South Dakota Crop Insurance Practice Exam

Under MPCI, what is the basis for insuring each parcel of land independently?

1. Field basis

2. Unit basis

3. Acre basis

4. Location basis

The correct answer is: Unit basis

The basis for insuring each parcel of land independently under Multi-Peril Crop Insurance (MPCI) is referred to as the unit basis. This concept allows insurance coverage to be determined separately for each agricultural unit, which can help farmers effectively manage their risk. By using the unit basis, producers can address specific risks associated with different fields or parcels of land, taking into account variables such as soil type, crop rotation practices, and historical yield data for that specific location. This independent evaluation ensures that if one parcel experiences issues such as adverse weather or disease while others remain unaffected, the coverage can properly reflect those conditions. It promotes a tailored approach to risk management, allowing producers to make better-informed decisions about their insurance needs based on the unique characteristics of each parcel. The concept of a unit basis contrasts with other potential methods like field or location basis, which do not allow for the same level of individual parcel evaluation. The unit basis also provides the flexibility to choose how to define units, either as individual fields or groups of fields, depending on the producer’s needs and risk tolerance.