PRF Insurance Dictionary

Grids:

All land in the United States is divided into roughly 13x17 mile grids. By knowing which grids your acreage falls into, we can assign coverage into grids that would have historically paid out indemnities over the last 20 years.  

NOAA:

This acronym stands for National Oceanic and Atmospheric Administration. They’re responsible for reporting rainfall data to the Risk Management Agency of the USDA to impact your PRF policy.

NOAA Rainfall Data:

NOAA collects rainfall data for each grid throughout the year from the 4 weather stations closest to its center—at least one of those 4 stations records data each day, but not all record every day.

Intervals:

Interval refers to the time period in which you can apply your coverage. PRF insurance can be spread over two-month intervals (Jan-Feb., Feb.-Mar., Mar.-Apr.; etc.) Though you cannot double insure certain months (i.e. if you’re covered for Jan.-Feb., you cannot be covered Feb.-Mar., instead your next possible interval would be Mar.-Apr.

For example, you can place 50% (or whatever percentage you and your agent choose) of your coverage in Mar.-Apr. and another 50% of your coverage in Jun.-Jul. if those intervals would have historically performed the best. This way, your policy wouldn’t be affected by above-average precipitation in another interval. NOTE: each county has a unique limit for the max coverage that can be put in an interval

Coverage Level:

This is the percentage of average rainfall that your acreage is insured up to. It can be between 70-90% of average rainfall (i.e. if you are insured up to 90% of average rainfall, then an indemnity will be paid if your grid receives less than 90% of average rainfall during an insured interval).

Indemnity:

Indemnity refers to the money that is credited to your policy. Each time you receive less than your chosen coverage level average rainfall during a covered interval, an indemnity is credited toward your policy.  An “indemnity payment” is the check(s) you start receiving once your PRF policy premium has been paid off through losses/lack of rainfall.

Loss Total (per interval):

This number reflects the amount of money credited toward your policy based on rainfall data for a specific interval. In other words, this is your indemnity credited toward your policy for a given interval, as determined by the formula above. On your monthly interval statements, this number is calculated per interval using the formula:

Self-funding:

Your PRF policy is self-funding, meaning your indemnities will go toward your premium until the balance is satisfied, then any additional indemnity goes straight to you with no money out of your pocket! However, if your premium amount is not satisfied through triggered losses (lack of rainfall) then you would be responsible for the remaining premium amount.

USDA Subsidy:

PRF insurance is subsidized anywhere from 51-59% by the USDA, which means funding for the program comes from the USDA’s Risk Management Agency.  PRF is included under the crop insurance category of the Farm Bill.

% of Coverage:

This refers to the percentage of your policy’s coverage that is placed into a specified interval. ‍

YTD Loss:

Your YTD loss refers to the total amount of indemnity credited toward your policy throughout the year due to lack of rainfall, including any indemnity that was credited toward your premium.

Net: ‍

Your Net refers to the total indemnity that has gone straight to you, once your premium has been paid off. (YTD Loss - Total Premium = Net)

Total Premium:

‍This is the amount owed to the AIP (Authorized Insurance Provider) on September 30th if no losses are triggered by lack of rainfall.

% of Normal (in terms of rainfall data):

The percentage of rainfall received measured against the average rainfall for that grid.

$ of coverage:  

Is the maximum amount of potential indemnity that could be credited toward your policy if there is no rainfall.

SBI:

This acronym stands for “Substantial Beneficial Interest”. Any person with 10% or more financial interest in the named insured individual would be considered to have SBI, and therefore, must be included on the PRF insurance application.