CropUSA Glossary of Terms

Changes in national farm policy mean that farmers must assume more of their own farming risk. Shrinking profit margins and increasing risks are leading more farmers to pass their risk to their private insurance company. Crop insurance is a farmer's best remaining safety net that can be tailored to fit his own risk management needs.

Below is a compiled list of terms that you should be familiar with to do make educated decisions about Risk Management and to insure your crops through CropUSA.

A&O Subsidy: The subsidy for the administrative and operating expenses paid by FCIC on behalf of the policyholder to the insurer for eligible crop insurance contracts.

ACT: The Federal Crop Insurance Act (7 U.S.C. 1501 et seq.)

Actual Yield: The yield per acre for a crop year which is determined by dividing total production (includes both harvested and appraised production) by planted acres.

Additional Coverage: A level of coverage greater than catastrophic risk protection.

Adjuster: A person who has the ability to determine the amount of loss and the authority from the company to enter into an agreement of settlement with the insured.

Administrative Fee: The processing fee the policyholder must pay under an eligible crop insurance contract. The insurer must collect this fee and forward it to the FCIC.

AGR: Adjusted Gross Revenue. This plan insures the revenue of the entire farm, rather than an individual crop, by guaranteeing a percentage of average gross farm revenue, including a small amount of livestock revenue. The plan uses information from a producer`s Schedule F tax forms to calculate the policy revenue guarantee. Five continuous years of tax data are used to calculate the average AGR.

Agricultural Commodity: Grain and non-grain crops, vegetables, fruits, nuts, nursery plants, floriculture, Christmas trees, maple tree sap, animals, products from animals such as milk, eggs, etc., and any other agricultural production, excluding timber, forest, and forest products.

APH: Actual Production History. A measure of an individual farmer`s "normal" crop yield in the crop insurance program. When the actual crop yield deviates by more than a certain percentage from the APH, an insured producer is eligible for an indemnity (loss) payment.

Approved Yield: The actual production history (APH) yield, calculated and approved by the verifier, used to determine the production guarantee by summing the yearly actual, assigned, adjusted or unadjusted yields contained in the database, which will always contain at least four yields. The database may contain up to ten consecutive crop years of actual or assigned yields.

Assignment of Indemnity: A transfer of policy rights whereby a farmer assigns his right to an indemnity payment to any party of his choice for the crop year.

Base Premium: The net written premium of a policy that includes the premium paid by the policyholder and the premium subsidy provided by the FCIC.

Basic Unit: All insurable acreage of the insured crop in the county on the date coverage begins for the crop year: (1) in which the farmer has 100% crop share; or (2) which is owned by one person and operated by another person on a share basis. (Example: If, in addition to the land owned by the farmer, the farmer rents land from five landlords - three on a crop share basis and two on a cash basis - the farmer would be entitled to four units; one for each crop share lease and one that combines the two cash leases and the land the farmer owns.)

Cancellation Date: The calendar date on which coverage for the crop will automatically renew unless canceled in writing by either the farmer or the FCIC in accordance with the policy terms.

CAT: Catastrophic Risk Protection. Coverage that compensates the farmer for crop yield losses exceeding 50% of his average historical yield at a payment rate of 55% of the projected season average market price. CAT coverage requires that a farmer realize a yield loss of more than 50%. The farmer pays no premium for CAT coverage, but (except for cases of financial hardship) must pay an administrative fee of $100 per crop per county. CAT coverage also receives a reduced administrative cost reimbursement. Farmers must sign a waiver foregoing any federal disaster assistance if they decline CAT coverage.

Check-off Program: A reference to the generic research and commodity promotion programs for farm products that are financed by assessments applied to sales of those products by producers, importers, or others in the industry.

CIH: Crop Insurance Handbook. A manual issued annually by the FCIC which provides underwriting and processing procedures for a given crop year.

Claim for Indemnity: A claim made for damage or loss to an insured crop and submitted to the FCIC not later than 60 days after the end of the insurance period.

Cover Crop: A crop generally recognized by agricultural experts as agronomically sound for the area for erosion control or other purposes related to conservation or soil improvement. A cover crop may be considered to be a second crop.

Coverage Begins - Date: The calendar date insurance begins on the insured crop as continaed in the policy's Crop Provisions, or the date planting begins on the unit.

CRC: Crop Revenue Coverage. A type of federal crop insurance in which the revenue guarantee is based on individual farm yield histories and futures prices. CRC covers revenue losses due to a low price, low yield, or any combination of the two. It differs from other revenue insurance programs by allowing producers to use the higher of the planting price or the market price in determining a target level of revenue.

