Group Risk Income Protection | GRIP

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ABOUT GRIP

The Group Risk Income Protection (GRIP) plan of coverage is an area-based revenue insurance program that provides insurance protection against widespread loss of revenue in a county.

The insured is paid when the county revenue falls below the insured's selected trigger revenue.

Coverage levels are available from 70% to 90% in increments of 5% of the county trigger revenue.  Protection per acre is available from 60% to 100% of the county maximum protection per acre (expected county yield, times expected price, times 150%).

Coverage is expressed as a county revenue trigger (expected county yield times expected price times coverage level).

GRIP TRIGGER REVENUE (GUARANTEE)

1. The expected county yield (same as the GRP expected yield)

2. Times the expected price (the simple average of the daily settlement prices for the trading month on the crop futures contract specified in the crop provisions)

3. Times the level of coverage

4. times the insured acreage

A Harvest Revenue Option Endorsement is available which redefines the trigger revenue price as the greater of the expected price or the harvest price (see example below for more details).

LOSS PAYMENT

The loss payment is calculated by multiplying the payment calculation factor (the trigger revenue minus the insured's county revenue, divided by the insured's trigger revenue) times the insured's protection per acre (60 to 100% of the maximum county protection per acre), times insured acres, times the insured's ownership share.

UNITS

The coverage unit is all acreage of the crop in the county.

ADVANTAGES AND DISADVANTAGES:

Some advantages of the GRP and GRIP programs are:

• No individual yield history is needed

• damaged crops do not have to be appraised to determine the amount of payment

• there is only one policy per farm for each crop, unless county borders are crossed

• past farm level loss experience does not affect premiums

• higher dollar amounts of coverage are available

• protection against price risk is the same as for individual policies

However, the GRP and GRIP programs protect farmers only when yields are low all over the county, not when isolated problems hit an individual's crops.  In addition, GRP and GRIP do not provide coverage for prevented and delayed planting or for reduced gain quality such as aflatoxin damage.  Crop producers who can afford a large loss in one year, or whose yields track closely with county yields will benefit the most from GRP and GRIP.

HOW IT WORKS

The amount of payment the farmer receives depends on the level of protection selected when the farm is enrolled.  For GRP, the Risk Management Agency (RMA) sets a maximum protection level each year.  For GRIP the maximum protection level is 150% of the average futures price for the month of February, multiplied by the expected county yield.  The value of protection can be as high as 100 percent of the RMA maximum protection level and as low as 60 percent.

With a GRIP policy, a futures price of $10, and a coverage level of 80%, a farmer receives an insurance payment if revenue drops below the trigger revenue of $320.  As shown below, if the actual county yield is 28 bushels and the fall price is $8.00, the actual county revenue is only $224.  This is a 30% shortfall from the trigger revenue.  The farmer would receive a payment equal to 30% of the dollar coverage level chosen ($350 in the example), or $180 per acre.  The amount of payment received does not depend on the yield achieved on the farmer's acres or the actual selling price.  The dollar level of coverage can be any value between the RMA maximum and minimum.