High input prices continue to shrink margins, leaving farmers seeking additional insurance protection to cover their bottom line. There are numerous products on the market that can help. We are focusing on two popular area-based coverage plans—Enhanced Coverage Option (ECO) and Supplemental Coverage Option (SCO).
County-based policies are add-on products that are purchased in addition to your existing multi-peril cop insurance policy (MPCI). These policies work similarly to your MPCI policy by using the same spring and fall prices as your crop insurance, but instead of using your personal annual product history (APH) they use the expected and final county yields. County-based policies offer revenue protection (RP), yield protection (YP), and APH policy plans. Liabilities for these specific plans are based on each farmer’s approved yields. If your yields are higher than the county average, premium and liabilities will increase; if they are lower, liabilities will decrease.
SCO starts coverage from your personal level up to 86%. Claims will be triggered when the county revenue or yield falls below 86% of the expected value. Farms that are enrolled in Agriculture Risk Coverage-County (ARC-CO) are not eligible to take SCO. You must enroll in Price Loss Coverage (PLC) to become eligible for SCO. You might be wondering why this is. SCO and ARC-County are both area-based revenue coverages that cover up to 86%. If both policies were chosen, the producer would have doubled insurance on the same risk and could possibly collect on the same loss in both programs. SCO is subsidized by the government at 65%.
ECO provides coverage starting at 86% up to 95%. Claims are triggered when the county revenue or yield falls below 90% or 95%, depending on which option you choose to enroll in. You can take ARC-CO with ECO as coverage doesn’t begin until 86%. ECO is subsidized by the government at 51% for YP and APH plans and 44% for RP plans.
Farmers looking for protection against price declines should take a hard look at ECO. Yields vary depending on location and moisture levels, but price drops affect every farmer and bushel grown county wide. Shallow losses can easily trigger indemnities with a 5% deductible.
No separate acreage reporting is necessary for ECO or SCO. Premium and indemnities are paid on planted acres. There is no attached coverage on prevented planting or follow ground. Farmers can take both ECO and SCO, or they can select each policy individually. Area plans are continuous until cancelled.
Both ECO and SCO policies are available on a wide variety of crops grown in the upper Midwest. Farmers routinely at or near the county average for yields should explore these possibilities. Our exclusive Optimum tool can show you how your farm would do with an ECO or SCO policy on an easy-to-follow graph as well as the how these policies have performed and previously paid out.
The sales closing date for ECO and SCO is the same as your MPCI policy—March 15. All indemnities for these plans will be paid out in June of the following year after the release of the final county yields. It is possible to collect on your personal coverage, but not collect on the area plans, and vice versa. ECO and SCO policies must be purchased from the same company as your existing MPCI policy and cannot be taken as standalone policies. These policies have the option to reduce the liability and premium, which range from 50% to 100%.
Contact your local AgCountry office and ask to speak with an insurance specialist today. They will help answer your questions and create a customized policy to fit your farm.
Learn more about ECO and SCO by listening to our podcast
