On what basis is crop insurance generally calculated?

Crop insurance is primarily calculated based on projected market prices and historical yield data. Projected market prices represent the expected selling price of crops, serving as a benchmark for determining the potential revenue that a farmer might expect to generate from their harvest. This projection helps in setting coverage levels since insurance aims to protect the farmer's revenue based on market conditions.

Historical yield data plays a crucial role since it reflects past production outcomes for specific crops in given areas. This data is essential in assessing the risk associated with insuring a particular crop on a specific land parcel. By leveraging historical yields, insurers can estimate the likelihood of a farmer being able to reach certain yield thresholds, which in turn influences the risk assessment and pricing of the insurance policy.

In contrast, other options like land size and crop variety might affect specific policy terms but do not directly dictate the foundational calculations for insurance premiums. Insurance claim history and geographical location are relevant factors in risk analysis and may affect eligibility or pricing but are secondary to the fundamental reliance on projected market prices and historical yield. Annual operating costs and pest density are more closely related to farming inputs and management practices rather than insurance calculations.