The U.S. farm policy has progressively changed in recent years, with greater reliance on subsidized risk management programs to the detriment of direct payments. Many agricultural economists consider that this policy shift is unwarranted, leading to greater market distortions. We develop two economic models focused on the U.S. agricultural sector and isolate the coverage effects provided by subsidized insurance programs. We find that the welfare effects of subsidized insurance programs are dramatically modified once we recognize the risk sharing properties of these programs. Our simulated market effects on the U.S. cereal markets are consistent with currently available econometric evidence.