Agricultural Risk Protection Act of 2000 (ARPA). The new rule was enacted to prevent a producer from collecting more than one crop insurance indemnity payment for crop losses that occur on the same acre in the same crop year.

According to the rule, a producer who has a loss on their first insured crop may only receive 35 percent of the calculated indemnity (and only pay 35 percent of the first crop premium due) if they choose to plant and insure a second crop on the same ground that incurs an insurable loss.

If no loss is claimed on the second crop, the producer would receive the remaining 65 percent of the first crop indemnity less the remaining 65 percent of the first crop premium and 100 percent of the second crop premium due.

Due to efforts of the Plains Cotton Growers and the National Cotton Council, RMA has developed a revised rule that provides additional options to allow a producer to retain 100 percent of their first crop premium and opt out of second crop coverage in situations that would have required them to insure the second crop in the past.

Under the new rules a producer who incurs a loss on their first insured crop has several options that will allow them to retain 100 percent of their first crop indemnity: The producer, at his option, may: 1) Decide not to take insurance on a subsequently planted crop. This option is to be exercised on a unit-by-unit basis and the producer must make their insurance provider aware of their decision before the acreage reporting date for the second crop or when the claim is signed for the first insured crop; or, 2) Insure the second crop, but decline to accept any second crop claim payment. Producers who insure a second crop but later choose not to accept payment for a second crop claim will receive the remaining 65 percent of their first crop claim less the remaining 65 percent of the premium due on the first crop and 100 percent of the premium due on the second crop. Producers may decline to accept a second crop indemnity up until the time the claim check is cashed.

RMA also clarified prevented planting rules as well in the bulletin. Essentially a grower who files a prevented planting claim and subsequently hays, grazes or otherwise harvests a volunteer or cover crop after the final planting date and before Nov. 1 will be limited to 35 percent of the applicable prevented planting guarantee. Haying, grazing or harvesting a volunteer or cover crop after Nov. 1 will not result in the reduction of prevented planting payments.