Farm and Crop Insurance Explained
December 9, 2025
By Mitch Fastenau
Understanding crop and farm insurance is key to seeing how farmers manage unpredictable risks, from storms and droughts to fluctuating markets. For many outside of agriculture, it can seem complicated. To break it down, we spoke with Willie Jones of Farmers Mutual Hail. Jones explains how these policies work by comparing them to more familiar insurance products, like home and auto; clears up common misconceptions; and shows how crop and farm insurance keeps farmers’ operations — and our food supply — stable.
What Is Each Type of Insurance?
Crop insurance helps farmers protect their crops. In Iowa, this includes common crops like corn and soybeans, as well as specialty crops like grapes, nuts and berries. There are two main types of crop insurance: revenue policies and yield policies. Revenue policies protect farmers against revenue losses caused by declines in commodity prices. Yield policies protect against crop production losses due to natural disasters like drought, flooding or hail.
Farm insurance protects a farmer’s property, including buildings, equipment and other assets used to help plant, harvest or transport crops. It covers barns, sheds, vehicles, machinery, tools and even the home, if it’s located on the farm.
Homeowners insurance protects standard residential properties and personal belongings.
Auto insurance covers personal vehicles used primarily for everyday, non-farm purposes.
Who Provides and Regulates Each Type of Insurance?
Federal crop insurance, also known as multi-peril crop insurance, is supported and regulated by the United States Department of Agriculture’s (USDA) Risk Management Agency. It’s sold and serviced by private insurance companies and independent agents.
Private crop insurance is regulated by the insurer or Approved Insurance Provider (AIP) that offers it. Many approved AIPs, such as Farmers Mutual Hail, offer private crop insurance in addition to federal policies.
Private farm, homeowners and auto insurance are supported and regulated by the private insurance sector. In other words, they’re not federally supported or regulated by the USDA like federal crop insurance is.
How Are the Deductibles and Premiums Determined?
For crop insurance, deductibles and premiums are based on a farm’s production history and the coverage level the farmer chooses. The higher the coverage level, the smaller the deductible and the higher the premium.
For yield coverage, if a farm’s Actual Production History (APH) for soybeans is 50 bushels per acre, the farmer can choose a coverage level (such as 85%, 80%, 75%, etc.) to determine how much of that 50-bushel APH is insured. The portion not covered becomes the deductible.
For revenue coverage, the APH is multiplied by the spring price of soybeans to establish the guaranteed revenue per acre. The deductible is the percentage of the claim not covered, based on the coverage level the farmer selects.
Each policy for farm, homeowners and auto insurance has its own deductible options. In general, choosing a higher deductible lowers the premium, while choosing a lower deductible raises it.
How Much Customization Is There?
With crop insurance, it’s important to understand that farmers can customize their coverage by adding different endorsements, such as Enhanced Coverage, Supplemental Coverage and Margin Protection. These can be added on top of a farmer’s underlying revenue or yield policy.
The same idea applies to farm insurance. Farmers can add endorsements for things like ice and snow loadings, building replacement costs, or loss of income if a building is destroyed. Knowing which endorsements are available and which ones farmers need is key to making sure policies fully protect the operation.
Homeowners and auto insurance are more straightforward types of coverage. You can add some optional features, but not nearly as many as with crop or farm insurance. Mostly, you’re working with deductibles to decide how much risk you’re willing to take on in the event of a loss.
How Is a Loss Determined?
With crop insurance, coverage is largely based on yield, or how much a farmer can harvest. Price also factors in for revenue policies. So, if a farmer experiences both low production and low prices, it’ll likely trigger a claim, and adjusters will be sent out to evaluate losses. Depending on the situation, hail damage, production losses, etc., they may inspect fields, measure grain bins, or review scale tickets and settlement sheets.
Farm insurance works a bit differently. It’s not tied to price; it’s based on the named perils listed in the policy, such as wind, hail, fire and lightning. When one of those events occurs, an agent submits a claim, and an adjuster inspects the damage and determines the loss based on the repairs needed and current repair costs.
The same structure for farm insurance applies to homeowners’ policies and auto policies. They also include named perils, such as wear and tear or maintenance issues. When a covered peril occurs, an adjuster assesses the damage and determines what’s required to complete repairs.
What Misconceptions Do People Have About Each Type of Insurance?
One common myth about crop insurance is that the government pays all the premiums. While there is federal premium support, farmers still pay a significant share of the cost and have deductibles, so they absolutely have skin in the game.
Another myth about crop insurance is that disaster relief makes crop insurance unnecessary. That’s not true. Disaster relief isn’t guaranteed, and when it does come, it often arrives long after farmers need it. Crop insurance provides predictable, timely protection when a loss occurs.
Some people also believe that crop insurance guarantees farm profits. It doesn’t. Crop insurance is designed to help protect a farmer’s income enough to cover input costs and keep the operation running from year to year, not to ensure a profit.
On the farm insurance, home insurance, and auto insurance side, people often misunderstand what is or isn’t covered. Coverage depends on the policy type. For example, a named-peril policy covers only the specific perils listed in the policy, while a special-form policy covers everything except what is specifically excluded. Knowing which type you have is key to understanding your protection.
Note: Some of Jones’ comments have been shortened and clarified.