Written by M. Sean High
On October 20, 2015, the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA) announced an expansion of the federal government’s crop insurance program. According to RMA, beginning with the 2016 crop year, the crop insurance program’s Supplemental Coverage Option (SCO) will now be made available in select counties “for buckwheat, sweet corn, extra-long staple cotton, cucumbers, processing beans, dry beans, flax, silage sorghum, green peas, various hybrid seeds, millet, mustard, peanuts, popcorn, pumpkins, sesame, sunflowers, and sugar beets.” The inclusion of these newly eligible crops is in addition to the thirty-three crops previously approved for SCO protection for the 2016 crop year.
SCO is a crop insurance option that is intended to provide agricultural producers with an extra layer of risk management protection by providing coverage for a portion of an underlying crop insurance policy deductible. When available, SCO may be purchased as an endorsement to a crop insurance policy for Yield Protection, Revenue Protection, Revenue Protection with the Harvest Price Exclusion, or Actual Production History.
Accordingto UDSA, “[t]the amount of SCO coverage depends on the liability, coverage level, and approved yields for your underlying policy.” Importantly, USDA notes that “SCO differs from the underlying policy in how a loss payment is triggered. The underlying policy pays a loss on an individual basis and an indemnity is triggered when you have an individual loss in yield or revenue. SCO pays a loss on an area basis, and an indemnity is triggered when there is a county level loss in yield or revenue.”
Interested agricultural producers must select SCO “by the sales closing date… [of] the underlying crop insurance policy” and may only purchase the additional coverage from the same company providing the underlying crop insurance policy. Significantly, if selected as part of a federal crop insurance policy, “[t]he Federal Government [will pay] 65 percent of the premium cost for SCO.”