Crop insurance refers to an insurance which insures farmers and crop producers against the their loss of crops due to natural disasters, such as hail drought, and floods. There are two types of crop insurance :
Crop-yield insurance consists of two main classes :
1.Crop-hail insurance is available from private insurers because hail is a narrow peril that occurs in a limited place and its accumulated losses tend not to overwhelm the capital reserves of private insurers.
2.Multi-peril crop insurance covers the broad perils of drought, flood, insects, disease, etc., which may affect many insureds at the same time and present the insurer with excessive losses.
Crop-revenue insurance is a combination of crop-yield insurance and price insurance. Crop-revenue insurance covers the decline in price that occurs during the crop's growing season.
The following is an example of the federal statute defining crop insurance:
7 USCS § 1508 states that the Corporation may insure, or provide reinsurance for insurers of, producers of agricultural commodities grown in the United States under one or more plans of insurance determined by the Corporation to be adapted to the agricultural commodity concerned. To qualify for coverage under a plan of insurance, the losses of the insured commodity must be due to drought, flood, or other natural disaster.