What does Catastrophic Coverage (CAT) pay for regarding crop losses?

Catastrophic Coverage (CAT) is a type of crop insurance that provides a safety net for producers by paying out for crop losses due to various circumstances such as natural disasters. This coverage is designed specifically for situations where there may be significant crop yield losses.

The correct understanding of CAT insurance is that it pays for 55% of the established price of the crop. This means if a producer suffers a loss in their yield, they will receive a payment based on the established price of the crop, which corresponds to that percentage. This is particularly critical for farmers who may not have the resources to sustain prolonged losses without some form of compensation.

This type of coverage is often more affordable than other forms of crop insurance and is meant to help minimize financial burdens during extreme loss scenarios. It ensures that even in dire situations, producers have some level of income support to maintain their operations. The focus of CAT is hence primarily on yield losses rather than guaranteeing a full revenue or pricing support, which distinguishes it from other more comprehensive insurance options available to farmers.