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. Continue reading