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 Frequently Asked Questions
- Can I buy LGM for Cattle or Swine insurance if I do not live in one of the eligible states?
Yes. You do not have to live in one of the eligible states to purchase LGM insurance; however, the livestock that you insure must be physically located within an eligible state. Your state of residence does not determine eligibility.
- What if I live in an eligible state but have livestock in an ineligible state?
Those livestock that are located in the ineligible state cannot be insured with LGM. Livestock must be physically located within one of the eligible states in order to be insured with LGM.
- How can I find an insurance agent who sells LGM for Cattle or Swine?
The USDA-RMA website has an online agent locator tool that allows you to find crop insurance agents in your area who are certified to sell LGM. It is important to note that the agent must be licensed to sell insurance in the state where the livestock are located. For example, if you are a rancher in north-central Nebraska and have cattle in both Nebraska and South Dakota, you may want an agent that can sell LGM insurance in both states.
- How do I prove that the insured livestock are mine?
Your insurance company, USDA, or any person they designate may request to inspect the insured livestock or paperwork proving you own the livestock. Acceptable proof of ownership can include purchase receipts from prior owners, financing documents from a lender that financed the livestock purchase, or a bill of sale when the insured livestock are sold. Also, third party statements may be used to verify ownership. For example, if a veterinarian or feed supplier is familiar with your operation, has visually inspected the insured livestock, and can attest to your ownership, that veterinarian or feed supplier can provide a written statement stating the time and number of livestock owned by you. Check with your insurance agent for more details.
- When can I buy LGM for Cattle or Swine insurance?
LGM for Cattle is sold on the last business day of every month. LGM for Swine is sold on the second-to-last business day of every month. The sales period commences once RMA validates the price data that is used to calculate the gross margin guarantee. This verification of data for LGM for Cattle occurs after the futures market closes on the last day of the price discovery period, which is simply the last three days of prices in the corresponding commodity months (fed cattle, feeder cattle, and corn) that are used to calculate gross margins for each of the target marketing months. For swine, the price discovery period is simply the last three days prior to the last business day of the month in the corresponding commodity months (lean hogs, corn, and soybean meal) that are used to calculate gross margins for each of the target marketing months. The LGM sales period ends at 9:00 am CST on the next business day, respectively.
- Is there a minimum (or maximum) number of head that I can cover in one insurance period? …in one crop year?
Cattle feeders can insure any amount of cattle they own up to a program limit of 5,000 head for any 11-month insurance period and a limit of 10,000 head per crop year, which begins July 1 and ends June 30. Swine producers can insure any amount of swine up to a program limit of 15,000 head for any 6-month insurance period and a limit of 30,000 head per crop year. There is no minimum number of livestock that must insured with an LGM policy. You can cover one head at a time if desired.
- How much does LGM insurance cost?
The cost of LGM depends on the level of coverage purchased. For current LGM premium rates, click here.
- Does death loss need to be reported to the insurance agent?
LGM does not protect against death loss, poor performance, or any physical damage or loss. Any death loss that does occur does not need to be reported to the insurance agent; however, it might be a good management practice to do so.
- Is LGM for Cattle basis the same as futures basis?
No. LGM basis is not the same as futures basis. Even though each policy uses a state- and month-specific basis, LGM basis is based on the historical difference between the adjusted futures price (including the policy’s fixed basis) and the local cash selling price producers actually receive (using local basis).
- Are basis levels fixed? How often is basis updated or changed (or is it)?
Yes. Basis levels are state and month specific for fed cattle, feeder cattle, and corn for LGM for Cattle and are determined by RMA from the State National Agricultural Statistics Service. LGM for Swine uses a state- and month-specific basis for lean hogs and corn. Soybean meal does not have an associated state- and month-specific basis.
Basis levels are fixed throughout a crop year (July 1 to June 30). Once a producer signs up for LGM for Cattle or Swine, the basis is fixed over the course of the policy. The basis levels will be updated between crop years. Therefore, basis levels for a policy sold in July can differ from the basis levels for a policy sold in the previous June.
- Can I let someone else (like by bank) collect my indemnity?
Yes. You can assign your right to collect an indemnity on the insurance to another entity. This is similar to transferring the right to an indemnity, but in this case, ownership of the livestock does not change. You must file an Assignment of Indemnity form with your insurance agent. Once the form is approved, the assignee has the responsibility of filing the claim form if an indemnity is due.
- What do I do if I am owed an indemnity payment?
If you are owed an indemnity, your insurance company will send a notice of probable loss stating that you are likely owed an indemnity on your insurance coverage approximately ten days after all actual gross margins applicable for the insurance period are released by RMA. You must then submit a marketing report within 15 days of your receipt of the notice of probable loss.
- How is the Total Actual Gross Margin determined?
The actual total gross margin is the target marketings for each month of an insurance period multiplied by the actual gross margin per head for each month of that period and then summed. This number represents the true gross margin (using RMA numbers) experienced by you at the time of sale of the cattle or swine. It is not the gross margin using cash prices, but rather a comprehensive margin using the prices established by RMA to then determine the indemnity you will receive.
- How are futures prices adjusted and why are adjusted futures prices used with LGM for Cattle and LGM for Swine?
Futures price is adjusted using a corresponding state- and month-specific basis (with the exception of soybean meal in LGM for Swine). These prices are adjusted to better mirror or represent the cash prices you will actually be experiencing with fed cattle, feeder cattle, and corn (LGM for Cattle) or lean hogs and corn (LGM for Swine).
- Is my premium subsidized?
Premiums are not subsidized, but all administrative and operating expenses of the crop insurance companies are covered by the federal government.
- Can I use other insurance in combination with LGM?
Insuring cattle or swine with both Livestock Risk Protection Insurance and LGM is prohibited. The LGM policy does not prohibit a policy holder from obtaining separate insurance coverage for any other peril such as lightning, drowning, or full mortality. However, in order to protect against any of these losses, cattle feeders and swine finishers must obtain a separate property and casualty insurance policy because these are not losses insured by LGM.
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