New Hurricane Endorsement Option for Crop Insurance
October 6, 2020 With a historically busy hurricane season underway, it’s a good time to evaluate crop insurance options. There are some new things on the table from USDA Risk Management Agency (RMA) worth consideration.
The agency has rolled out its “Hurricane Insurance Protection Wind-Index (HIP-WI) Endorsement,” which can be attached to your Crop Insurance Policy. Catastrophic (CAT) and Buy Up policies are eligible for the endorsement on eligible crops for an additional premium. In Florida, the endorsement can be added to most fruit and vegetable crops. The coverage can be combined with the Supplemental Coverage Option (SCO) and the Stacked Income Protection Plan (STAX), when acreage is also insured by a companion policy.
What does it do?
The HIP-WI endorsement provides coverage for a portion of the deductible of your underlying insurance policy that is not otherwise covered, when the insured county, or a county adjacent to it, is within the area of sustained hurricane force winds from a named hurricane according to the National Oceanic and Atmospheric Administration. The coverage applies in that case whether your farm has damage or not. There is no need to file a claim, and indemnities will be paid within 30 days of when USDA releases the list of counties identified as sustaining hurricane-force winds (74 mph or higher).
What Does it Cost?
An administrative fee and premium for the crop covered by each HIP-WI endorsement will be due in addition to any administrative fee(s) and/or premium(s) of the underlying policy. However, the HIP-WI administrative fee may be waived if you qualify as a limited resource farmer, a beginning farmer/rancher, or a veteran farmer/rancher. The USDA RMA premium subsidy for HIP-WI is fixed at 65%, so the producer is paying 35% of the imputed premium.
“What I like about this coverage and what growers like is it is scalable,” says Regina Thomas, Senior Vice President of Farm Credit of Central Florida. “You can buy it all or a percentage of the coverage level — 10%, 20%, or 50%. Whatever premium level and risk tolerance fits your budget.”
The maximum price of the underlying blueberry policy for conventional highbush/irrigated with frost protection is reduced for the coming season at $2.60 per pound, down from $2.70 per pound. For blueberries, the HIP-WI coverage must be added to the underlying Multi-Peril Crop Insurance (MPCI) blueberry policy by the sales closing date of Nov. 20, 2020, at which time it begins, and ends on Dec. 31, 2021.
Another addition this year to the blueberry policy will be coverage for blueberries grown in pots under a written agreement. This will be very helpful as more and more acres in pots are being put into production each year in Florida that need coverage. Unfortunately, blueberries grown in pots will not be eligible for the hurricane endorsement.
“One of the most significant perils blueberry growers face during the offseason is the extreme winds from a hurricane damaging the plants,” Thomas says. “During the season, there is the chance of freezes and market disruptions, but hurricanes are a major threat they have to deal with. This hurricane endorsement will, in a way, give growers coverage for the bushes that they have not had under the MPCI blueberry policy.”
A 10-Acre Blueberry Orchard Example
Let’s say you are a 10-acre blueberry grower with a historical yield of 6,000 pounds per acre. At this year’s insurable rate of $2.60 per pound, your total insured value for your 10 acres is $156,000. If you opt to purchase the Hurricane Insurance Protection Wind-Index Endorsement at the 50% level, your premium would be $6,808. Should a hurricane with sustained winds of 74 mph or higher hit your county or an adjacent county, your payout would be 50% of the total insured value of your policy at $70,200. Your farm does not need to be subject to damage to receive the payment.
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