| Updated February, 2003 |  |
File A1-56 |
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Insurance Units for Crop Insurance
Each parcel of land that is insured independently of other parcels is called a unit. One farming operation may have several insurance units. It is possible to be hailed out on one unit and receive an indemnity payment, while other units on the same farm produce a record crop. Consequently, many farmers like to divide their land into as many units as possible. Of course, this may result in higher premiums on each one.
Basic units
Producers can designate a basic unit for all tracts of land they own and/or cash rent within a county. They also receive one basic unit for all of the land they share rent with a different landlord. For example, if a crop is planted on land rented under a crop share lease with Mr. Smith, a crop share lease with Mrs. Jones, and a cash rent lease with Black, Inc., and the remaining crop land is owned, the acreage would qualify as three basic units (see example). There would be one basic unit with each crop shareowner, and one basic unit for the cash rented and owned land combined. Each crop share landowner can also insure his/her own interest in the crop as a separate unit.
Each different crop also creates a separate unit, and tracts of land in different counties must be insured as separate units. Each crop can have a different type of policy and level of coverage, and could receive an indemnity payment independent of the other units. Separate production records must be kept for each basic unit. Insuring all acres as basic units entitles producers to a 10 percent discount on their premiums.
Optional units
If the four farms discussed above were all owned or rented under a cash lease, they would qualify for only one basic unit for each crop. However, if the four farms were located in four different township sections, the operator could elect to insure them as four separate optional units, with separate polices. Separate actual production history (APH) records must be reported for each optional unit and the operator would not receive the 10 percent premium discount.
Optional units may also be designated when a crop is being grown under distinctly different farming practices. For example, a grower with both irrigated and dry land acres of the same crop may qualify for optional units. There must be an obvious break between the irrigated and dry land acres, however. Other special farming practices may qualify acres to be insured as separate units.
Enterprise units
An enterprise unit combines all acres of a single crop within a county in which the policyholder has a financial interest into a single unit, regardless of whether they are owned or rented, or how many landlords are involved. For example, corn-soybean growers could have just two enterprise units for all their land, a corn enterprise unit and a soybean enterprise unit. Since the enterprise units would usually be larger than basic units or optional units, it is less likely that the average yield would be low enough to trigger an indemnity payment in a given year. Consequently, premiums are usually lower for enterprise units.
Multiple Peril Crop Insurance (MPCI) policies offer enterprise units as an option, while Income Protection (IP) offers only enterprise units. Revenue Assurance (RA) provides a premium discount for selecting enterprise units. The discount is based on the number of township sections included in the acres used to form the enterprise unit.
Crop Revenue Coverage (CRC) also offers a premium discount for enterprise units on land that would normally qualify for more than one basic unit. The CRC enterprise premium discount is based on the number of acres in the enterprise unit-more acres will qualify for a larger discount.
Whole farm unit
Growers who are willing to combine both their corn and soybean acres into a single insurance unit can gain an additional premium discount. This is called a whole farm unit. The amount of the discount will depend on the proportion of the total acres planted to each crop. Growers planting an equal number of corn and soybean acres qualify for the largest whole farm unit premium discount.
All producers should check with an informed crop insurance representative when making decisions about insurance units for their crops.
Example: Farms A, B, C, D, E, F, and G are all farmed by the same operator, and planted to the same crop.
Basic units
This operation would qualify for 3 basic units.
Unit 1 includes Farms A, C, D, and F (all owned or cash rented).
Unit 2 includes Farms B and E (both crop share rented from Smith).
Unit 3 includes Farm G (crop share rented from Black).
Optional units
This operation would qualify for 6 optional units.
Unit 1 includes Farms A and C (owned or cash rented in Section 1).
Unit 2 includes Farm B (crop share rented in Section 1).
Unit 3 includes Farm D (cash rented in Section 2).
Unit 4 includes Farm E (crop share rented in Section 2).
Unit 5 includes Farm F (owned in Section 12).
Unit 6 includes Farm G (crop share rented in Section 11).
Enterprise units
This operation would qualify for one enterprise unit, including all the farms shown. If more than one crop was being grown, or if some farms were located in a different county, additional enterprise units would be designated.
Whole farm unit
If both corn and soybeans were being grown on the farms shown, all acres could be combined into a single whole farm unit.