Group Risk Plan (GRP) and Group Risk Income Protection (GRIP) are low-cost insurance programs designed to help farmers protect their crops from disastrous losses. GRP and GRIP are alternatives to the traditional Multiple Peril Crop Insurance and revenue insurance products.

Edwards, William M.

English

Research Papers in Economics

FM-1850 | Revised | January 1999
Group Risk Plan (GRP) and Group Risk Income
Protection (GRIP) are low-cost insurance pro-
grams designed to help farmers protect their crops
from disastrous losses. GRP and GRIP are alterna-
tives to the traditional Multiple Peril Crop Insur-
ance and revenue insurance products.
Trigger Yield and Trigger Revenue
Under GRP, farmers receive payments any time
the actual county yield drops below the trigger
yield that the farmer chooses.  The trigger yield
can be 90, 85, 80, 75, or 70 percent of the expected
county yield, which is based on the county’s yield
history since 1962.
As shown in Example 1, if the expected county
yield for soybeans is 40 bushels per acre and a
producer or landowner chooses a coverage level of
90 percent, the trigger yield is 36 bushels.  If that
year’s official county yield as estimated by the
National Agricultural Statistics Service (NASS)
falls below 36 bushels, a payment is made, regard-
less of the farmer’s own yield.
Example 1.  Trigger Yield with GRP
Expected county yield 40 bu.
Coverage level 90 %
Trigger yield 36 bu.
Under GRIP, farmers receive payments any time
the actual county revenue drops below the trig-
ger revenue that the farmer chooses.  The trigger
revenue is calculated by multiplying the expected
price by the expected county yield, then multiply-
ing this by 90, 85, 80, 75, or 70 percent.  The
expected price is the average futures price for the
five business days prior to March 15.  For corn the
December futures contact prices are used, while
the November futures contract prices are used for
soybeans.
As shown in Example 2, if the expected average
county yield for soybeans is 40 bushels per acre,
the expected price is $6.00, and a farmer chooses a
coverage level of 90 percent, the trigger revenue is
$216 per acre (40 bu. x $6.00 x 90%). If that
year’s actual county revenue falls below $216 per
acre a payment is made, regardless of the farmer’s
own soybean revenue.  The actual county revenue
is computed by multiplying the actual county yield
by the harvest price.  The harvest price for soy-
beans is the average of the November futures
contract price during October.  For corn it is the
average of the December futures contract price
during November.
Example 2. Trigger Revenue with GRIP
Expected county yield 40 bu.
Expected price $6.00
Coverage level 90 %
Trigger revenue $216
Dollar Protection Level
The amount of payment the farmer receives de-
pends on the level of protection selected when the
farm is enrolled.  The value of protection can be as
high as 150 percent of the expected market price
multiplied by the expected county yield, or as low
as 90 percent.  For GRP the expected market price
is set each year by the U.S.D.A. Risk Management
Agency (RMA).   For GRIP the expected market
price is the average futures prices for the last five
business days prior to March 15, the same as used
to set the trigger revenue. For example, assuming a
Group Risk Plan and
Group Risk Income Protection40 bushel county yield and an expected price of
$6.00, a farmer can buy up to $360 of coverage per
acre (40 bu. x $6.00 x 150%).
Insurance PaymentInsurance Payment
With a GRP policy and a coverage level of 90%, a
farmer receives an insurance payment if the county
average yield drops below the trigger yield of 36
bushels (40 bu. x 90%).  As shown in Example 3,
if the actual county yield is only 30 bushels, this is
a 6 bushel shortfall from the trigger yield, or 16.7
percent  The farmer would receive a payment
equal to 16.7 percent of $360, or $60 per acre.
The amount of payment received does not depend
on the yield achieved on the farmer’s own acres,
only on the county yield.
Example 3. Insurance Payment with GRP
County average yield 40 bu.
Expected price $6.00
Dollar protection (150%) $360
With a GRIP policy and a coverage level of 90%, a
farmer receives an insurance payment if revenue
drops below the trigger revenue of $216 ($6.00 x
40 bu. x 90%).  If the actual county revenue is
only $190, this is a 12 percent shortfall from the
trigger revenue.  As shown in Example 4, the
farmer would receive a payment equal to 12
percent of $360, or $43 per acre.  The amount of
payment received does not depend on the yield
achieved on the farmer’s own acres or the actual
selling price.
Example 4. Insurance Payment with GRIP
County average yield 40 bu.
Expected price $6.00
Dollar protection (150%) $360
The final payment is not determined until about
April 15, when the official NASS county yield
estimates are released.  Payments will be received
within 30 days.
Premiums
The insurance cost depends on the trigger yield (or
trigger revenue) and coverage value selected by
the farmer.  RMA pays a portion of the premium
up to a maximum value per acre in each county.  In
most cases, the premium cost for GRP and GRIP
will be less than the cost for the traditional crop
insurance products, for the same dollar level of
coverage.  All of the operator’s or landowner’s
acres of the insured crop in the same county must
be insured together, as an enterprise unit.
Advantages and Disadvantages
Some advantages of the GRP and GRIP programs
are:
• no individual yield history is needed
• no actual production data is needed to
• determine the amount of payment
• there is only one policy per farm for each
crop, unless county borders are crossed
• past farm level loss experience does not
affect premiums
• higher dollar amounts of coverage are
available
However, the GRP and GRIP program protects
farmers and landowners only when yields are low
all over the county, not when more isolated prob-
lems hit their own crops.  Crop producers who
cannot afford a large loss in one year, or whose
yields do not track closely with county yields, may
prefer to continue with the traditional crop insur-
ance programs based on the farm’s actual produc-
tion history.  Producers cannot carry both GRP (or
GRIP) and the actual production history crop
insurance products, however.
Farmers who purchase GRP or GRIP insurance
may want to supplement it with private hail and
fire insurance, to guard against isolated occur-
rences that could damage their own crops without
substantially lowering county yields.  There is no
reduction in the GRP or GRIP premium when
supplemental coverage is purchased, though, as
there is with crop insurance products based on the
farmer’s actual production history.
. . . and justice for all
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consistent with pertinent federal and state laws and regulations on
nondiscrimination. Many materials can be made available in
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Issued in furtherance of Cooperative Extension work, Acts of May 8
and June 30, 1914, in cooperation with the U.S. Department of
Agriculture. Stanley R. Johnson, director, Cooperative Extension
Service, Iowa State University of Science and Technology, Ames,
Iowa.
Prepared by William Edwards, extension economist, Department of Economics.“Iowa State University does not discriminate on the basis of race, color, age, 
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Group Risk Plan and Group Risk Income Protection

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