Farming is full of unknowns. Weather can turn on a dime, pests can arrive unexpectedly, and a single natural disaster can wipe out an entire year’s work. For farmers who want basic, affordable insurance against total loss, Catastrophic Coverage (CAT) offers a low-cost way to protect the bottom line.
CAT coverage is a simple form of crop insurance administered by the USDA’s Risk Management Agency (RMA). It’s designed to give farmers a financial safety net in case of extreme events—those rare but devastating years when yields plummet well below normal.
Let’s take a closer look at how CAT works, who it’s for, and when it can make a difference.
What Is Catastrophic Coverage?
Catastrophic Coverage, or CAT, is the most basic level of crop insurance available through the federal crop insurance program. It is intended to provide protection when a farmer experiences severe crop loss, generally defined as losing more than 50% of their expected yield.
Unlike higher levels of multi-peril crop insurance, CAT:
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Does not cost a premium (the federal government covers it)
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Requires only a small administrative fee from the farmer
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Provides limited financial protection for extreme losses only
This makes CAT especially useful for:
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Small-scale farmers
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Beginning farmers
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Growers with low margins or limited access to capital
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Anyone looking for a safety net without a large financial commitment
How It Works
To be eligible, a farmer must apply through an approved crop insurance agent and pay a flat administrative fee, which is currently $655 per crop per county (as of 2025), though this fee may be waived for beginning, limited-resource, or socially disadvantaged farmers.
Once enrolled, CAT provides:
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Coverage at 50% of a farm’s average yield
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Compensation at 55% of the projected price for the crop
This means CAT kicks in only if the yield drops below half of the farm’s normal production, and the payment is based on just over half of the market value of the lost crop.
Real-World Example
Let’s say Miguel grows dryland wheat in eastern Colorado. His approved average yield for wheat is 60 bushels per acre, and the projected price is $7.00 per bushel.
Under CAT coverage:
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His coverage yield is 50% of 60 bushels = 30 bushels per acre
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His payment rate is 55% of $7.00 = $3.85 per bushel
A drought hits during the growing season, and Miguel harvests only 20 bushels per acre—10 bushels below the covered threshold.
He receives a payment for the 10-bushel loss at $3.85 per bushel, or $38.50 per acre.
While that’s far less than what a higher-level policy might offer, it still helps offset some of the financial shock and provides a buffer against disaster.
What CAT Does Not Cover
It’s important to understand the limits of CAT:
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It does not protect revenue or price fluctuations
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It does not cover moderate losses or yield declines above 50%
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It offers no customization—coverage levels cannot be increased
Farmers who want more comprehensive protection, including revenue-based policies, need to purchase a buy-up policy, which involves paying a premium but also delivers greater flexibility and higher coverage.
Who Should Consider CAT Coverage?
CAT is a good fit for:
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Farmers who cannot afford premium coverage
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Those looking for basic disaster protection only
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New or small-scale producers who want to meet minimum insurance requirements (for loans or participation in USDA programs)
It also satisfies certain federal farm program requirements, such as those tied to the Farm Service Agency’s disaster assistance programs.
Final Thoughts
While not a complete risk management solution, Catastrophic Coverage provides a simple, low-cost way for farmers to protect themselves from the worst-case scenarios. It won’t cover every bump in the road, but in a year where the harvest is truly wiped out, it can be the difference between staying afloat or shutting down.
If you're a farmer looking for foundational coverage—or just want to meet insurance requirements without breaking the bank—CAT might be worth considering.
To explore your options and apply for coverage, connect with a certified crop insurance agent or visit the USDA Risk Management Agency website at www.rma.usda.gov.