Crop Provisions: The part of the policy that contains the specific provisions of insurance for each insured crop.

Double Crop: Producing two or more crops for harvest on the same acreage in the same crop year.

Earliest Planting Date: The initial planting date contained in the Special Provisions, which is the earliest date a farmer may plant an insured commodity and qualify for a replanting payment.

Endorsement: An amendment, added to the insurance contract by the sales closing date, used principally to alter the printed terms of the policy.

Enterprise Unit: All insurable crops in a county that are reported on one production record.

FCIC: Federal Crop Insurance Corporation. A wholly owned corporation of the U.S. Department of Agriculture, administered by the Risk Management Agency.

Final Planting Date: The date contained in the Special Provisions by which the insured crop must initially be planted in order to be insured for the full production guarantee.

First Insured Crop: With respect to a single crop year and a specific crop acreage, the first instance that an agricultural commodity is planted for harvest or prevented from being planted and is insured under the Act. For example, if winter wheat that is not insured is planted on acreage that is later planted to soybeans that are insured, the first insured crop would be soybeans.

FSA: Farm Service Agency. An agency of the U.S. Department of Agriculture which administers farm programs and producer benefits on a local level.

FSN: Farm Serial Number. An identification number assigned to a farm by the FSA county committee. This number is unique to a farm and producer.

Good Farming Practices: The production methods utilized to produce the insured crop and allow it to make normal progress toward maturity and produce at least the yield used to determine the production guarantee or amount of insurance, including any adjustments for late planted acreage.

GRIP: Group Revenue Insurance Policy. A county-based revenue insurance program that is a variation of GRP. GRIP pays a participating producer when the county revenue per acre for an insured crop falls below a trigger revenue selected by the insured producer, regardless of the actual revenue level of the individual producer. It is available on a limited basis where GRP is currently available.

GRP: Group Risk Plan. A form of crop insurance available in certain parts of the country that makes an indemnity payment to all participating crop farmers in a particular area when the entire county`s crop production is a certain percentage below the normal production level of the county. This differs from the basic crop insurance program that makes payments to participating farmers when the individual farmer`s own crop yield is less than his normal yield. GRP protection involves less paperwork and costs less than MPCI, however, individual crop losses are not covered if the county yield does not suffer a similar level of loss.

Indemnity Payment: The payment that eligible producers receive if they realize a qualifying crop loss under crop insurance, revenue insurance, or any insurance program.

Insurance Provider: A company reinsured by FCIC that provides crop insurance coverage to producers participating in any Federal crop insurance program administered under the Federal Crop Insurance Reform Act of 1994.

Insured: The named person as shown on the application accepted by the insurance provider. This term does not extend to any other person having a share or interest in any portion of the insured's farming operation (for example, a partnership, landlord, or any other person).

ITS: Ineligible Tracking System. A tracking system designed to identify producers who are ineligible to participate in any program administered by the FCIC.

LAM: Loss Adjustment Manual. A manual issued annually by the FCIC that contains loss adjustment approved practices.

Late Plant: This is an option that will reduce your coverage in the case that you are unable to plant by the final plant date in accordance with the Special Provisions provided in the crop`s policy provisions.

Late Planting Period: The period that begins the day after the final planting date for the insured crop and ends 25 days after the final planting date.

Limited Resource Farmer: A person with: (1) Direct or indirect gross farm sales of not more than $100,000 in each of the previous two years (adjusted for inflation beginning in 2004); and (2) a total household income at or below the national poverty level for a family of four, or less than 50% of the county median household income in each of the previous two years (determined annually using Commerce Department Data).

Loss Ratio: The ratio calculated by dividing the ultimate net loss by the net book premium, expressed as a percentage. For example, the ratio of $1 ultimate net loss to 50 cents net book premium would be expressed as 200%.

MGA: Managing General Agent. A licensed entity that manages all or part of the insurance business of an insurer and acts as an agent for such insurer whether known as a managing general agent, manager, or other similar term, that produces and underwrites an amount of gross direct written premium equal to or more than five per cent (5%) of the policyholder surplus as reported in the last annual statement of the insurer. Note: This definition is for Idaho and varies from state to state.

