Group Risk Plan | GRP

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ABOUT GRP

Group Risk Plan (GRP) provides a dollar amount of protection per acre.  A loss payment triggers when the county average yield in a given year falls below the trend adjusted average yield by a greater percentage than the policyholder's selected deductible.  Group Risk Plan does not provide prevented planting, late planting, or replant payments.

LEVELS OF COVERAGE

The grower selects the dollar amount of protection per acre and the percentage of the county yield (70 to 90% for most crops) at which they want to insure.  GRP Catastrophic (CAT) coverage is available at 65% of the expected county yield and 45% of the maximum amount of protection per acre.

LOSS PAYMENT

A loss is payable when the county average yield for the crop in the current year is less than the percentage of coverage selected by the grower at the time of application.

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 GRP policy and a coverage level of 80%, a farmer receives an insurance payment if the county average yield drops below the trigger yield of 32 bushels.  As shown below, if the actual county yield is only 28 bushels, this is a 4 bushel shortfall form the trigger yield, or 12.5%.  If the dollar coverage chosen was $350, the farmer would receive a payment equal to 12.5% of $350, or $43.75 per acre.  The amount of payment received does not depend on the yield achieved on the farmer's acres, only the county yield.