Premiums of the livestock price insurance program are fully funded by producers. The premiums are based on traditional insurance principles and will fluctuate based on a number of factors, for example:
- Life of the policy – normally the longer the policy, the greater the chance of the market price fluctuating and potentially being below the insured price. As a result, in most cases the longer the policy is for, the higher the premium will be.
- Market volatility – If at the time the policy is being sold, the cattle market is highly volatile, the premium to participate will be higher. If the market is relatively stable the premium should be less expensive.
- Coverage price – By selecting a higher coverage price, there is a greater chance the policy will produce a benefit. Similarly, selecting a lower coverage price means there is less chance the policy will produce a benefit. The premium will be reflective of the coverage selected as higher coverage will produce a higher premium and lower coverage will produce a lower premium.
A producer can monitor the coverage levels and premiums and decide when the time is right to buy insurance. The total premium cost is based on the coverage level, the length of policy, and how much weight of the cattle is insured.