South Dakota Crop Insurance Practice Exam

How is the amount payable per acre for a crop-hail event calculated?

1. Limit of insurance x percentage of gain

2. Limit of insurance x percentage of loss

3. Value of crop x yield

4. Actual damage cost x market price

The correct answer is: Limit of insurance x percentage of loss

The amount payable per acre for a crop-hail event is determined by calculating the limit of insurance multiplied by the percentage of loss. This calculation is rooted in the concept of risk management and financial coverage provided by crop insurance policies. When a hail event occurs, the insurance is designed to provide compensation based on the extent of the damage assessed against the insured value of the crops. The limit of insurance represents the maximum payout the policy offers for each acre insured. The percentage of loss quantifies the actual damage incurred by the crop due to hail, derived from an evaluation of the impacted yield. Thus, calculating the amount payable by multiplying the limit of insurance by the percentage of loss effectively allows for an accurate determination of compensation aligned with the specific damage that the crops have suffered. This ensures producers receive fair reimbursement based on actual losses incurred, which is crucial for their financial recovery and ongoing agricultural operations.