What type of coverage does a CAT policy focus on?

A CAT policy, or Catastrophic Risk Protection, is designed specifically to provide coverage for catastrophic losses in crop production. This means it aims to help farmers when their crops suffer significant damage due to unforeseen events, such as natural disasters, which could lead to substantial financial loss.

The key aspect of CAT coverage is that it serves as a safety net, ensuring that farmers receive some assistance when the losses exceed a certain threshold, typically set at 50% of their average yield. This safeguard is particularly crucial during widespread adverse conditions that can drastically affect agricultural output.

While full coverage of all yields and partial coverage with a specific deductible may apply to other types of crop insurance policies, CAT coverage is distinct in its focus on severe, catastrophic events. Similarly, coverage for low-return crops does not specifically align with the intent or structure of CAT policies. Instead, the primary objective remains to protect against catastrophic situations that could otherwise lead to dire financial consequences for farmers.