The 2012 crop year provided an unnecessary reminder of the role crop insurance plays in modern agriculture.  Significant spring freeze events reduced regional yields by 50%.  If crop insurance had been implemented by all growers at the 65% - 75% level of coverage, payments would have easily been in excess of $10,000,000.  Premiums paid by regional growers would total approximately 900,000 annually.  This illustrates the experience most growers have with crop insurance.  In the event of a significant loss, the cash value of a claim typically covers the financial cost of premiums for 10 to 12 years.

Financial costs of crop insurance include an annual administrative fee and an annual insurance premium.  The premium is based on the value of the maximum claim.  For a typical Concord grower with a six ton average, premiums are approximately $30 per acre for 70% coverage.  Changes in yield and price significantly impact the cost of the premium.  

Crop insurance requires an investment in time, as well.  Walking into the purchase of crop insurance with the expectation that there will be an annual investment in time immensely increases the probability that you will remain committed to the program.  This investment of time has led to the decline in CAT (catastrophic) coverage.  Typically CAT coverage results in claims once every ten or twenty years.  Despite the extremely high level of premium subsidy, growers tend to give up CAT policies.  The time associated with filing paperwork, filing potential claims and shopping policies appears onerous when the probability of a claim is very low.

On average the typical expected value of crop insurance is approximately $3 for each $1 in premium purchased.  Block divisions, site conditions and production risk do have the ability to change the risk of loss significantly.  Those with less production risk and other factors tend to see a lower than average expected value.  That being said, for nearly all growers a gross expected value of $.90 would be entirely adequate to justify the purchase of crop insurance.