Most crop insurance is bought for a single crop. Since prices, yields, and revenues are not perfectly correlated across crops, multicrop insurance has the potential to reduce premiums, an important factor in farmers’ crop insurance decisions (see, for example, Knight and Coble (1997) and Woodward (2016)). Insuring corn and soybeans jointly as opposed to individually is found to reduce indemnities / premiums by 19% on average for the states in this study. Adding wheat to corn-soybean multicrop insurance reduces indemnities / premiums by 37%. A strong interaction is found between multicrop insurance and irrigation, resulting in further reductions.
