Compared to other federally subsidized crop insurance programs, Pasture, Rangeland, Forage (PRF) insurance is still a relatively new offering. That can leave farmers and ranchers with questions. Is PRF coverage hay insurance? How does it work? When and how are claims triggered?

To help answer some of the most common PRF questions before the Dec. 1 sales closing date, we turned to three experts from the ProAg team:

  • Travis Green, Senior District Sales Manager for the Central Region
  • Nick Salemme, District Sales Manager for the Western Region
  • Dustin Converse, District Sales Manager for the Eastern region

Here’s what they had to say.

So, is PRF coverage hay insurance?

Yes, PRF could be called hay insurance but it is so much more.

“PRF is a coverage option for pasture, rangeland and forage crops, but it certainly isn’t the only coverage type available for forages. PRF is a single-peril type of insurance. It protects against increased costs related to a lack of precipitation in your haying and grazing acres used to feed cattle. Other coverage options may be able to protect against additional perils.” Salemme said.

How does PRF insurance work?

PRF insurance is a federal area-based program primarily designed to help cattle producers who raise forage acres to feed their herds. This coverage option correlates to the amount of precipitation that falls in mapped grids as measured against a rainfall index created with National Oceanic and Atmospheric Administration Climate Protection Center (NOAA CPC) data.

“PRF claims are based on how much rain falls in an insured grid area. A lack of precipitation can negatively impact forage yield, leaving those farmers and ranchers with increased costs related to feed needs, destocking or depopulating. That’s where PRF insurance comes in,” Green offered. “It can help cover those expenses, which could be the difference between culling or keeping cattle.”

Coverage is available in two-month periods, also called index intervals. Farmers and ranchers must insure two or more periods and should choose the times when precipitation is most critical to their forage crop.

Does that mean PRF insurance is drought insurance?

This is one of the most commonly asked questions. PRF coverage is not drought insurance. PRF insurance claims are only triggered by lower-than-average rainfall during specified periods.

“Droughts are characterized by more than a lack of precipitation — and they can last significantly longer than the two-month intervals of PRF insurance. Periods of abnormally high temperatures and windy conditions are common in droughts, but PRF coverage doesn’t protect against either,” Converse elaborated. “However, a drought could lead to a large enough drop in the rainfall index during insured periods that an indemnity payment is issued.”

Can policyholders customize PRF coverage?

Yes. That’s one reason PRF policies are gaining popularity. Farmers and ranchers can work with ProAg agents to customize coverage to meet the risk management needs of their specific operations.

“Policyholders can choose which grid locations and two-month increments to cover, but those aren’t the only customization options available. They can choose a coverage level between 70% and 90%. New levels are available every five percentage points — so at 70%, 75% and so on,” Salemme said. “They can also select a productivity factor between 60% and 150%.”

A productivity value is established for grid areas. Policyholders can use the productivity factor to increase or decrease coverage compared to that value to match what their crops are worth. The premium will go up or down with those changes.

When do policyholders pay for PRF insurance? 

One nice thing about this type of hay insurance? Policyholders buy now and pay later, which provides added financial flexibility.

“PRF insurance premiums aren’t due when policyholders sign up,” Converse said. “The bill doesn’t come up until September of the year after coverage kicks in. Another nice thing is that the premium cost is subsidized by the federal government. That covers more than half of what’s due.”

What triggers an indemnity payment?

Good news for policyholders: PRF indemnity payments trigger automatically based on the rainfall index. That means they won’t need to submit a notice of loss (NOL) to receive payment. There are some unique circumstances to be aware of, however.

“PRF rainfall indexes are measured for an entire grid area. It’s possible for someone to have very dry conditions during their insured periods and still not receive an indemnity payment if the rest of the grid saw more precipitation,” Green added. “That risk likely evens out over the long term, but it’s important to consider.”

Where is PRF coverage available?

“This type of insurance is available in the 48 contiguous states and Hawaii, with a few exceptions for grids that cross international borders,” Converse said.

Find the right coverage for your operation

One thing all three experts emphasized? It’s important to work with a trusted agent to determine the right level of coverage for every operation. Your local independent ProAg agent can help. But make an appointment soon. Sales close for PRF coverage on Dec. 1. Learn more about PRF insurance and find your ProAg agent here.