MPCI: Multiple Peril Crop Insurance. This program is to insure against losses due to natural causes and to help protect farmers for loss of production below a predetermined yield, known as the unit guarantee, which can be calculated using the producer`s actual production history. The farmer selects the amount of average yield to insure (from 50-85%) and the percent of the predicted price to insure (between 55-100% of the crop price established annually by the RMA). If the harvest is less than the yield insured, the farmer is paid an indemnity based on “the difference.” The indemnity is calculated by multiplying “the difference” by the insured percentage of the established price selected when the crop insurance was purchased.

NCIS: National Crop Insurance Services. An established organization which plays an active role in policy formation and education within the industry.

Net Book Premium: The total premium for all eligible crop insurance contracts, less A&O subsidy, cancellations, adjustments and administrative fees.

Practical to Replant: The determination, after loss or damage to the insured crop, based on all factors, including but not limited to moisture availability, marketing window, condition of the field, and time to crop maturity, that replanting the insured crop will allow the crop to attain maturity prior to the calendar date for the end of the insurance period.

Prevented Planting: Failure to plant the insured crop by the final planting date designated in the Special Provisions for the insured crop. The farmer must have been prevented from planting because of drought, flood, or other natural disaster that is general in the surrounding area and that prevents other producers from planting acreage with similar characteristics.

Producer Premium: That portion of the premium for an eligible crop insurance contract payable by the policyholder.

Production Report: A written record showing the farmer`s annual production, including planted acreage and harvested production. This report must be supported by written, verifiable records from a warehouseman or buyer of the insured crop or by measurement of farm-stored production.

RA: Revenue Assurance. A form of revenue insurance that protects a grower of an insurable crop whenever low prices, low yields, or a combination of both causes revenue to fall below a guaranteed level selected by the producer. It differs from other revenue insurance programs in that it allows a farmer to use the posted county price, rather than a national price, in determining a target level of revenue.

Reinsurance Year: The period from July 1 of any year through June 30 of the following year and identified by reference to the year containing June.

Replanting: Performing the cultural practices necessary to prepare the land to replace the seed or plants of the damaged or destroyed insured crop and then replacing the seed or plants of the crop in the same insured acreage.

Representative Sample: Portions of the insured crop that must remain in the field for examination and review by a loss adjuster when making a crop appraisal.

Retained: As applied to ultimate net losses, net book premium, or book of business, retained means the remaining liability for ultimate net losses and the right to associated net book premiums after all reinsurance ceded to FCIC under the SRA.

RMA: Risk Management Agency. An independent office within USDA that is responsible for the supervision of the Federal Crop Insurance Corporation; and the administration and oversight of the federal crop insurance program and any pilot or other programs involving revenue insurance.

Sales Closing Date: A date contained in the Special Provisions by which an application must be filed. The last date by which the farmer may change AGR coverage for a crop year.

Second Crop: With respect to a single crop year, the next occurrence of planting any agricultural commodity for harvest following a first insured crop on the same acreage. The second crop may be the same or a different agricultural commodity as the first insured crop, except the term does not include a replanted crop.

Special Provisions: The part of the policy that contains specific provisions of insurance that may vary by geographic location.

SRA: Standard Reinsurance Agreement. A contract issued annually between the FCIC and a private insurance company that allows the private insurance company to market, underwrite, and adjust crop insurance policies.

Summary of Coverage: A statement from the company to the farmer, based upon the farmer's acreage report, specifying the insured crop and the guarantee or amount of insurance coverage provided by unit.

Underwriting Review: A review of the applicant/insured's underwriting information by a person designated by the insurance provider (verifier or underwriter) who is versed in the AGR program and is proficient in the knowledge and skills necessary to evaluate the grower's request for insurance.

USDA: United States Department of Agriculture. The USDA was originally established in 1862 and raised to cabinet status in 1889. In FY1997, it had an employment level equal to about 113,000, working in some 30 separate agencies. Over 90% of the staff are located in local, state, and regional field offices away from the Washington, DC, headquarters. Forestry, natural resource, and farm activities utilized 58% of the staff time. About 70% of USDA expenditures went to domestic food assistance programs.

Whole Farm Unit: All insurable acreage of two or more insured crops planted in the county in which the farmer has a share on the date coverage begins for each crop for the crop year. All crops for which the whole farm unit structure is available must be included in the whole farm unit. At least two of the insured crops must each constitute at least 10% of the total liability of all insured crops in the whole farm unit, and all crops in the unit must be insured under the same plan of insurance and with the same insurance provider.

Written Agreement: An agreement to allow exceptions or changes to a policy. A written agreement is authorized under the basic provisions, the crop provisions, or the Special Provisions for the insured crops.