By John Berry
As we enhance our understanding of new risk management tools available to us out of the 2014 Farm Bill, the Supplemental Coverage Option (SCO) is a crop insurance product we should consider.
With SCO the amount of protection and our premium cost is based on the underlying crop insurance policy coverage we choose. With lower underlying coverage, we’ll have greater SCO protection and a higher cost. With higher underlying coverage, we will have a lesser amount of SCO protection and a lower cost. SCO can be thought of as an endorsement to our individual plans of insurance as we must have yield protection or revenue protection crop insurance products in place in order to secure SCO coverage.
Additional features of SCO:
- No coverage overlap with traditional crop insurance coverage
- Covers all planted acreage of the crop
- Increases the level of coverage to 86% of our APH yield
- Results in additional premium, and an additional administrative fee
- Premium is subsidized at a standard 65%
SCO differs from traditional crop insurance in that it provides coverage based on a county yield loss trigger for losses above the underlying individual plan’s coverage level, and SCO does not provide prevented planted benefits. Also, there is no Notice of Loss for SCO as payment occurs based on county yield data with any indemnity available later than for individual policy because of this need to wait for county summary data to be finalized. If the county yield triggers a loss, an indemnity is triggered for all SCO policies even if the individual farm did not have a loss.
Indemnities will not be paid on acreage that has been determined to have been solely damaged by causes of loss not insured by the underlying policy. Although SCO is a product of the 2014 Farm Bill, it does not have a payment cap or base acre limitations, and there is no waiting for the national average farm price for the marketing year.
Exploring how SCO indemnity is calculated; we see payments begin if County revenue/yield is less than 86% of expected. Our indemnity is then based on our individual crop insurance product coverage with a maximum of 86% (SCO coverage) minus our individual crop insurance coverage level.
To determine which of your crops are eligible for SCO, contact a crop insurance agent (list available at: http://www.rma.usda.gov/tools/agent.html)or the RMA Website. In Pennsylvania all counties have SCO for corn, 47 counties have SCO for soybeans, and 57 counties have SCO for wheat.
Source:psue.edu