Agricultural insurance is not just confined to the coverage of crops and livestock. It also applies to aquaculture, forestry, animals of high market value (high pedigree animals) greenhouse crops, etc.
Agricultural insurance is also designed to cover companies as well as individuals dealing with agricultural production.
Agricultural Insurance 101
Agricultural insurance is an effective mechanism for reducing the losses farmers suffer due to natural calamities such as floods, droughts, and outbreaks of pests and diseases. The following are some other benefits of agricultural insurance:
It enables farmers to obtain credit and financing for investment in new technologies, tools, and equipment to enhance and sustain their productive capacity.
It also assists farmers in regulating cash flows and provides a financial buffer with which to rehabilitate damaged enterprises
It reduces business risk. In agriculture, equipment and properties are used in the operations which due to human error can be damaged or destroyed in a split second. Agricultural insurance helps to offset these types of risks.
It provides the farmers with peace of mind. Agricultural insurance removes the worries, tensions, fear and anxiety associated with farming making it possible for farmers to be more productive and creative with their farming business
It encourages saving through regular payment of premium which cannot be withdrawn easily before the expiration of the policy.
It provides credit facilities. The farmer can get loans by using the insurance policy as collateral whose interest will not exceed the cash value of policy charged by the insurer.
It accelerates the economic growth of a country by accumulating capital from the insured and using it for investments in services and infrastructure necessary to grow the economy.
It also helps to reduce inflation caused by oversupply of money by collecting excess money in circulation in the form of premiums
It also provides job security for employees because it can save their employers from going out of business which will lead to employees or workers losing their jobs.
Different types of agricultural insurance
There isn’t a single agricultural insurance to cover all types of farming business. As there are different types of farming business so there are specific agricultural insurance policies to protect them. Generally speaking, there are three broad classes of agricultural insurance: Animal agricultural insurance, Crop agricultural insurance and Farm property and equipment agricultural insurance.
Animal agricultural insurance is purchased by farmers who rear animals to protect themselves against the loss of their animals such as fish, birds and livestock due to disease outbreaks, accidents and natural disasters, such as hail, drought, and floods.
Crop agricultural insurance is purchased by agricultural producers, including farmers, ranchers, and others to protect themselves against either the loss of their crops due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural commodities. The two general categories of crop insurance are called crop-yield insurance and crop-revenue insurance.
Farm equipment and property agricultural insurance is purchased by farmers and agro allied businesses involved in processing and packaging agricultural produce. This insurance safeguards equipment and properties used in agriculture and farming.
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