Crop Insurance Purchases

Crop insurance is a critical risk management tool for farmers who wish to protect themselves against yield and revenue losses, smooth income over time, and help themselves remain a viable operation after catastrophic events. Despite government subsidies for the purchase of crop insurance many farmers fail to purchase insurance to cover catastrophic revenue losses. To better understand the relationship between farmer risk tolerance and the decision to purchase crop insurance, UGA agricultural and applied economists tested three alternative hypothetical measures. Results from the study indicate that a simple hypothetical gamble scenario where farmers considered potential farm revenue gains/losses was highly correlated with the decision to purchase crop insurance. This method to measuring farmer risk tolerance is easy and fast to implement and offers UGA Extension agents and researchers a simple validated tool to assess farmer risk tolerance.