Federal Crop Insurance

Chris Edwards

Spending on farm subsidies is rising after a series of costly expansions in recent years. The subsidies are not an emergency safety net for poor farm families but rather permanent welfare for high-earning businesses. With Congress now considering more farm spending, let’s examine the largest farm subsidy program—crop insurance.

The government often calls crop insurance “market based,” but that cannot be true because the program costs taxpayers billions of dollars a year. Also, it is run by a 413-person bureaucracy—the Risk Management Agency—that imposes a 941-page rulebook on the top-down system. The government works with 12 insurance companies that sell policies covering just about every farm contingency. The government subsidizes the companies and pays most of the insurance premiums.

The Congressional Budget Office (CBO) has published new estimates for crop insurance spending, summarized in the illustration. In 2026, crop insurance premiums are expected to be $20.4 billion, of which farmers will pay $7.8 billion and the government will pay $12.6 billion. 

Farm insurance policies are projected to pay out $17.4 billion this year in indemnities. Thus, farmers are expected to receive a net payment of $9.6 billion ($17.4 billion – $7.8 billion). The CBO expects similarly large net payments to farmers in coming years, so these are subsidies, not insurance. Even with the generous benefits, some farmers defraud the system for extra gains.

In 2026, the government is expected to pay the insurance companies $5.1 billion, including $2.4 billion for administrative costs and $2.7 billion for underwriting gains. The Government Accountability Office (GAO) found that the 12 crop insurance firms earn profits far above market rates. It seems very inefficient that to give farmers a subsidy of $9.6 billion, taxpayers also have to pay $5.1 billion to corporate middlemen.

All in all, taxpayers are expected to pay $14.7 billion in 2026 for the federal crop insurance program, with rising amounts in the years ahead, according to the CBO. Republicans expanded the program in their Big Beautiful Bill last year, and there may be further tweaks in the farm bill moving through Congress.

The crop insurance program is like the government giving you $900 a year for your $1,500 car insurance premium, all while paying billions of dollars to GEICO, State Farm, and other insurance firms to boost their profits. The government calls its crop insurance program “actuarially sound,” but it relies on huge subsidies from the actuarially unsound federal budget.

Here’s one more ridiculous thing about the program: There are no income limits on crop insurance subsidies. As a result, the subsidies flow heavily to the top end. One American Enterprise Institute analysis found that the largest 10 percent of farms receive 56 percent of all crop insurance subsidies.

GAO has reported that 1,341 crop insurance recipients have annual incomes of more than $900,000, and that even some billionaires receive the subsidies. We don’t know which billionaires because the program’s specific payments are secret. That combination of secrecy and high-income benefits has made crop insurance the favorite subsidy machine of the congressional farm committees.

In sum, here is the current situation with crop insurance and farm subsidies:

• Your earnings are taxed to pay subsidies to wealthy farm businesses and big insurance companies, of which half are headquartered abroad such as Switzerland-based Chubb Limited. 
• The government uses Orwellian language for crop insurance such as “market based” and “actuarially sound” to pretend that it is being responsible. 
• Despite huge federal budget deficits, Republicans continue to increase farm subsidies, all while GOP farm subsidy supporters claim to be fiscal hawks. 
• Republicans are currently moving another major farm bill through the House and may also add $15 billion of “emergency” farm spending on top.
• Republicans demand personal responsibility from low-income welfare recipients but do not apply the same approach to high-income farm welfare recipients.
• Farmers should save in good years to cover their losses in bad years. Farmers should make their own “safety nets,” as do millions of businesses in unsubsidized industries. 

Farm subsidies are a relatively small part of the federal overspending problem, but they exemplify the reckless approach that Congress is taking toward rising federal debt. If Americans elect a more fiscally conservative House and Senate this fall, crop insurance should be high on the list of wasteful programs to cut.