Navigating 2026 Crop Insurance Choices: SCO, ECO, and the New Insurance Evaluator
Farmers face increasingly complex decisions when it comes to crop insurance. Recent changes, driven by the One Big Beautiful Bill (OBBBA) Act, are reshaping the landscape, particularly regarding the Supplemental Coverage Option (SCO) and the Enhanced Coverage Option (ECO). A new Insurance Evaluator, developed by the University of Illinois, is designed to help producers navigate these choices and optimize their risk management strategies.
The Impact of the OBBB Act and Increased Premium Support
The OBBB Act significantly increased premium support for both SCO and ECO to 80%, down from 65%. This reduction in farmer-paid premiums is a game-changer, prompting many to reconsider their insurance portfolios. Previously, farmers needed to enroll in Price Loss Coverage (PLC) to be eligible for SCO. The OBBB Act removed this requirement, allowing farmers to choose Agriculture Risk Coverage (ARC) and still utilize SCO.
Introducing the Insurance Evaluator
Developed jointly by the Department of Agricultural Economics and the National Center for Supercomputing Applications at the University of Illinois, the Insurance Evaluator is a web-based tool accessible through the farmdoc website. It simulates insurance outcomes for a case farm, allowing users to compare different coverage levels, and combinations. The tool considers factors like Actual Production History (APH) yield, Farm Trend Adjusted (TA) yield, and projected prices.
To access the tool, navigate to the “Tools” menu on farmdoc, select “Crop Insurance Tools,” and then “Crop Insurance Evaluator.” Users input details like state, county, crop, and acreage to generate customized results.
Case Study: Soybeans in McLean County, Illinois
For soybeans in McLean County, Illinois – the state’s largest soybean-producing county – the Insurance Evaluator reveals fascinating insights. With an APH yield of 67.05 bushels per acre and a TA yield of 70 bushels per acre, a base RP policy at 85% coverage results in a farmer-paid premium of $6.77 per acre and an average indemnity payment of $6.13. However, the average net insurance benefit is negative, at -$.64 per acre. This suggests the premium is currently set too high, a trend observed in many Midwestern areas.
SCO and ECO: Enhancing Coverage and Net Benefits
Adding SCO to the RP-85% policy increases the farmer-paid premium to $7.04 per acre, but boosts the net insurance benefit to $0 per acre. The probability of receiving a payment as well increases to 18.3%. However, the most significant gains approach from incorporating ECO.
The Insurance Evaluator demonstrates that adding ECO at the 95% coverage level dramatically improves net insurance benefits, increasing them to $13.60 per acre. Net revenue in a worst-case scenario also rises substantially, from $609.51 to $650.46 per acre. Farmer-paid premiums do increase with ECO, reaching $11.94 per acre at the 95% coverage level.
Lowering RP Coverage: A Potential Strategy
With tight margins, farmers are exploring ways to reduce costs. Lowering RP coverage levels and supplementing with SCO and ECO is one potential strategy. The Insurance Evaluator’s “Compare Mode” allows for side-by-side comparisons. For example, a combination of ECO 95%, SCO, and RP at 60% coverage can yield a net revenue (worst case) of $638.17 per acre – $28.67 above the base RP-85% scenario – with a relatively small increase in farmer-paid premium.
Pro Tip: Consider the correlation between your farm’s yields, county yields, and prices when deciding between farm-level (RP) and county-level (ECO/SCO) coverage. If your farm’s yield variations don’t align with county variations, a higher RP coverage level might be preferable.
Important Considerations
While ECO generally offers more risk benefits than SCO, it’s crucial to remember that county-level revenue products only pay when county revenue declines. They won’t cover individual farm yield losses unless accompanied by a sufficient county-level decline. Farms concerned about prevent plant risks should avoid reducing their base COMBO product coverage, as this will reduce prevent plant payments.
Did you know? ECO/SCO payments are typically made in June, after official county yields are released, whereas RP payments are usually made after harvest.
FAQ
Q: What is the OBBB Act?
A: The One Big Beautiful Bill Act increased premium support for SCO and ECO to 80%.
Q: Where can I find the Insurance Evaluator?
A: The tool is available on the farmdoc website under the “Tools” menu.
Q: Is SCO better than ECO?
A: ECO generally provides more significant risk benefits than SCO.
Q: Will lowering my RP coverage level reduce my risk protection?
A: Yes, lowering RP coverage reduces protection against farm-level yield losses, but can be offset by adding SCO and ECO.
Q: What is the target loss ratio for crop insurance?
A: Properly-rated crop insurance should have a loss ratio of .88, but current loss ratios are well below this target.
Explore the Insurance Evaluator and carefully consider your individual risk tolerance and farm characteristics when making your 2026 crop insurance decisions.
Ready to dive deeper? Visit farmdoc daily for more in-depth analysis and resources.
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