What You Need to Know
What is PRF Insurance?
Pasture Rangeland & Forage (PRF) insurance is a specialized insurance product designed to protect qualified cattle and forage operations from the financial risks associated with insufficient rainfall.
This area-based risk management program compensates producers when actual precipitation falls below the historical average for a specific area and time period and is triggered by the coverage level selected.
By concentrating exclusively on the risk of inadequate rainfall, PRF insurance provides a customizable coverage option that enables producers to tailor their risk management strategies to meet their specific operational needs.
PRF Insurance is Not Drought Insurance
PRF policies respond when the actual rainfall in your operation’s area falls below the predetermined trigger point for the selected time period.
Importantly, these policies do not respond solely based on drought declarations made by any entity, including government agencies.
While a drought may increase the likelihood of insufficient rainfall and thus trigger a response from the policy, a drought declaration alone does not guarantee that rainfall will dip below the trigger point necessary for an indemnity payment to be issued.
Administration of the PRF Insurance Program
The PRF Insurance program is administered by the USDA’s Risk Management Agency (RMA).
The RMA, through the Federal Crop Insurance Corporation (FCIC), collaborates with Approved Insurance Providers (AIPs) to make the policies available to the public.
The AIPs appoint qualified insurance agents to represent them and sell the policies. All policies are the same regardless of which Agent the policy is purchased from.
How the Program Works
The PRF program utilizes a grid system established by the National Oceanic and Atmospheric Administration (NOAA), with each grid covering approximately 17 by 17 miles and identified by a unique number.
NOAA does not consider an individual’s operational data; instead, it relies on precipitation data from 6,000 to 15,000 NOAA weather stations, with at least four stations reporting daily for each grid.
The Risk Management Agency (RMA) calculates the Expected Grid Index, reflecting historical rainfall averages since 1948, and the Actual Grid Index for specific intervals during the insurance period.
The trigger point for indemnity payments is based on the producer’s selected coverage level, which ranges from 70% to 90% in 5% increments.
Each coverage level has an associated federal subsidy: 59% for 70% and 75%, 55% for 80% and 85%, and 51% for 90%.
Indemnity payments are issued when the Final Grid Index published by the RMA falls below the Trigger Grid Index (selected coverage level) during the selected time period.
What is The Process?
All federally subsidized crop insurance programs require applicants to qualify for coverage by submitting a complete and accurate application.
Once an applicant is determined to be qualified, they will receive a policy that remains in effect until canceled by either the policyholder or the Approved Insurance Provider (AIP).
It is important to note that no specific insurance coverage is attached to the policy initially; rather, crop and livestock insurance can be added through endorsements for the designated crop year.
The sales ending date for PRF insurance is December 1st.
One key qualification for receiving the subsidy is the completion of Form AD-1026, also known as the Certificate of Compliance.
This USDA document certifies compliance with Highly Erodible Land Conservation (HELC) and Wetland Conservation (WC) provisions and is required for individuals seeking USDA program benefits, including federal crop insurance premium subsidies.
The form must be filed with the Farm Service Agency (FSA) and remains effective as long as there are no changes in the operation or its affiliated persons.
An acreage report must also be submitted, detailing the acreage to be insured along with its correct longitude and latitude within one or more unique grids.
The report should specify intended use (if grazing then it must be fenced and have water access), farming practices, and may require verification documents.
The acreage report is typically completed with assistance from your insurance agent.
When attaching PRF insurance to the policy, the applicant must select between two to six non-overlapping two-month intervals, known as unit intervals.
The total policy protection is determined by the county base set by the RMA, along with the chosen coverage level, productivity factor, and percentage of ownership.
This total value is then distributed as a percentage across the selected unit intervals, with a maximum allocation of 70% and a minimum of 10% for any single interval.
It is required to select at least two intervals.
When Do I Get an Indemnity Payment?
Indemnity payments under the PRF policy are issued when the Final Grid Index, as published by the RMA, falls below the trigger point established by the producer’s selected coverage level for a specific interval during the insurance period.
The trigger point is calculated by multiplying the Expected Grid Index (always set at 100%) by your chosen coverage level, which can be 70%, 75%, 80%, 85%, or 90%.
When the Final Grid Index falls below the trigger point, an indemnity payment is issued, making the coverage level directly responsible for determining when payments are activated.
How Much Am I Going to Get?
The amount you receive as an indemnity payment is influenced by several key factors.
The primary factor is the value of the Total Policy Protection, which is largely determined by the coverage level you select; higher coverage levels increase the policy’s value.
The second important variable is the productivity level you choose, which allows you to fine-tune your coverage based on the county base level set by the RMA.
You can select a productivity level ranging from 60% to 150% of the county base, with 100% representing the county base and 150% equating to 1.5 times that amount.
Another factor affecting your indemnity payment is the percentage of liability allocated to the selected interval.
Additional considerations include:
- The county base value per acre established by the RMA,
- The Final Grid Index used to calculate a “payment factor,” and
- Your percent share of insurable interest in the unit being insured.
It’s important to note that any premium payments due will be offset by indemnity payments, and there is also a $30 administrative fee that will be deducted from any indemnity payment received.
What About the Adjuster?
The PRF program does not involve an adjustment process.
No adjuster will come to your door for assessments.
When Do I Receive My Indemnity Payment
You’ll be pleased to know that when you’re enrolled in the PRF program, that there is no additional paperwork required to receive your indemnity payment.
Once the Risk Management Agency (RMA) publishes the Final Index, your Approved Insurance Provider will process any due indemnity payments.
- Typically, you can expect to receive your payment within 60 days of the Final Index publication.
- This streamlined process ensures that you receive timely financial support without the hassle of extra documentation.
What is a PRF Policy Going to Cost Me?
The cost of a Pasture, Rangeland, and Forage (PRF) insurance policy is influenced by several factors, including your selected coverage level, premium rate set by the RMA, productivity factor, intended use, farming practices, and unit intervals.
Premiums are billed at the end of the policy period, with a billing date of September 1.
It’s important to note that any premiums and administrative fees, including a $30 administrative fee, will be deducted from any indemnity payments.
PRF policies are federally subsidized, making them more affordable; subsidy levels vary based on your chosen coverage level, ranging from 51% to 59%.
Understanding these costs can help you effectively budget for this essential risk management tool.
How Do I Get My PRF Policy?
To get a PRF policy, the first step is to contact an agent appointed to sell crop insurance. All PRF policies are standardized, meaning the coverage remains consistent regardless of the Insurance Provider (AIP) offering it.
When selecting an agent, consider their knowledge and service quality, as these factors represent their primary value proposition.
Ask yourself if they are knowledgeable about the PRF program and responsive to your questions.
Important Dates
It’s also important to be aware of key dates related to your PRF policy: January 1 marks the start of the insurance period, while December 31 is the end date.
The contract change date is August 1, which is the deadline for any language changes to the policy by the FCIC/RMA.
Premium billing begins on September 1, marking the earliest date a producer can be billed for their PRF policy.
Finally, remember that December 1 is the sales close date; you must purchase your PRF policy and submit all documentation by this date.
Contact Us
At Armor Insurance Agency in Miles City, Montana, we are dedicated to assisting you with your PRF policy needs.
Our team is committed to providing prompt responses and the guidance you expect. Give us a call today!
Disclaimer
The information on this page is intended to offer a general overview of the PRF program and should not be considered a comprehensive guide to policy procedures. Actual policies and procedures take precedence over this training material.