What is Crop Insurance? | Crop Insurance Schemes in India

What is Crop Insurance?


Crop or Agriculture Insurance covers risks of anticipated loss in yield of various crops. mostly the entire Crop Insurance business comes from Schemes or curricula. These Crop Insurance Schemes operate on the Theory of the ‘Area Approach. Coverage is mandatory for planters taking crop loans from rural financial institutions (RFIs) for the cultivation of crops, i.e., loanee farmers. Non-loanee Kisaanon can also insure their crops under the same yojana.

The main Schemes available to farmers in respect of crop insurance are as under:

a) National Agricultural Assurance Scheme (NAIS) of Government of India

b) National Crop Insurance Programme (NCIP) of Government of India

i. Modified National Agricultural Insurance Scheme (MNAIS),

ii. Weather Based Crop Insurance Scheme (WBCIS) and

iii. Coconut Palm Insurance Scheme (CPIS) 

a) National Agricultural Insurance Scheme (NAIS)

NAIS was introduced in the year 1999 and is presently in operation in a few states. Scheme is practically an all-risk insurance cover based on ‘Area Yield Index.

  • Which are the crops covered: 

The Scheme veil all food, oil seeds, and yearly commercial / horticultural phasalon for which historical produce data is available and crop cutting usage is planned for the current year. State governments issue notices containing names of crops, areas Cupule for insurance, rates of premium, etc. at the beginning of each cropping season. 

  • Who can insure: 

The Scheme is acquirable to all Farmers - compulsory for best farmers and optional for non-borrowing farmers. Farmers have to fill up a simple Proposal Form and submit the same with a premium amount at the nearest branch of the bank or Primary Agricultural Credit Society.

  • What is Sum Insured and Premium:

 Sum Insured is at least equal to the loan amount which can be increased to 150% of the value of the average yield at the option of the farmer. There are limits for non-loanee farmers which are published in the state government’s notification. Surcharge rates for Food crops and Oilseeds range from 1.5 percent to 3.5 percent and actuarial rates are charged for Annual Commercial / Horticultural Crops. Subsidy in premium is available to small and marginal farmers at 10% of the premium. Some State governments offer Surpassing subsidies.

  • Where to pay a premium (Intermediary):

Network of pecuniary institutions viz. commercial banks, regional rural banks, and cooperative banks, spread across the length and breadth of the country, play the role of intermediaries. The scheme operates broadly on the bancassurance model.

  • Levels of indemnity

Levels of indemnity are 60%, 80%, and 90% which means farmers are themselves to bear the loss of the first 40%, 20%, or 10% respectively. This Term is also Extensively called ‘deductible’. 

  • What is the procedure for claims:

The Scheme operates on principles of Area- product Index or Guarantee. There is a guaranteed yield defined as the Threshold Yield for every crop in every Identical Area e.g. taluka, block Village panchayat, etc. Threshold Yield is the moving average of the past five years' actual yield (three years in the case of Paddy and wheat) multiplied by the applicable level of indemnity. If the present season’s Real yield recorded is less than the Threshold yield, then claims become to be paid. 

Yield data used for claims is generated under General Crop Calculation Surveys (GCES) by way of crop-cutting check-ups. The procedure of assessment and Where to pay premium (Intermediary) Resolution of claims are automated processes and the claim raashi is credited to the insured farmers’ bank account. No paperwork is required to be done by insured farmers or intermediaries.

b) National Crop Insurance Programme (NCIP)

 NCIP has three components- viz. MNAIS, WBCIS, and CPIS. There are some common features for MNAIS and BCIS components i.e.

1. Private sector insurance companies are allowed as ‘implementing agencies.

2. Rates of premium are charged on an actuarial basis. Actuarial rates of premium help insurance companies transfer the risk in the global reinsurance market and the governments budget their liabilities.

3. Premium payable by farmers is subsidized substantially to make it affordable.

4. Sum insured is broadly equal to the cost of cultivation.

5. All claims will be paid by the insurance company as there will be no sharing of claims by state and central governments. 

Component – I: Modified National Agricultural Insurance Scheme (MNAIS)

  • Which are the crops covered:

 The Scheme covers all food, oilseeds, and annual commercial horticultural crops for which historical yield data is available and crop-cutting experiments are planned for the current year. State governments issue notifications containing names of crops and areas eligible for insurance, rates of premium, etc. at the beginning of each cropping season. 

  • Who can insure: 

Available to all Farmers - compulsory for borrowing and optional for nonborrowing farmers- who have to fill up a simple Proposal Form and submit the same with the premium amount in the nearest branch of the bank or Primary Agricultural Credit Society.

