Understanding Insurance Rules and Options
Can Be A Tricky Proposition in 2004
LUBBOCK, June 11, 2004 By Shawn Wade
Scatteredstorms over the past week have provided more than a few producers with justwhat they needed in terms of moisture to either germinate recently planted seedor to keep young stands adequately supplied with moisture.
Unfortunately,those same storms brought some people more than they bargained for when theysent in their request for rain. As a result some producers are dealing withcrop loss situations and the need to move forward with crop insurance claims ondamaged or destroyed acreage.
Eachyear when these situations arise the potential for confusion exists asproducers and insurance providers begin wading through the rules to determinewhat can or cannot be done and when.
Whilethe 2004 crop year includes a new rule that applies to secondary crops andinsurance coverage, the provisions that apply to appraisals on crops remainunchanged. For crops damaged or lost to adverse weather events, or that fail toemerge, the rules remain the same as they were in 2003.
The most confusing situations generally involve non-emerged seed. Over the past couple of years there have been several changes in the rules that apply to non-emerged seed and how acreage that is caught in this situation is treated.
Foremerged crops the rules have not changed significantly for several years andallow for timely appraisal of damaged or destroyed acreage, especially if thatdamage occurs after the applicable final planting date.
Generallyspeaking any crop planted before the final planting date that emerges to astand is eligible to receive an adjustment almost immediately after the lossevent is reported to the insurance company.
Inorder to allow for a proper evaluation most appraisals are scheduled 3-5 daysafter the damage report is received. This allows the adjuster to see how welldamaged acreage rebounds from the event.
Thebottom-line for producers that have recently lost standing cotton to highwinds, localized flooding or hail is that a minimal waiting period can beexpected before an adjustment is made, but the process can be put into motionimmediately after the damage report is submitted to insurance.
Forproducers that have cotton in the ground but do not receive adequate moistureto bring the crop to a stand, insurance rules are different and require aspecific waiting period after the final planting date before an appraisal canbe scheduled.
Fornon-emerged seed the current rule states that no adjustment can be made untilafter the end of an 8-day deferred appraisal period that begins at the end ofthe crop's late planting period. For cotton, that means that non-emergedacreage cannot be appraised for 23 days after the applicable final plantingdate.
Forcounties with a June 5 final planting date, insurance appraisals on non-emergedacreage will begin no sooner than June 28. For counties with a June 10 finalplanting date appraisals cannot begin until July 3.
Inthe past the additional waiting period after the 15-day late planting periodhas been revised by RMA. Whether or not a similar relief from the rules will beallowed in 2004 has yet to be determined although it appears the situationcould develop that warrants such consideration.
New Double Insurance ProvisionAdds New Twist For 2004
Whilethe rules that pertain to crop damage and appraisals have not changed from 2003to 2004, there has been one important change that will affect producers wholose crops early in the 2004 season.
In2004 growers who wish to plant a second crop on failed cotton acreage will haveto make several important decisions that could impact the level of coveragethey receive on their first crop.
Thecrux of the change involves the implementation of a new "doubleinsurance" provision that was originally included in the Agricultural RiskProtection Act of 2000. The purpose for the new rule is to prevent a producerfrom collecting crop insurance indemnity payments for multiple crop losses onthe same acre in the same crop year.
Thefinal rule, as implemented, requires for the first time that growers who losetheir first insured crop may only receive 35 percent of the calculatedindemnity (and only pay 35 percent of the first crop premium) if they elect toplant a second insured crop on the same acreage.
In anattempt to provide more discretion to the grower that incurs an early seasonloss, Plains Cotton Growers and the National Cotton Council worked with theRisk Management Agency to craft an alternative that gives the growers moreflexibility.
Theresult of that effort was inclusion of an option that the grower can exerciseto receive 100 percent of the first crop indemnity if they elect not to insurea subsequent crop on the acreage during the balance of the growing season.
Growers that lose crops early in the season have the following options. They can:
1) Opt 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 secondcrop, but decline to accept any second crop claim payment. Producers who insure a second cropbut later choose not to accept payment for a second crop claim will receive theremaining 65 percent of their first crop claim less the remaining 65 percent ofthe premium due on the first crop and 100 percent of the premium due on the secondcrop. Producers may decline to accept a second crop indemnity up until the timethe claim check is cashed.