South Dakota Crop Insurance Practice Exam

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How can you calculate the total crop-hail premium?

Multiply by the limit of insurance
Divide the limit of insurance by 100 and multiply by the rate
Subtract premiums from total coverage
Only using the crop evaluation

The correct answer is: Divide the limit of insurance by 100 and multiply by the rate

To calculate the total crop-hail premium, you can use the method of dividing the limit of insurance by 100 and then multiplying that figure by the applicable rate. This process is standard in crop insurance practices, particularly for determining premiums based on coverage limits and rates established by insurance providers. The limit of insurance represents the maximum amount the policy will cover in the event of a loss, while the rate indicates the cost per unit of coverage. By first dividing the limit by 100, you effectively establish a per-hundred coverage basis, which is a common method in calculating insurance premiums. Subsequently, multiplying by the rate will yield the total premium amount due for that coverage amount. This method is directly aligned with how crop-hail insurance rates are structured and calculated, making it the correct approach for this specific situation.