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Is insurance compulsory for an agricultural loan? What are its merits?

Agriculture is truly the backbone of our country’s economy. Most of the people engaged in farming and agricultural related activities in India often struggle from a lack of sufficient funds. 

Loan against gold can be helpful to meet some of the immediate requirements of farmers if they have gold in the form of jewelry or other articles in their hands. The gold loan interest rate is also quite low because it is a secured loan. However, this loan wouldn’t be sufficient enough to meet all agricultural requirements.

The best solution would be to apply for an agricultural loan. Banks, NBFCs and other financial institutions in India provide agricultural loans to people engaged in farming activities. 

Insurance On Agricultural Loans

People involved in agriculture and farming often face major losses every year due to several factors like:

  • Natural disasters like floods, hail, landslides, and drought
  • Fire
  • Infestation of pests
  • Plant diseases

Farmers who face huge losses often find it extremely difficult to meet the daily needs of their families let alone pay off their existing loans. This, in turn, could result in huge debts causing them to lose their property.

Insurance on Agricultural loans can cover up the damage and loss that arises from any of the above-mentioned causes. Just like any other insurance, the farmer has to pay a certain amount as premium every month/year and they are given the protection required.

The insurance coverage and the premium rates mainly depend on the following.

  • Productivity
  • Susceptibility to the risk of agricultural lands in that particular area

The different types of insurance coverage for agriculture and farming includes

  • Insurance coverage against hail
  • Insurance coverage against fire
  • Insurance coverage against flood
  • All-risk agricultural/crop insurance coverage
  • Multiple Peril Insurance for crops: Covering risk arising from weather-related damages and loss
  • Coverage for crop revenue: When there is a drop in price the difference in revenue is covered
  • Actual History of Production: Losses arising from insects, hail, wind and lower yield are covered under this policy

Is Insurance Coverage Compulsory On Agricultural Loans?

  • Insurance coverage for Agricultural loans is mandatory for loanee farmers and voluntary to the rest. 

Merits Of Insurance Coverage

Some of the major benefits of taking insurance coverage on agricultural loans are as follows.

  • Stability In Farm Income

Protects the farmers against losses caused by the failure of crops which in turn ensures the stability of the agricultural income.

  • Adoption Of Advanced Practices In Agriculture

Giving economic protection to farmers against risk or loss enables them to adopt advanced agricultural practices. Working along with agricultural platforms using IOT, Insurance companies can help farmers understand the latest advancements in agricultural technology and improve their production.

  • Tax Exemption And Debts Are Minimal

The farmers get tax exemption on the premium paid against the insurance policy. They are also able to pay off the loan even during times of loss thereby minimizing the risk of debts.

  • Awareness To Farmers

Awareness campaigns are conducted by Insurance companies to give the farmers a proper understanding of natural disasters and the different ways by which they can protect their agricultural land and crops.

With the support of good insurance coverage, the farmers can pay off their loans even when there has been a crop failure due to natural disasters or the infestation of pests. As a result, the farmers do not end up losing their property due to huge debts.

This blog is maintained by the Finaura team. Finaura is a solution that will help you find the best gold loan solution from gold loan company nearest to you. If you have any queries please feel free to contact us. Call us on +91 484 2388285 or email us at [email protected]

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