Insure Crops By Enterprise Unit Or Optional Unit?

Majority of Iowa farmers used enterprise units in 2009.

Published on: Jan 28, 2010

FAQ: I will sign up soon to buy crop revenue insurance for corn and soybeans in 2010. Should I choose to insure by enterprise unit or by optional unit?

Answer: Provided by Steve Johnson, Iowa State University Extension farm management specialist.

There is a move among farmers in Iowa toward the use of enterprise units rather than traditional optional units. Iowa farmers elected to use enterprise units onĀ over 50% of the 2009 crop insurance policies. I expect a similar move this year, but more interest is building among farmers in adding hail coverage.

Insuring by enterprise unit does provide additional risk because the enterprise unit coverage insures all the farmers' corn fields together in the county. Insuring by enterprise unit was popular in 2009 because of a government crop insurance subsidy savings of 45% compared to insuring farms in each section of land.

However, if the farms you insure are dispersed in the county, a peril such as hail might hit one farm and not trigger an indemnity payment. If a farmer elects to use enterprise units in 2010, my advice is that the farmer should consider buying additional hail coverage by individual farms in combination with the use of a revenue product such as RA (revenue assurance) or CRC (crop revenue coverage) at a higher level of coverage.

To better understand "units", here's more information

If you have variable productivity across your farms, consider staying with the optional units. While the premiums may be higher, it may be easier to trigger an indemnity loss should a peril occur.

The decision whether to use optional vs. enterprise units in 2010 and possibly adding hail coverage are important decisions if you're planning to market your crop pre-harvest and committing a large portion of your APH bushels to delivery.

To get a better understanding of enterprise vs. optional units and the 2009 crop revenue products and levels of coverage, listen to my latest webcast at www.extension.iastate.edu/polk/news/efarmmanagement.htm

If you have specific questions or need details regarding USDA farm programs, contact your local USDA Farm Service Agency office. You can also get news and information about DCP, ACRE and other USDA programs at www.fsa.usda.gov.

Two Iowa State University Extension Web sites have farm program information and analysis. They are ISU's Ag Decision Maker site at www.extension.iastate.edu/agdm and ISU Extension Specialist Steve Johnson's site at www.extension.iastate.edu/polk/farmmanagement.htm.

And be sure to read the regular column "Frequently Asked Questions about the Farm Program" that appears in each issue of Wallaces Farmer magazine and at www.WallacesFarmer.com