In 2012, the drought in Kansas was in its second year, and wheat, corn and soybean farmer Paul Penner was just trying to survive to the next season.
Crop insurance has been Penner's lifeline for the last two years and the years before that. It has given him and his wife, Deborah, the means and security to plan ahead and prepare for another year should the drought persist. "Without it, many farmers, including us, would face financial uncertainty as revenue would be insufficient to cover production expenses," said Penner, 60, of Hillsboro, which is about 45 miles north of Wichita.
In 2012, the Penners had a 75 percent coverage plan for wheat crops and 70 percent coverage for fall crops, such as corn, soybeans and sorghum. Just like car insurance, his goal is to "never have to use it."
Penner has been covered by crop insurance policy for more than 25 years now. If not for this federal safety net, he said, "I wouldn't be in farming today."
The insurance helps him recover part of his losses. "It pays for a little bit of your crops or production if we had a bad year like the last two to three years' drought. The insurance pays me a certain percentage of the revenue I have lost. They don't pay all of it," he explained. "They will never pay you 100 percent."
But he said he's OK with not recovering 100 percent because even in a bad year, he said a farmer does not really lose a 100 percent of his production. "At least you're given enough so you can pay your bills," he said.
Insurance estimates are based on actuarial history of crop yield and the price of the commodity, among other parameters. Premiums could be higher for one crop per acre than the other. In Penner's case, corn has a higher premium cost than wheat and soybeans.