Protecting your Crop: The Value in the Micro Farm Policy for Diversified Farms

Written by: John Fitzpatrick

Whole Farm Revenue Protection is an important risk management tool for diversified farmers to insure all their crops and livestock in one insurance policy. However, for smaller-to-mid-sized specialty crop producers, the micro farm crop insurance policy is a subset of the whole farm policy that may be a better option. How does the micro farm policy differ from whole farm? Read on to learn more.

Revenue maximum: The revenue for a micro farm policy is limited to $350,000 for a new policy and $400,000 for a carryover. The approved revenue cannot be any higher than those two. For operations with annual revenues exceeding $350,000, Whole Farm Revenue Protection is the better choice.
Simpler recordkeeping: Micro farm offers simpler recordkeeping than the whole farm policy. Producers who do not track their income by crop can take advantage of a micro farm policy to combine all crops into one set of revenue records.
3-crop diversification discount: Regardless of the actual number of crops you produce, the micro farm policy considers all operations to produce three crops, which reduces the premium. Whereas with the whole farm policy, the maximum discount requires seven crops.
Allowable revenue includes value-added products: Post-production, value-added products, such as apple cider, jams or pies, are considered allowable revenue under the micro farm policy, whereas it is not under the whole farm policy. However, the added value must be removed from the revenue and only the value of the crop itself determines the coverage amount.
3-to-5-year average: Coverage is determined based on a 3-to-5-year average, dependent on the number of tax returns available. For example, if a producer only has three years of tax returns available, coverage will be based on the 3-year average. However, if the producer has five years of returns, it will be based on the 5-year average. Revenue per acre is then determined based on the average income divided by the average number of acres grown. Once the crops are planted for the year, coverage will be adjusted to the average revenue per acre times the planted acres, so long as that is equal to or lower than the five-year average.

The micro farm crop insurance policy is a valuable risk management tool for operations to mitigate financial risks associated with their production by covering a portion of their potential revenue loss due to weather events or other covered perils. The micro farm policy may especially be a beneficial risk management tool for small or new producers, or producers who don’t have robust reporting on each crop they grow.

Learn more about Micro Farm Crop Insurance

To discuss your particular situation and the risk management tools that may be beneficial to your operation, reach out to a Crop Growers insurance specialist who can develop a risk management plan unique to your operation to help you achieve your business goals.

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