Agricultural insurance is the insurance policy which provides compensation to famers for losses suffered. For example, 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.

Insurance is one of the tools that farmers and other stakeholders can use to manage risks that are too large for them to bear/manage on their own. Part of the risk is transferred to another, who takes it in return for a fee (or premium)



  1. Agricultural insurance plays an important role in simulating investment in agriculture and in stabilizing famers’ income.
  2. Insurance can assist farmers in accessing new opportunities by improving their ability to borrow either in cash or in kind as credit facilities. In doing so, farmers may potentially experience safer and possible higher returns
  3. Another area where insurance is of relevance is in improving agricultural technology. With the security of insurance, the farmers might be more willing to take a chance with efficient technology as his risks are now being shared.
  4. It stimulates investment in agriculture
  5. Help to stabilize farmers income
  6. Assist farmers in accessing new opportunities By improving their ability to borrow.
  7. It helps to improves the development new technology in agriculture.
  8. It boosts farmers willingness to take chance with efficient technology.



  1. Human or personal risk: The farm operator can get health problems or even die.
  2. Asset risk: This includes theft, fire and other damage or loss.
  3. Production or yield risk: Most of the time the weather is responsible, but it also includes risks like plant and animal diseases.
  4. Price risk: risk resulting from fall in price after production modification has been done
  5. Institutional risk: this is associated with policy changes which can have negative impact on production and farm revenue
  6. Financial risk: this refers to the possibility of increase in interest of a mortgage, insufficient liquidity and loss of equity



  1. Define agricultural insurance.
  2. State three importance of agricultural insurance
  3. Briefly explain five agricultural risks



  1. Specific enterprise insurance: this is an insurance policy that covers a particular farming enterprise. It protects the farmer against any form of loss due to disasters or calamity. It is further divided into
  • Crop insurance: this is purchased by crop farmers, ranchers and anyone whose enterprise is based on crop product to protect themselves against loss of crop due to natural disasters such as flood, drought, and convulsion of nature (earth quakes, volcanic eruptions, pest and disease) or from malicious damages. The policy maybe to protect against a particular peril or collection of perils or all.
  • Livestock insurance: to protect animal farmers and their allies against foreseeable and unforeseen disasters. It also gives the insurance industry the opportunity to make meaningful entry into the rural areas.
  1. Farmer’s vehicle insurance: this Insurance covers machineries used on the farm such as tractors, harvesters, pumps, wind mill etc. The premium rates in some countries are determined by motor insurance tariff.
  2. Life assurance: this is insuring human life in the event of death, accidents, retirement or disability. The policy holders are assured that in the event of any of the above, financial compensation will be paid to their dependents or to them as the case maybe.


Insurance premium: is the consideration (a fee paid at regular interval) given by the insured (farmer) in return for the insurer’s (insurance company) undertaking to compensate the insured in the manner agreed on the happening of a specified occurrence.


Indemnity: this is the mode of compensation that the insurer employs to (honor the agreement they had) put the insured back to his position before the loss.



  1. Lack of skilled personnel both at managerial and operational level
  2. Lack of awareness of benefit of insurance in other to convince farmers of the benefits.
  3. Uncertain weather conditions
  4. Limited capacity of insurance businesses to assume risks
  5. Illiteracy and conservatism of farmers in rural areas.



  1. Differentiate between the following a) Premium b) Indemnity
  2. State different forms of agricultural insurance policy
  3. State five problems of agricultural insurance.



  1. State three importance of agricultural insurance.
  2. Explain briefly five risks of agricultural insurance.
  3. State four forms of agricultural insurance policy.



  1. ___ is the mechanism by which insurer provides financial compensation to the insured in an attempt to place the insured back to the position he was before the loss A. Premium B. Loan C. Indemnity D. Subsidy
  2. All these are forms of agricultural insurance policy except A. Crop insurance B. Livestock insurance C. Marine insurance D. Motor vehicle insurance
  3. ___ deals with the insurance of human life either in death, retirement or disability. A. Crop insurance B. Specific enterprise insurance C. Livestock insurance D. Life assurance
  4. ___ is the consideration given by the insured in return for the insurer’s undertaking to indemnify the insured in the manner agreed on the happening of a specified occurrence. A. Premium B. Loan C. Indemnity D. Subsidy
  5. Agricultural risk includes the following except A. Personal risk B. Yield risk C. Price risk
  6. Premium risk



  1. What is agricultural insurance
  2. Explain briefly the following types of insurance policies for agricultural production
  3. Specific enterprise insurance
  4. Life assurance
  • Fire disaster insurance (WASSCE 2016 question 5 a and b).
  1. Give four reasons why agricultural insurance is important (WASSCE 2017 question 6b)


See also






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