Enhanced Coverage Option

ECO will be available for 31 crops (shown below), starting with the 2021 crop year, in most counties where these crops are grown. Additional crops will be added in subsequent years based on producer interest and data availability.

ECO follows the coverage of your underlying policy. If you choose Yield Protection or a yield-based policy, then ECO covers yield loss. If you choose a Revenue Protection policy, then ECO covers revenue losses.

The amount of ECO coverage depends on the liability of your underlying policy. However, ECO 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. ECO pays a loss on an area basis, and an indemnity is triggered when there is a decrease in the county level yield or revenue. ECO has two trigger levels: 90 and 95 percent. ECO provides a band of coverage between the elected trigger level and 86 percent. If the county yield or revenue is reduced beyond the trigger level, you will receive an ECO indemnity. If the reduction in yield or revenue exceeds the 86 percent threshold, you will receive an indemnity equal to the full insured liability.

Suppose your corn crop has an expected value of $765.00 per acre (170 bushels at $4.50 per bushel). Assume you purchase 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.

At this point, you have the option to buy ECO coverage. Since the underlying policy is Revenue Protection, ECO will also provide revenue protection, except that payments will be determined at a county level. The ECO revenue coverage is described in the following table. ECO yield coverage performs in the same manner.

The ECO Endorsement begins to pay when county average yield or revenue falls below 95 percent (or 90 percent, if that is the trigger level you elect) of its expected level. The full amount of the ECO coverage is paid out when the county average revenue falls to 86 percent, as shown on step B in the table.

ECO payments are determined only by county average revenue or yield and are not affected if you receive a payment from your underlying policy. Therefore, it is possible for you to experience an individual loss but to not receive an ECO payment, or vice-versa. You may also receive a loss on both the underlying policy and ECO.

The dollar amount of ECO coverage is based on the percent of crop value covered. In this example, there are 9 percentage points of coverage – from 95 percent to 86 percent. Nine percent of the expected crop value ($765.00) is $68.85 (or x9 percent x $765.00). Thus, the ECO policy can cover up to $68.85 of the $191.25 deductible amount not covered by your underlying policy. You may cover a portion of the remaining amount of the deductible with other coverage such as the Supplemental Coverage Option (SCO).

Now consider an event where the actual county revenue falls to 89 percent of the expected value. This loss is 6 percentage points less than the trigger level elected (95 percent - 89 percent = 6 percent). This indicates a loss of 66.67 percent of the ECO coverage range (6 percent / 9 percent = 66.67 percent). This loss is then applied to the amount of ECO protection to determine an indemnity of $45.90 per acre (66.67 percent x $68.85 = $45.90).

ECO provides coverage on a portion of your deductible where losses are more frequent, so your premium will reflect that higher risk. The premium cost is shared between you and the government, where the government pays 51 percent or 44 percent of the premium for yield and revenue policies, respectively.

The exact premium cost will depend on the crop, county, coverage level selected, and type of coverage selected such as Yield Protection versus Revenue Protection. Additional variables, including the projected price and even the volatility of the applicable commodity market can also affect the amount of your premium. You should consult your crop insurance agent for detailed price quotes.