Presentation on theme: "OPTIONS TO A BASIC APPLE INSURANCE POLICY Adding additional quality based coverage to your apple policy."— Presentation transcript:
OPTIONS TO A BASIC APPLE INSURANCE POLICY Adding additional quality based coverage to your apple policy
Perils Excluded From the Basic Policy Size Color Shape Russeting These perils are insured causes of loss when a producer adds the quality endorsement.
Breakdown by Varietal Group Varietal Group A: Fuji, Braeburn, Gala, Jonagold, Crispin, Pink Lady, Cameo, Honeycrisp, Sommerfeld, Royal Gala, and Macoun Varietal Group B: All varieties not listed in Group A Processing Group: Varieties grown for processing only can be excluded from the quality option and insured as processing apples at the same level of coverage.
Separate Database Records Separate APH must be available for each varietal group. A maximum of 5 years is included to determine average production Separate annual packout percentages by varietal group are averaged for 4 years. Most recent year is not included in the average to determine historical packout percentage.
Insuring For More Than Bushels Producers insure for a combination of bushels and Fancy or better grade apples. Coverage is calculated using the producers APH and historical packout percentage. Each varietal group will be insured independently, but both must be insured at the same level of coverage. Available for any buyup level from 50% to 75%.
Price Elections for 2003 Varietal Group A: Fancy or Better $12.25/bushel Varietal Group A: All Other Apples $1.85/bushel Varietal Group B: Fancy or Better $7.15/bushel Varietal Group B: All Other Apples $1.85/bushel
Calculating $s of Coverage The Producers APH x Level of Coverage x Historical Packout % for Fancy is multiplied by the Price Election for the Varietal Group PLUS The Producers APH x Level of Coverage x Historical Packout % for All Other is multiplied by the All Other Price Election
$s of Coverage Example For Varietal Group A, the producer has a 500 bu APH, a 60% Historical Packout and chooses 65% coverage level 500 x 65% x 60% x $12.20 = $2379 PLUS 500 x 65% x 40% x $1.85 = $241 TOTAL of $2620 per acre
Separate Units Each variety is not insured separately, BUT Each Varietal Group is a separate unit when calculating $s of coverage Same calculations as shown previously would be done to determine $s of coverage for Varietal Group B Optional: Processing apples can be insured without the quality option as a separate unit.
Grade Appraisal at Harvest VERY IMPORTANT: A grade appraisal must be performed by an insurance adjuster before any harvested apples are placed in storage. Failure to meet this requirement will result in all apples not graded being counted as U.S. Fancy.
Loss Calculations A combination of loss in production and/or reduced packout percentage can trigger a loss. Cull apples are not considered in the value of production to count unless sold. Cull apples sold are included in the value at the net value received.
Quality Factors 0-10 % below historical packout factor 100% of apples grading Fancy will count as Fancy 11-30 percentage points below historical packout factor Percent of apples to count as Fancy will be reduced 2% for each % below historical 30-40 percentage points below historical packout factor Percent of apples to count as Fancy will be reduced 3% for each % below historical 50 or more percentage points below historical packout factor All apples will be counted as All- other apples
Loss Calculation Example Poor Yield, Good Quality Using 500 bu APH, 60% historical packout, and 65% level of coverage = $2620/acre Harvested 250 bushel with 75% packout 250 x 75% x $12.20 = $2288 PLUS 250 x 25% x $1.85 = $116 = Total of $2404 Indemnity Payment of $216/acre
Loss Calculation Avg Yield, Poor Quality Using 500 bu APH, 60% historical packout, and 65% level of coverage = $2620/acre Harvested 450 bu with 30% packout 450 x 30% = 135 less 54 bushel (Quality Factor of.60) = 81 bushel x $12.20 = $988 PLUS 450 X 70% = 315 plus 54 bushel (from Quality Factor reduction) = 369 x $1.85 = $683 $2620 - $1671 = $949 Indemnity Payment
Premium Costs Premium is calculated based on the APH, Packout Percent, Level of Coverage, and Varietal Group The higher the Historical Packout – The higher the premium per acre – The higher the $s of coverage
Premium Example – Kent County, 500 bu APH, 60% Packout, 35 acres Group A, 65 acres Group B Level of Coverage $s of CoverageTotal Premium 50%$152,263$4,287 55%$167,490$5,991 60%$182,715$7,885 65%$197,942$11,744 70%$213,168$15,197 75%$228,395$21,311