Q&A on Crop Insurance and Disaster Relief

Statement

Q: What's the rationale for federally subsidized crop insurance?
A: A stable and affordable food supply is fundamental to national security, and U.S. agriculture helps to feed the world with advanced farming technology and markets to export farm commodities and value-added agriculture products. At the same time, farming is financially risky, with production subject to the unpredictability of the weather, along with volatile market prices, which can jeopardize farmers' ability to continue producing food. For many farmers, crop insurance is the most important component of the farm safety net. For taxpayers, crop insurance encourages individual risk management and reduces reliance on emergency disaster relief measures. Without a federal subsidy for some of the premium costs, farmer participation in the crop insurance program would be lower and the cost to taxpayers for emergency disaster assistance would increase substantially.

Q: When did the crop insurance program begin, and how does it work?
A: In 1938, Congress created the Federal Crop Insurance Corporation for major crops in major producing regions. In 1980, 1994 and 2000, Congress enhanced the crop insurance program to encourage greater participation and risk management. Insurance policies are sold and completely serviced through 15 approved private insurance companies. Producers who purchase a policy pay a portion of the premium, and pay more for more coverage. As part of the farm bill passed in 2008, Congress reduced crop insurance costs covered by the federal treasury. As with any taxpayer funded program, oversight of the program is essential to safeguard funds and make the program effective.

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