GRP is yield insurance insuring county yields. GRP pays indemnities when county yield falls below a yield guarantee.

Yield guarantee under GRP
Under GRP, the yield guarantee equals the expected county yield times a farmer-chosen yield election. Yield elections ranges from 70 to 90 percent of expected county yield.

In the example below, corn has a 141 bu. expected county yield. A yield guarantee of 127 bu. results when a 90 percent yield election is chosen (see Figure 1).

Figure 1.  Yield Guarantee under GRP Insurance.

Situation:
Crop	Corn
Expected county yield	141 bu.
Farmer election:
Yield election	90%
Yield guarantee:	127 bu. = 141 bu. expected yield x 90% yield election

Indemnity payments under GRP
GRP makes an indemnity payment when actual county yield is below a yield guarantee. The indemnity payment equals the percent yield shortfall times a protection level.

Protection levels range from 60 to 100 percent of a maximum protection level. The maximum protection level is a value set for each insured crop in a county. In the example, corn has a maximum protection level of $454 per acre. Protection levels range from $272 (60 percent x $454) to $454 (100 percent x $454).

Given the 127 bu. yield guarantee, an indemnity payment occurs when actual county yield is below 127 bu (see Figure 1). For a 110 bu. yield, the percent yield shortfall is 13.38 percent [(127 bu. yield guarantee – 110 bu. yield) / 127 bu yield guarantee]. For a $410 protection level the indemnity payment is $55 ($410 protection level x 13.38 percent yield shortfall).

Choices under GRP
Farmers have two choices under GRP:

1. Yield election, and
2. Protection level

All acres of the insured crop in the county must be insured at the same level of coverage. You may have a different level of coverage if it is for a different crop, or if the same crop is grown in a different county.

Yield election: A higher yield election increases the yield guarantee. In the above example (see Figure 1), an 85 percent yield election has a 120 bu. guarantee (141 expected county yield x 85 percent yield election). A 90 percent election has a 126 bu. guarantee.

When actual yield is below the yield guarantee, higher yield elections also have higher indemnity payments. In the example, a $68 per acre indemnity is paid when actual yield is 100 bu. for an 85 percent yield election. For a 90 percent election, the indemnity payment is $87, an increase of $19 per acre from the 85 percent election (see Figure 2).

Figure 2. Per Acre Indemnity Payments under GRP Insurance for Different Actual County Yields and Yield Elections¹.

Actual County Yield	85% Yield Election	90% Yield Election
90	$103	$119
100	$68	$87
110	$34	$55
120	0	$23
130	0	0

¹ Based on information given in Figure 1 and a $410 protection level.

Protection level: When actual yield is below the yield guarantee, a higher protection level has higher indemnity payments than does a lower protection level election. Differences in indemnity payments given a 90 percent yield election are shown in Figure 3. At a 120 bu. actual yield, a $21 indemnity payment results from a $480 protection level. A $410 protection level gives a $23 indemnity payment, a $3 increase over the $380 protection level.

Figure 3. Per Acre Indemnity Payments under GRP Insurance for Different Actual County Yields and Protection Level Elections¹.

Actual County Yield	$380 Protection Level	$410 Protection Level
90	$111	$119
100	81	87
110	51	55
120	21	23
130	0	0

¹ Based on information given in Figure 1 (90% yield election).

GRP premiums
Per acre premiums depend on the county of the insured crop, and the yield and protection level elections chosen by the farmer. Higher yield and protection level elections result in higher premiums.

Download Software
Insurance Payment Calculator: The Insurance Payment Calculator compares gross revenue under alternative insurance products. It allows users to see how insurance indemnity payments and gross revenue varies under differing harvest prices and yields

Adobe Acrobat Reader : This program is needed to view many of the documents you will encounter on the internet that has a file format ending in "pdf".

Other information
Iowa State University Extension, Group Risk Plan and Group Risk Income Plan, January 1999, http://www.exnet.iastate.edu/Publications/FM1850.pdf

U.S. Department of Agriculture, Risk Management Agency. Group Risk Plan Fact Sheet, September 1999. http://www.usda.gov/rma/rme/fctshts/fsh_4.htm

 Updated: April 1999 and May 2000

Some Information Provided by:  Gary Schnitkey, University of Illinois.

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