  • What is Sum Insured and Premium:

Sum Insured is based on the cost of cultivation and at least equal to loans disbursed. Often the State government decides the sum insured for various crops for a district within the State. Sum insured can extend up to the value of Threshold Yield. Premium rates vary from crop to crop and area to area based on risk profile reflected in historical yield data, past insurance, and claims experience.

  • Where to pay a premium (Intermediary):

A network of financial institutions viz., commercial banks, regional rural banks, and cooperative banks, spread across the length and breadth of the country plays the role of intermediaries. Additionally, insurance intermediaries licensed by IRDAI are also allowed to ensure non-loanee farmers.

  • Levels of Indemnity:

Levels of Compensation are 80% and 90% which means farmers have to bear the first 20% or 10% of losses Serially.

  • What is the procedure for claims:

Operates on principles of Area-Crop Index or Guarantee. The guaranteed yield termed as Threshold Yield for every crop in every Homogenous Area e.g. taluka, block, or gram panchayat, is based on the past seven years’ moving average yield with a provision for excluding yields of a maximum of two calamity years. The other process is the same as the NAIS. 

  • New provisions on claims:

MNAIS provides additional features in terms of coverage of ‘Prevented sowing’, post-harvest losses, individual farm level assessment in case of localized calamities, and On-Account settlement of claims in case of serious crop losses/major disasters.

Component – II: Weather Based Crop Insurance Scheme (WBCIS):

  • Which are the crops covered:

The Scheme covers all food, oilseeds, and annual commercial/ horticultural crops. All crops for which historical yield data is not available can also be covered.

  • Who can insure:

Available to all Farmers - compulsory for borrowing farmers and optional for non-borrowing farmers -who have to fill up a simple Proposal Form and submit the same with the premium amount in the nearest branch of the bank or Primary Agricultural Welfare Society. 

  • Risks covered:

Major perils covered are deficit, excess and deviation of rainfall, relative humidity, temperature (high and low), wind speed, and a combination of the above. Risks of hail-storm and cloud bursts can also be covered as add-on covers.

  • What is Sum Insured and Premium:

Sum Insured is pre-defined and is based on the cost of cultivation, and is decided by the state for each crop and district. Premium rates can be a maximum of 10% for Kharif and 8% for Rabi season with 12% for commercial/ horticultural crops. The premium subsidy achievable ranges from 25 to 50 percent.

  • Where to pay a premium (Intermediary):

Network of Pecuniary institutions viz., commercial banks, regional rural banks, and cooperative banks, spread across the length and breadth of the country plays the role of intermediaries. Insurance intermediaries licensed by IRDAI are also allowed to ensure non-loanee farmers.

  • What is the procedure for claims:

If the observed weather index value falls below or above (as the case may be) the notified trigger value, then claims shall be calculated per unit area. Claims are assessed and settled solely based on weather data of automated stations installed in the Reference Unit Area for the purpose. The calculation is done based on term sheets published in notifications. 

The procedure of Evaluation and settlement of claims are automated Procedures. No paperwork is required to be done by insured farmers or intermediaries. Losses for Add-on covers are assessed on a particular basis for which farmers have to inform the insurance company within 48 hours of the occurrence of the insured peril.

Component - III: Coconut Palm Insurance Scheme (CPIS)

This scheme operates largely like a non-life insurance policy. It is an annual contract, administered only by the Agriculture Insurance Company of India. 

  • Who can insure:

Any palm grower having at least five healthy nut-bearing palms in a contiguous area is eligible to insure. Palms are insured in two categories viz., palms in the age group of 4 to 60 years in the case of dwarf and hybrid palms and 7 to 60 years in the case of tall variety.

  • What is covered:

Storm, Downpour, cyclone, gale, tornado, heavy rains, flood, overflow, pests, diseases, accidental fire, Jungle fire, bush fire, lightning, tsunami, severe drought, and consequential total loss causing the death of palm or making it totally counter-productive. 

  • What is not covered:

Loss due to theft, war, nuclear risks, rebellion, revolution, insurrection, mutiny, natural mortality, uprooting, etc.

  • Sum Insured and Premium:

Sum Insured for palms within the age group of 4th to 15th year is Rs. 900/- and premium is Rs. 9.00 per tree while for palms within the age group of 16th to 60th year is Rs. 1750/- and premium is Rs. 14.00 per tree. A subsidy of 75% is available. The farmer pays only 25% of the premium amount.

  • Assessment of claims:

Claims have to be intimate to the insurance company within 15 days from the incident of hazard. Claims will be assessed on an individual basis and the claim amount will be released to the insured farmer.


