1. Do you know if your crop hail policy has an actual cash value clause?
An actual cash value clause states that the amount payable may not exceed the actual cash value of the portion of the crop destroyed by perils insured against. The actual cash value may be determined by averaging the next 10 days closing market cash price at a facility where you normally sell your grain.
Most years, the actual cash value clause doesn’t affect a hail payment. However, if the weather is abnormally dry or wet, the crop hail coverage may exceed the actual cash value of the crop. Unfortunately, this situation is when the actual cash value clause may reduce a hail payment.
For example: You insured your crop to value at $800 per acre, but at claim time, a drought caused the crop to only be worth $600 per acre. The hail storm created a 30% hail loss. On a full coverage policy, the loss calculation would use the $600 actual cash value limit rather than the $800 crop hail limit. This would result in a $180 per acre claim payment ($600 x 30%) rather than a $240 claim payment ($800 x 30%).
Check to see if an actual cash value clause is included in your crop hail policy.
2. Do you know if your crop hail policy has a replant clause?
A replant clause states that the insurance company will determine if the replant is necessary and feasible. If replant is necessary and feasible, you would then be given a couple different options in regards to how you would receive a claim payment. The options may be similar to Option A and Option B described below.
Option A—Replant acres to the same or replacement crop. The insurance company will pay the actual expense of replanting a crop, not to exceed 20% of the per acre liability. No deductible would apply. The remaining limit of insurance is then reduced by the replant payment and transferred to the replanted crop. If the replanted crop is a replacement crop, the premium will be adjusted to the replacement crops rates.
Option B—Replant acres to same or replacement crop. The loss would be paid at the sustained loss less any applicable deductible. No coverage would be transferred to the replanted crop, but additional insurance may be applied for.
If the insurance company determines it is feasible to replant and the acres were not replanted, the loss would be paid at 20% of the limit of insurance for each damaged acre. The coverage would then cease.
Check to see if you have a replant clause is included in your crop hail policy.
3. Do you know if your crop hail policy has a pro-rata clause?
A pro-rata clause states that if a crop loss is also covered by other insurance, the crop hail policy will only pay for the loss beyond the loss paid from the other insurance. Therefore, the crop hail policy would no longer be the primary policy to cover the loss.
Check to see if you have a pro-rata clause included in your crop hail policy.
For those of you insured with Farmers Mutual Hail (FMH), your crop hail policy does not include an actual cash value clause, replant clause, or pro-rata clause.
- FMH will pay the hail claim based on your coverage per acre, not subject to the actual cash value of the crop.
- FMH will pay the hail loss and you can decide whether or not you replant. The remaining coverage will be available to the original crop or transferred to the replanted crop.
- FMH will pay a loss regardless if the loss is covered by another insurance policy.
Check with Betsy today, if you have questions about your crop hail policy.