Crop Insurance Today Third Quarter 2019 - 9

Over time lessons have
been learned by farmers,
agents, and insurance
company personnel as
they have become more
educated and familiar
with the concepts and
requirements of WFRP.
expanding production capacity through adding
land or facilities, but those details are best saved
for another article.
Over time, lessons have been learned by farmers, agents, and insurance company personnel as
they have become more educated and familiar
with the concepts and requirements of WFRP. As
the title of the article suggests, there have been
some assumptions about WFRP that do not quite
align with the fine print of the policy. Let's look at
some of the most common myths about WFRP.

Myth: A Loss on the IRS
Schedule F = Loss on WFRP.

The opening paragraph of the WFRP policy
states: "Whole-Farm Revenue Protection (WFRP)
pilot provides protection against loss of revenue
that you expect to earn or will obtain from commodities you produce or purchase for resale during
the insurance period."
* The Take Away: The IRS Schedule F may
include revenue from previous years or may
exclude revenue from commodities produced
during the current policy year because they
have yet to be sold. WFRP requires that accrual adjustments be made to allowable revenue used to determine the insurance guarantee and for claims. The IRS Schedule F is not
a cash flow or profitability statement for the
farming operation; rather, it is a measurement
of the tax liability of the farming operation.

Myth: No Loss on the IRS
Schedule F = No Loss on
WFRP.

Under the heading of "Coverage," the policy
states: "This policy insures the approved revenue
that you earn or expect to earn from all commodities that you produce or purchase for resale during
the insurance period and in which you have an insurable interest."

* The Take Away: The current year's IRS
Schedule F may include revenue produced
in prior years (e.g., the selling of stored grain
from a previous year) that offsets revenue declines in the current year. The policy DOES
NOT state that coverage is a measure of revenue fluctuations from one year to another
based solely on the information provided on
an IRS Schedule F.

Myth: The IRS Schedule F
is the only source document
needed to support the
Whole-Farm History.

The word "supporting" or some version of

it is used fifteen times in the WFRP policy.
The policy has a provision that clearly spells
out that providing just the IRS Schedule F is
simply not enough: "The allowable revenue
and allowable expenses stated on the farm tax
forms, including all forms and records supporting these figures, for the entire whole-farm
history period..."
* The Take Away: The procedures that are
spelled out for approved insurance providers (AIPs) to follow require adjustments to
allowable revenues and expenses for each
year in the Whole-Farm history period.
These adjustments simply cannot be made
without supporting documentation of the
numbers reported on the IRS Schedule F.
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Crop Insurance Today Third Quarter 2019

Table of Contents for the Digital Edition of Crop Insurance Today Third Quarter 2019