Q 1: What is crop insurance?

Ans: Crop insurance is an arrangement aimed at mitigating the financial losses suffered by the farmers due to harm and ruin of their crops resulting from various production risks.

Q 2: What is the purpose of the Agricultural Insurance Scheme?

Ans: The objectives are:-

• To provide financial support to the farmers in the event of foil of any of the notified crops as an outcome of natural calamities,  and diseases.

• To restore the creditworthiness of farmers arising out of crop losses leading to non-repayment of crop loans.

• To encourage the farmers to adopt progressive farming practices, high-value inputs, and higher technology in Agriculture.

• To help get up farm incomes, particularly in calamity years.

Q 3: What are the various risks covered under the crop insurance scheme?

Ans: The Scheme provides ambient risk insurance for yield damage due to: (i) Natural Fire and Lightening, Storm, Downpour, Cyclone, Gale, Tempest, Hurricane, Eddy, Flood, Flood and Landslide (ii) Drought, Dry spells (iii) Pests / Diseases, etc. in Area-Yield Index Insurance Schemes and Weather indices under WBCIS or Weather Index based crop insurance Scheme.

Q 4: What are the various crops covered under the schemes?

Ans: NAIS and MNAIS cover grain, millet, pulses, oilseeds, and Annual Commercial/yearly Horticultural crops. The crops are Elected for insurance if the past crop data for 10 years are Existing, and the State government agrees to conduct a requisite number of yield estimation surveys to estimate the yields during the Introduced season. However, almost any crop can be covered under WBCIS for which a broad correlation can be established between weather parameters and anticipated loss in crop yield.

Q 5: Who is eligible to be covered under the schemes?

Ans: All farmers growing notified crops in notified areas as notified by the State government are eligible for availing insurance. Crops of loanee farmers are compulsorily insured, while non-loanee farmers can insure their crops at their option.

Q 6: How is this crop insurance scheme administered?

Ans: Selecting of Insurance Company to do harvest insurance in the State is decided by the concerned State Government only and it may vary from season to season. The following general insurance companies are impaneled by Govt of India to transact Crop Insurance:

1. Agriculture Insurance Company of India Limited,

2. ICICI Lombard General Insurance Co. Ltd.

3. IFFCO TOKIO General Insurance Co. Ltd.

4. HDFC ERGO General Insurance Co. Ltd.

5. Cholamandalam MS General Insurance Co. Ltd.

6. Tata-AIG General Insurance Co. Ltd.

7. Future Generali India Insurance Company Ltd.

8. Reliance General Insurance Company Ltd.

9. Bajaj Allianz General Insurance Co. Ltd.

10. Universal Sompo General Insurance Co. Ltd.

11. SBI General Insurance Co. Ltd.

This list is Suggestive only and topic to change by Govt of India from time to time.

Q7: What is the Unit of Insurance?

Ans: The size of the unit area varies from State to State and crop to crop. Presently, the unit of insurance is Block/ Mandal/ Taluka / Patwarihalka / Nyaya Panchayat/ Gram Panchayat/ Village, etc., as per the convenience of the concerned state government.

Q 8: What is the amount of sum insured under NAIS and MNAIS?

Ans: A. For loanee farmers (compulsory coverage): The amount of crop loan availed for the notified crop is the minimum amount of sum insured covered on a compulsory basis. However, a loanee farmer so wishes he may insure his crop for a higher Sum Insured i.e. up to the value of Threshold Yield (i.e. guaranteed yield) or up to 150% value of average yield by paying a premium on the actuarial basis for the difference in the sum insured.

B. For Non-loanee Kisan: Distribution at normal rates of premium is available up to the value of the Threshold crop. Additional coverage up to 150% value of Actual Yield can be availed by payment of premium at actuarial rates for the difference in sum insured. In the case of Yearly commercial and horticultural crops, only Actuary rates of premium are charged at all the slabs of the sum insured.

Q 9: How much premium a farmer has to pay to get the insurance covered?

Ans: NAIS: Flat rates of premium ranging from 1.5% to 3.5% are applicable for food and oilseed crops. For yearly Commercial and Horticultural Yield, actuarial premium rates are charged. Subsidy in premium to the extent of 40% to 75% is available to all farmers to make it affordable.

MNAIS and WBCIS: Actuary rates of premium are charged which Change from crop to crop and area to area. Subsidy in premium is available to all Kisan to make it Inexpensive.

Q10: Does a non-loanee farmer need to produce some documents for obtaining insurance cover?

