PRF is a subsidized risk policy for farmers and ranchers who rely on pasture, rangeland, and forage for haying and/or grazing. It offers coverage for a significant reduction in the rainfall index amount in a geographic area (or grid) containing the insured’s property. The policy is based on the experience of each grid to determine indemnities rather than individual farms or ranches. It pays the insured in the event a grid’s accumulated index is below the insured’s “trigger grid index” (coverage level multiplied by the expected grid index) for the period of insurance. This coverage is offered for landlords and tenants, as well as an owner/operator.
Rainfall Index Methodology:
The Rainfall Index is based on the National Oceanic and Atmospheric Administration (NOAA) rainfall data in a 17 x 17 mile grid. You must select at least two 2-month index intervals where rain is important to your operation.
Losses are based on the actual rainfall in the grid and how it differs from normal rainfall within the grid and index interval(s) you selected. Coverage is for a single peril: lack of rain.
Coverage Levels:
- Levels of coverage are 70, 75, 80, 85 or 90% with premium rates stated in dollars per one-hundred dollars of protection.
- Non-contiguous acreage located in a single grid is combined and insured as a single unit. The point of reference must be selected for each acreage and an FSA farm serial number, tract number, and field number for acreage must be provided on the acreage report.
- PRF is available in the 48 contiguous states with the exception of a few grids that cross international borders. (Not all counties are included so please ask your agent for specific county availability.)
Rainfall Example
Calculating Indemnities
At the end of the insurance period, the FCIC issues a final grid index for the insureds grids. A payment is made only if the final grid index for the insured unit is less than the trigger grid index, regardless of the individual’s actual precipitation in that index interval.
So, if the final grid index is 60 and the trigger grid index selected was 85, the indemnity is calculated as follows assuming the insured owns 100% of the acreage.
Payment Calculator Factor = (trigger grid index – final grid index)/trigger grid index
(85-60) / 85= .294
Indemnity Payment = Payment calculation factor X Policy Protection per unit
.294 x $450 = $132
