The population worldwide is increasing by leaps and bounds and what they need most of all is food. So, its no wonder that a large part of the world population is engaged in agriculture and related fields such as forestry, horticulture, etc. the majority of the GDP of many of the less developed country depends on agriculture.
In this context, it is quite understandable that crop insurance has become really important. Agriculture is a really risky field if you think about it; natural disasters can strike at a moment’s notice. And the farmers are the ones to bear the fall back as floods, cyclones, draughts can lead to complete loss of crops and may have other consequences such as increase of salinity, water stagnation on the cultivable land, etc. which impacts future crops as well.
Crop insurance ensures that the quality of life of the farmer is maintained and that even complete failure of the crop doesn’t push them into poverty. But crop insurance has other tertiary functions as well. It is a risk management tool which can help the farmers stand back up on their feet and try again even if they lose a season’s entire crop.
Following are some of the major benefits of crop insurance:
- Economic stability is maintained: Farming is an endeavor that depends heavily on the climate. One day of storms or a few days of heavy rains can put a big dent in the expected quantity as well as the quality of the crop. This would mean that the farmer will have to live in poverty or borrow heavily to make ends meet. But if the crop is insured, then the insurance payout will ensure that the quality of life for the farmer is maintained.
- Investment is secure: agriculture is a big investment; farmers have to buy seeds, machinery, they may have to hire labor as well. Most farmers take out loans against their farmland to get the money necessary for such investments. Crop insurance ensures that even if a season’s crop is lost, the farmer will be able to pay back their loans and buy seeds, pesticides, etc. for the next season of farming.
- Help bring in new technology: Continuous technological advancements are being made in the field of agriculture and farmers are encouraged to make use of such technologies. However, some of these advancements have not been proven in the field and farmers don’t feel safe trying them in the fear that their crop might fail. But if their crop is insured, then they can try out new things without worry.
- Protection of yield: If the yield is more than expected than the prices go down and if the yield is low the farmer can’t recoup their investment; either way they face loss. Crop insurance also offers protection if planting and replanting are
- Awareness: The insurance companies carry out awareness campaigns so that farmers understand that natural calamities can happen and their effects and how to protect their farms from such situations.