USDA ERS · federal crop insurance · FY2023
Crop Insurance Explained
How the federal crop insurance program splits premiums between farmers and taxpayers, and which states draw the largest indemnity payments when disaster strikes.
Key Takeaway
Federal crop insurance is a public-private partnership: farmers pay roughly 40% of the premium, the government subsidizes the other ~60%, and private insurers service the policies. According to USDA ERS data, indemnity payments concentrate in large drought-exposed commodity states, Texas and Kansas lead total FY2023 indemnities, because both acreage and weather risk drive claims.
Texas and Kansas lead total FY2023 crop insurance indemnities, a reflection of the severe 2022–23 Plains drought that triggered large claims on cotton, wheat, and sorghum acreage. Indemnities are the dollars paid out on claims, a cleaner measure than the loss ratio, which depends on how premium is counted.
What Is Federal Crop Insurance?
The Federal Crop Insurance Program (FCIP) is the primary risk management tool for US farmers, administered by the USDA Risk Management Agency (RMA). Unlike direct subsidy payments, crop insurance requires farmers to pay premiums and file claims when losses occur.
The program is unique: the federal government subsidizes approximately 60% of premium costs, and private insurance companies sell and service the policies under reinsurance agreements with USDA. This public-private partnership covers losses from natural disasters, price declines (for revenue protection policies), and other qualifying events.
How the Money Flows
Understanding the Loss Ratio
The loss ratio measures how much is paid out in claims relative to premiums collected. A ratio of 100% means every dollar in premiums resulted in $1 in claims, breakeven. Read it with care: the figure depends on whether "premium" counts only the farmer-paid share (~40%) or the full premium including the government subsidy, so the same state can look very different under each convention. That is why this guide ranks states by raw indemnity dollars above rather than by ratio.
Types of Crop Insurance
Yield Protection (YP)
Pays when actual yield falls below the guaranteed yield. Covers production losses, not price declines.
Revenue Protection (RP)
The most popular policy. Covers revenue losses from both yield decline AND price declines, using the harvest price option for final calculations.
Area-Based Policies
Pay based on county-level losses rather than individual farm losses. Lower premium, triggering on widespread county events.
Frequently Asked Questions
What is federal crop insurance?
Federal crop insurance (FCIP) is a risk management program where the government subsidizes ~60% of farmer premium costs. Private insurers sell and service policies, paying indemnities when insured losses occur. Over 500 million acres are enrolled annually.
What is a crop insurance loss ratio?
The loss ratio = indemnities ÷ premiums × 100. A ratio of 100% means every premium dollar was paid out as claims. Above 100% means claims exceeded premiums, common in drought years. The exact value depends on whether premium counts the farmer share or the full subsidized premium.
Which states have the highest crop insurance claims?
Large drought-exposed commodity states, Texas, Kansas, Nebraska, top total indemnities, driven by both acreage and recurring weather losses. States with diverse crops and stable climates tend to have lower indemnity totals.
This guide's top-10-states chart renders live from USDA RMA crop-insurance indemnity data, the premium-subsidy tier figures (40%-100% by coverage level) in the text are editorially researched and written from USDA RMA program rules, not pulled from a live database query. See our editorial standards & corrections policy, the methodology behind these numbers, or report a data error.