Supplemental Coverage Option for Federal Crop Insurance

SCO follows the coverage of your underlying policy. If you choose Yield Protection, then SCO covers yield loss. If you choose Revenue Protection, then SCO covers revenue loss.

The amount of SCO coverage depends on the liability, coverage level, and approved yield for your underlying policy. However, SCO differs from the underlying policy in how a loss payment is triggered. The underlying policy pays a loss on an individual basis and an indemnity is triggered when you have an individual loss in yield or revenue. SCO pays a loss on an area basis, and an indemnity is triggered when there is a county level loss in yield or revenue.

For example, suppose a grower’s corn crop has an expected value of $765.00 per acre (170 bushels at $4.50 per bushel). Assume the grower buys a Revenue Protection policy with a 75-percent coverage level (this is the “underlying policy”). The underlying policy covers 75 percent (or $573.75) of the expected crop value and leaves 25 percent (or $191.25) uncovered as a deductible.

By the sales closing date, the grower has the option to buy SCO coverage. Since the underlying policy is Revenue Protection, SCO will also provide revenue protection, except that an indemnity will be determined at a county level. SCO revenue coverage is described in the following table.

The SCO Endorsement begins to pay when county average revenue falls below 86 percent of its expected level. The full amount of the SCO coverage is paid out when the county average revenue falls to the coverage level of the underlying policy. In this example it is 75 percent (shown on line B in the table).

SCO payments are determined only by county average revenue or yield, and are not affected by whether you receive a payment from your underlying policy. It is possible to experience an individual loss but to not receive an SCO payment, or vice-versa.

The dollar amount of SCO coverage is based on the percent of crop value covered. In this example there are 11 percentage points of coverage (from 86 percent to 75 percent). Eleven percent of the expected crop value is $84.15 (or 11 percent • $765.00). The SCO policy can cover up to $84.15 of the $191.25 deductible amount not covered by your underlying policy.

SCO also allows growers to customize their amount of coverage with a coverage percentage. The coverage percentage is elected from a range of 50 percent to 100 percent, and the maximum amount of SCO coverage is multiplied by that percentage. The coverage percentage defaults to 100 percent if the grower chooses not to specify a coverage percentage.

Following from the example above, if you choose an SCO coverage percentage of 50 percent, the SCO policy will cover $42.08 (50 percent • $84.15) of the $191.25 deductible not covered by your underlying policy.

SCO was first available for the 2015 crop year in select counties for spring barley, corn, soybeans, wheat, sorghum, cotton, and rice. RMA will be making greater use of crop insurance data to expand SCO coverage into more areas, more crops, and to make SCO coverage more practice-specific (for example, irrigated in comparison to non-irrigated). Tools are available on RMA’s public website to view availability and other program-related information. A map of SCO availability can be accessed through the Map Viewer tool on the RMA website at
public-rma.fpac.usda.gov/apps/MapViewer/index.html

Other program-related information is available through the Actuarial Information Browser on the RMA website at webapp.rma.usda.gov/apps/actuarialinformationbrowser

If you elect SCO and ARC for the same crop on a farm, your SCO coverage for that crop on that farm will be cancelled and you must report the crop on that farm as covered by ARC on your acreage report. If you do not report a farm covered by ARC the acreage of that farm will be ineligible for an SCO payment but you will still owe 60 percent of your SCO premium on that crop and farm to cover administrative expenses. However, your underlying policy will still be in effect.

FSA Election for ARC is March 15, which is the date RMA will use to establish if producers are eligible for SCO.

Examples:

• Example 1: If you have a farm with corn base acres and elect ARC and plant corn then you may not participate in SCO.
• Example 2: If you have a farm with corn base acres and elect ARC but plant soybeans, you may purchase SCO on the soybeans.
• Example 3: If you have a farm with corn base acres and elect PLC and plant corn then you may participate in SCO.