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What Happens if You Pay Crop Insurance Late?
Former Successful Farming editor Loren Kruse once said, “The check for crop insurance is the hardest one to write.” It’s understandable because when you write and mail that check, it is often abundantly clear that there are no substantial crop loss and no indemnity payment to offset the premium. Some buyer’s regret comes with writing a check for something you don’t use, but write the check you must, if you want to continue to have crop insurance.
Of course, your right brain tells you that crop insurance is more than a potential claim check and premium credit. Coverage enables operating credit at reasonable rates, allows forward marketing of crops at potentially better prices, and protects a farm from a potential knockout blow. Yet, the time to write that check has caused confusion and unexpectedly dire consequences.
You don’t have to write the check when it is immediately due. Following an old agricultural tradition long dropped by other agribusinesses, the insurance premium is due near the end of a crop season instead of up front. In 2010, the due date for Midwestern spring crops was moved to August 1 from October 1 to generate federal budget savings. Since the federal fiscal year ends September 30, the change enabled government accountants to claim two premium payments in one fiscal year.
Your portion of the premium is due on a specified date that varies by crop (August 1 for Midwest spring crops) with 30 days grace. An extension of credit is automatic if the payment is not received within 31 days of the due date. The extension of credit is no bargain because it comes with a hefty price tag: 1.25% per month (or any part of it) including the grace period. That’s more than 15% per annum. If that’s not draconian enough, the automatic extension of credit has a tough, nonnegotiable payment date – a true deadline that’s unforgiving.
If you don’t pay your full indebtedness by the policy cancellation date (March 15 for Midwestern spring crops), you are not just a deadbeat, you are dead – put on the Ineligibles Tracking System (ITS)) to the crop insurance program going forward. Changing insurance agents, companies, or forming a new partnership or corporate entity will not cloak your demise for long.
Since you are no longer eligible for crop insurance on the sales closing date, no crop insurance coverage can be had. Worse yet, eligibility for this next crop year cannot be restored even if you subsequently pay up. Additional time to pay the premium may be allowed by the insurer, but the payment plan must be in place before the deadline. If you falter (miss a payment), you are dead again, and it is retroactive.
Many farmers have appealed their plight (technically called an “adverse decision” by the Risk Management Agency) to the National Appeals Division (NAD) of USDA. An administrative judge hears the appeal and makes a decision on whether the adverse decision was made inappropriately by the RMA.
Hearing records and decisions of the NAD are available online. They reveal a very hard administrative line on nonpayment of premium. Although the administrative judge many times sympathizes with the farmer, the rules leave little discretion.
Following are some of the unsuccessful excuses denied by the NAD.
Farmer misplaces or forgets bills until after the deadline.
Farmer does not remember receiving a bill.
Farmer is away from his/her mail during the month prior to the deadline.
Check is made out in the wrong (lesser) amount.
Check amount in digits doesn’t match the words.
Farmer has an outstanding claim that would cover the premium due.
Check is mailed timely but is lost in the mail.
Check is mailed on the due date but is not received until after the due date.
Farmer disputes the claim.
Farmer does not think he/she should pay interest when the company owes him/her money. (Interest is always deducted first, leaving the unpaid premium.)
No matter what you dispute, pay the premium and interest due or negotiate a repayment plan before the cancellation date.
Allow plenty of time for the check to arrive prior to the cancellation date. Mailing the check in a certified letter with a return receipt is a good practice. It notifies you that the check was received, and you have proof of delivery.
For better or worse, the RMA is not your friendly banker or ag supplier who will overlook a late payment by a day or two or accept a good excuse.