Ans: The non-loanee farmer has to produce proof (copy of land passbook / 7/12 extract/land revenue receipt etc.) to prove that he/she is the owner of the land. In the case of sharecroppers and tenant farmers (who are not availing of crop loan), proof showing crop sharing/tenancy arrangement need to be produced.

Q 11: Are crop loans Repay through Kisan Credit Cards (KCCs) Cupule for insurance coverage under the NAIS?

Ans: Crop loans disbursed/withdrawn through KCCs are also eligible for coverage as per the terms and conditions applicable to regular crop loans.

Q 12: When and how the claims are settled under NAIS and MNAIS?

Ans: In case of widespread calamities, the losses are assessed on an area approach basis. Any Assured crop in a notified area recording a lower actual Crop than the guaranteed yield as per the crop yield estimation surveys of the State government shall automatically become eligible for Quid Proquo / claim. 

The shortfall in yield is determined for each crop and is the difference between the guaranteed yield and the current season's actual yield. The shortfall percentage is multiplied by the sum insured to arrive at the claim amount. Claim amount is released to the banks soon after approval and receipt of funds /subsidy from the government, who in turn credit the account of eligible farmers.

Q 13: Whether a Newark or any similar declaration/ certification by the revenue or agriculture departments of the State government at the village/block /district level has any bearing on claim Rectification?

Ans: No. Claims under the scheme are settled Rigidly as per the provisions and guidelines Stated. So the declaration of flood/drought/a Newari by any other agency/authority has no bearing on the claim.

Q14: Whether insured farmers whose crops are damaged need to intimate crop losses to the bank/AIC to be eligible for a claim?

Ans: In the case of "Area outlook", the farmers need not inform crop losses to bank/AIC. The crop losses, if any, or reduction in yield as compared to Guaranteed yield are determined from the Crop Estimation surveys, and the shortfall in yield, if any, shall be paid as a claim through the bank. In case of areas notified under localized calamities for individual loss assessment, the farmer needs to intimate the crop loss within 48 hours.


Loanee and non-loanee farmers insure their crops through financial institutions and licensed intermediaries. Insurance companies receive ‘Declaration Forms’ for underwriting which contain consolidated information. Collection receipts are issued to financial institutions and intermediaries after receipt of the premium amount. ‘Acknowledgements’ are issued to these channel partners after the process of underwriting is over.

 NAIS and MNAIS claims are processed upon receipt of actual yield data. Cut-off dates for receipt of actual yield data are published in notifications issued by State governments before the beginning of each season.

 The insurance company settles the claims soon after receipt of a share of funds from State and Central governments in the case of NAIS and as early as possible in the case of MNAIS.WBCIS claims are settled within 45 days from the last day of the period of insurance, subject to receipt of premium subsidy. 

The User Affairs Department of the Insurance Regulatory and Growth Authority of India (IRDAI) has introduced the Integrated Grievance Management System (IGMS) which is an online system for registration and tracking of Complaints. You must register your grievance first with the insurance company and in case you are not satisfied with its disposal by the Company, you may escalate it to IRDAI


through IGMS by accessing www.igms. irda.gov.in. In case you are not able to access the insurer’s grievance system directly, IGMS also provides you a gateway to register your grievance with the insurer. Apart from registering your Jeremiad by IGMS (i.e., web), you have other channels for grievance registration – through email (complaints@irda.gov.in), by letter (address your letter to Usufructuary Affairs Department, 

Insurance Control Regulatory and Development Authority of India, 3rd Floor, Parishram Bhavan, Basheerbagh, Hyderabad-500004) or a simple call to IRDA Grievance Call Centre at Toll-Free number 155255/1800 4254732 through which IRDAI shall, free of cost, register our complaints against insurance companies as well as help track its status. The Call Centre assists by filling up the complaint form on the basis of the call. Wherever required, it facilitates the filing of complaints directly with insurance companies as the first port of call by giving information relating to the address, telephone number, website details, contact number, email id, etc. of the many insurance companies.

 IRDAI Call Centre offers a true alternative channel for prospects and policyholders, with comprehensive tele-functionalities, serving 12 hours X 6 days from 8 AM to 8 PM, Monday to Saturday in Hindi, English, and various Indian languages. When a complaint is registered with IRDAI, it facilitates resolution by taking up with the insurance company. The company is given 15 days time to resolve the complaint.

 In case the complainant is not satisfied with the resolution of the complaint by the insurer, he may approach the Insurance Ombudsman for amicable resolution or adjudication by the Insurance Ombudsman in terms of the Redressal of Public Grievances Rules, 1998.

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