Crop Insurance

The Indian agricultural sector is dependent on vagaries of weather – particularly rain - fed areas which constitute more than 60% of the total sown areas.Large scale damage to crops for various reasons including weather is very common and the farming communities, whose sole livelihood depends on crops, bear the brunt of this. Due to the high element of risk involved in farming because of unfavourable weather,it becomes all the more important to protect the farmers from the losses that can occur due to large scale destruction of crops.

Crop insurance is purchased by agricultural producers, including farmers and others to protect themselves against either the loss of their crops due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural commodities.For this purpose, the Government of India introduced 4 crop insurance schemes in the country as follows:


The objectives of the Scheme are as under: -

To provide insurance coverage and financial support to the farmers in the event of prevented sowing & failure of any of the notified crop as a result of natural calamities, pests & diseases.
To encourage the farmers to adopt progressive farming practices, high value in-puts and better technology in Agriculture.
To help stabilize farm incomes, particularly in disaster years.


In addition to Agriculture Insurance Company of India Ltd., Private sector insurance companies with adequate infrastructure and experience will be allowed on selective basis to implement the scheme by the implementing States from out of the companies short listed by the Department of Agriculture & Cooperation.

Food crops (Cereals, Millets & Pulses)
Annual Commercial / Horticultural crops

Ten years historical data is adequate for setting premium rates, fixing indemnity limit and threshold yield etc. Wherever such historical yield data at insurance unit is not available for some years, the data of nearest neighboring unit / weighted average of contiguous units / next higher unit can be adopted, subject to appropriate loading in the premium rate, if necessary.


Modified NAIS based on major improvements suggested by the Joint Group is to be implemented in 50 districts. These districts may be identified in consultation with the States/UTs.


All farmers* including sharecroppers, tenant farmers growing the notified crops in the notified areas are eligible for coverage.

Individual owner-cultivator/ tenant farmers/ share croppers
Farmers enrolled under contract farming, directly or through promoters / organizers
Groups of farmers / societies serviced by Fertiliser Companies, Pesticide firms, Crop Growers associations, Self Help Groups (SHGs), Non-Governmental Organisations (NGOs), and Others the Scheme will extend coverage Component-wise

Compulsory Component

All farmers availing Seasonal Agricultural Operations (SAO) loans from Financial Institutions (i.e. loanee farmers) would be covered compulsorily.

Voluntary Component

The Scheme would be optional for all non-loanee farmers.

STANDING CROP (Sowing to Harvesting)

Comprehensive risk insurance is provided to cover yield losses due to nonpreventable risks, viz.:

Natural Fire and Lightning
Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc.
Flood, Inundation and Landslide
Drought, Dry spells
Pests/ Diseases etc.


In case farmer of an area is prevented from sowing / planting due to deficit rainfall or adverse seasonal conditions, such insured farmer who failed to sow / plant (but otherwise has every intention to sow / plant and incurred expenditure for the purpose), shall be eligible for indemnity. The indemnity payable would be a maximum of 25% of the sum-insured. The scale of payment for different crops will be worked out by implementing agency in consultation with experts.


Coverage is available only for those crops, which are allowed to dry in the field after harvesting against specified perils of cyclone in coastal areas, resulting in damage to harvested crop. Further, the coverage is available only upto a maximum period of two weeks from harvesting. Assessment of damage will be on individual basis.


Losses arising out of war & nuclear risks, malicious damage and other preventable risks shall be excluded.


In case of Loanee farmers under Compulsory Component, the Sum Insured would be at least equal to the amount of crop loan sanctioned/advanced, which may extend up to the value of the threshold yield of the insured crop at the option of insured farmer. Where value of the threshold yield is lower than the loan amount per unit area, the higher of the two is the Sum Insured. Multiplying the Notional Threshold Yield (district/region/state level) with the Minimum Support Price (MSP) of the current year arrives at the value of Threshold Yield. Wherever Current year’s MSP is not available, MSP of previous year shall be adopted. The crops for which, MSP is not declared, farm gate price established by the marketing department / board shall be adopted. Further, in case of Loanee farmers, the Insurance Charges payable by the farmers shall be financed by loan disbursing office of the Bank, and will be treated as additional component to the Scale of Finance for the purpose of obtaining loan. For farmers covered on voluntary basis the sum-insured is upto the value of Threshold yield of the insured crop. If the farmer so desire he may be provided with higher level of risk coverage. Sum insured up to 100% of threshold/average yield of notified area with normal premium subsidy but sum insured above 100% and up to 150% of the value of average yield without premium subsidy.


Premium rates are to be worked out on actuarial basis. However, the premium paid by the farmer is subsidized on the following lines:

Subsidy to Farmers
Upto 2% Nil
2 - 5% 40% subject to minimum net premium of 2%
5 – 10% 50% subject to minimum net premium of 3%
10 –15% 60% subject to minimum net premium of 5%
15% 75% subject to minimum net premium of 6%.

The “Weather Based Crop Insurance Scheme – WBCIS”(hereinafter referred to as the ‘Scheme’), intended to provide insurance protection to the cultivator against adverse weather incidence, such as deficit & excess rainfall, frost, heat (temperature), relative humidity, etc., which are deemed to adversely impact the crop during its cultivation period.
The Scheme shall run as a Pilot in selected areas, in selected States, for selected crops.


The Scheme shall operate on the principle of “Area Approach” in selected notified Reference Unit Areas. Area Approach signifies that a “Reference Unit Area” shall be considered as a Unit-Area of Insurance for the purpose of acceptance of risk and assessment of compensation as well. Therefore, all insured-cultivators of a Notified Crop in the notified Reference Unit Area shall be deemed to be on par so far as their terms of insurance coverage and assessment of compensation are concerned.

