Developing Area-Triggered Whole Farm Revenue Insurance

• Main Authors: Lekhnath Chalise, Keith H. Coble, Barry J. Barnett, J. Corey Miller
• Format: Article
• Language: English
• Published: Western Agricultural Economics Association 2017-01-01
• Series: Journal of Agricultural and Resource Economics
• Subjects: crop insurance; farm policy; multivariate simulation; risk
• Online Access: https://ageconsearch.umn.edu/record/252753

Whole-farm revenue insurance is frequently suggested as a conceptually attractive alternative to commodity-specific insurance, but attempts to deliver farm-level whole-farm revenue insurance (FWFI) have been fraught with underwriting and actuarial challenges. This study develops customizable area-based whole-farm insurance (CAWFI) that overcomes some known impediments to existing designs. Certainty equivalents are generated for representative farms in Kansas, North Dakota, Illinois, and Mississippi. We find that a restricted CAWFI design generates significant risk reduction at much lower cost than FWFI.