18 BULLETIN 1043, U. S. DEPARTMENT OF AGRICULTURE. 



in question plus^ an allowance for seed and for rental value of the 

 land. Unlike the contract described above, the policy does not 

 place a fixed value on the grain harvested, but provides instead 

 for valuation on the basis of market price at the time of adjustment. 

 The company, therefore, in effect, gives protection against a drop in 

 prices, as well as against crop damage. This feature of the policy 

 caused the venture to prove a costly one to the company in 1920 be- 

 cause of the unexpectedly heavy drop in prices. 



A crop policy even more recently devised involves a plan materially 

 different from either of those already described. The coverage as tO' 

 hazards insured against is, however, practically the same as in the 

 contract just outlined. In neither of these policies is the hail hazard 

 covered. Under the plan embodied in this policy, however, the 

 amount of insurance to the acre that an applicant may receive is- 

 based on a certain percentage of his average yield during the past 

 five years, such part of the average yield being translated into dollars 

 by appljdng to it a value per bushel or other proper unit of measure 

 based on the price prevailing during the period in question. Thus a 

 farmer who' on a given farm during the past five years has averaged 

 48 bushels of corn an acre may be offered insurance in an amount equal 

 to the value of about 3G bushels at the average price for corn during 

 the past five years. If such average price were found to be 50 cents a 

 bushel the insurance might be placed at $18 an acre. 



One of the most important differences between this policy and 

 either of those previously described is the plan provided for settle- 

 ment of losses. In the case of total destruction of the insured crop 

 the company agrees to pay 75 per cent of the cost of the field opera- 

 tions actually performed, such indemnity not to exceed 75 per cent 

 of the total insurance carried. Furthermore, it is provided that the 

 indemnity shall in no case exceed the cost of replacing all or any part 

 of the quantitative returns on which the insurance is based with prod- 

 ucts of like kind and sound quality. Finally, it is provided that in- 

 demnity shall in no case exceed the amount, if any, by which the 

 amount insured exceeds the market value of the crop harvested. 

 Under this provision a change in price in either direction may be 

 taken advantage of by the company. 



PRINCIPLES OF CROP INSURANCE. 



The need of the farmer is a form of insurance that (1) will safe- 

 guard him as far as practicable against all unavoidable losses which 

 would seriously cripple him, and (2) can be obtained at a cost or 

 premium which he can afford to pay. 



This means, in the first place, that the protection must be limited 

 to actual loss of a material part of the investment in a crop, reason- 

 able compensation for the farmer's labor, and a fair rental of the land 