“Reference Unit Areas” are linked to specific Reference Weather Stations.
“Reference Weather Stations” are those which are commissioned for providing “Weather Data” for the purpose of assessment of compensation.
“Reference Unit-Area” is a geographical area around a Reference Weather Station, pre-notified by the State Level Coordination Committee on Crop Insurance i.e., SLCCCI, which is deemed to be reflective of the Reference Weather Station’s Weather Data. To the extent practicable, such Reference Unit-Area shall be restricted to 25 km. radius around the Reference Weather Station in case of Rainfall and Wind parameters, and 100 km. radius in case of other weather parameters like Temperature, Relative humidity, Solar radiation, etc.

However, it shall be MANDATORY for all FIs to:
Compulsorily insure all Loanee Applicant Cultivators who have been sanctioned credit limits by them for any Notified Crop in any notified Reference Unit Area.
Accept Insurance Proposals from all Non-Loanee Cultivators desiring to avail insurance under the Scheme whose proposed field falls within the service area of the FI.
Financial Institution, for the purpose of the Scheme, includes all District Central Cooperative Banks and also the PACS affiliated to them, all Commercial Banks and all Regional Rural Banks, as defined in National Agriculture Insurance Scheme (NAIS).

In collaboration with Coconut Development Board, a comprehensive coconut life insurance product.
Insurance based on Named perils leading to death / permanent damage to coconut palm
Maximum liability is based on age of coconut palm and discounted future value.
Coconut is the leading plantation crop of India grown mostly in the coastal areas. Every part of coconut has use – coconut water, coconut oil, copra, raw kernel, toddy, shell, wood, and coconut leaves, etc. Coconut occupies dominant position with cultivated area of nearly 2 million hectares, producing over 12 billion nuts per annum.
Coconut is vulnerable to weather factors, particularly cyclone winds, gales etc. besides pests & diseases.

Coconut Palm Insurance Scheme

Is a mechanism for providing effective risk management aid to those growers who are likely to be impacted by non-preventable naturalfactors, pests & diseases, etc.


The insurance cover shall cover damage / losses to coconut palm and / or nut yield arising out of non-preventable natural factors. During the year 2011-12, only Section 1, i.e. loss of coconut palm due to non-preventable factors is covered.

Insurance of Nut Yield:

The insurance compensates the insured against the likelihood of diminished nut output/ yield resulting from non-preventable natural factors, such as Natural Fire & Lightning, Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood, Inundation, Landslide and Pests/Diseases etc

Insurance of Coconut Palm

The insurance compensates the insured in the event of total loss of the individual palm/tree in the insured plantation from the 4th year to the 60th year. In the first year, a waiting period of three months from the date of transplanting shall apply. The insurance coverage and claim assessment shall be on individual tree basis. The insurance is against perils like Storm, Hail storm, Cyclone, Typhoon, Tornado, Heavy rains, Flood, Inundation, severe Drought, Fire, Lightning, Earthquake, Landslide, Riot, Strike and Pests & Diseases of widespread incidence.

Sum Insured:

For section – 1 (nut yield), Sum insured shall vary from Block to Block and is determined by the Guaranteed Yield of the Block multiplied by the previous year’s average nut price in the respective district. For section – 2, Sum insured is based on the average input cost of the plantation according to the age of the plantation.


The premium is determined on the basis of variability in the historical Block level nut yield and age of the palm.

Note: The above product summary is meant for information only and may not necessarily match the actual insurance policy/scheme, word to word.

Other Schemes: (Click the list of Schemes given below)
Bio - Fuel Tree / Plant Insurance
Cardamom Plant & Yield Insurance
Potato Crop Insurance
Pulpwood Tree Insurance Policy
RainFall Insurance Scheme For Coffee (RISC) - 2011
Rubber Plantation Insurance
Weather Insurance (RABI)


Crop insurance is undertaken by agricultural producers, including farmers, ranchers, and others to protect themselves against either the loss of their crops due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural commodities.

History of Crop Insurance in India :

In a country like India, where crop production has been subjected to vagaries of weather and large-scale damages due to attack of pests and diseases, crop insurance assumes a vital role in the stable growth of the sector.

An All-Risk Comprehensive Crop Insurance Scheme (CCIS) for major crops was introduced in 1985, coinciding with the introduction of the Seventh-Five-year Plan and subsequently replaced by National Agricultural Insurance Scheme (NAIS) w.e.f. 1999-2000. These Schemes have been preceded by years of preparation, studies, Planning, experiments and trials on a pilot basis.

Agriculture Insurance Company of India Limited (AIC ) :

Agriculture Insurance Company of India Limited (AIC) has been formed by the Government of India consequent to the announcement by the Hon'ble Union Finance Minister in his General Budget Speech F.Y. 2002-03 that to subserve the needs of farmers better and to move towards a sustainable actuarial regime, it was proposed to set up a new Corporation for Agriculture Insurance

AIC has taken over the implementation of National Agricultural Insurance Scheme (NAIS) which until FY03 was implemented by General Insurance Corporation of India. In future, AIC would also be transacting other insurance businesses directly or indirectly concerning agriculture and its allied activities.

First scheme is being run only by the Agricultural Insurance Corporation and is most wide spread throughout the country (nearly 450 districts).Further details can be seen in the Credit Division at

State Government/UT notifies Crops and Defined Areas covered during the season in accordance with decision taken in the meeting of SLCCCI.State/UT Government notify the area as an Insurance Unit.For instance, in case of MNAIS, Village/Village Panchayat or any other equivalent unit is taken as an Insurance Unit for major crops.For other crops,it is a unit of size in between Village Panchayat and Taluka/Block, as decided by State/UT Government.

Associated Partners