South Dakota Crop Insurance Practice Exam

What does the CAT Coverage apply to regarding crop losses?

1. All crop losses

2. Losses in excess of 50%

3. Losses below 50%

4. Only losses calculated by yield

The correct answer is: Losses in excess of 50%

CAT Coverage, or Catastrophic Risk Protection, is designed to provide a basic level of insurance for producers facing significant losses. Specifically, it applies to covered losses that exceed a threshold, which is typically set at a percentage of the expected yield. Under CAT Coverage, this threshold means it effectively covers losses in excess of 50%. This makes it a safety net primarily for those instances where producers might face extreme yield reductions rather than offering a safety net for all potential crop losses. The idea behind this coverage is to help farmers recover from severe situations while not covering lower levels of loss that do not meet this critical threshold. Hence, CAT Coverage is particularly important for minimizing the financial impact when losses are significant and exceed this 50% mark. The context around other choices clarifies why this option is focused on severe losses. Coverage does not apply to all crop losses, nor does it cover losses below the set threshold or solely losses calculated by specific yield measurements; it is specifically designed to protect against substantial, catastrophic losses that go beyond the standard risk levels that producers expect to face annually.