With inflation looming and historic droughts affecting the U.S. in recent years, it's not overzealous to say that finances have been tight for most farmers and ranchers. For many producers, PRF has been a lifeline during dry years, providing the funds to keep cows fed, bills paid and operations moving forward when nature doesn't cooperate. Even in average years, knowing there's a financial buffer in place gives ranchers more peace of mind to focus on what matters most: running the operation and planning for the future.

What Is PRF Insurance?

How familiar are you with PRF insurance? In short, this federally subsidized insurance program issues indemnity checks when lower-than-average levels of rainfall limit your operation's forage availability or hay production. The payments are determined based on geographic grid areas your operation lies in and not on your individual fields or grazing areas. You get to choose your coverage level in bi-monthly periods based on percentages of the area's historic rainfall index and productivity.

Since PRF insurance is based on the regional 70-year precipitation average specific to your area, it can really be a benefit to your operation.

Why PRF Works

Unlike disaster relief or ad hoc government programs, PRF doesn't require a claim or inspection. Payments are triggered automatically based on NOAA-recorded rainfall in your insured grid. That means less paperwork, less hassle and faster support when you need it most. It's a tool built for the realities of ranching – low rainfall, high expenses and the pressure to keep things running.

And because PRF is federally subsidized, ranchers often find that the indemnity checks far outweigh the cost. Many producers have reported net positive performance in 17 out of the past 20 years. For operations that span volatile rainfall regions, that consistency can be a game changer.

Three Key Questions to Ask Before You Sign Up

The question of whether or not to participate in Pasture, Rangeland and Forage (PRF) insurance for your operation requires a thorough evaluation of a policy's premiums and benefits in relation to your risk tolerance, finances and geography. Consider the following factors:

1. What Is Your Risk Tolerance?

For many ranches across the west, PRF insurance is a net positive for 17 to 20 (or most) years of a 20-year coverage period. Those are pretty good odds! Regardless, some operations with a 20-year net positive will have more years paying premiums than other operations, so the policy benefits are a little more volatile in these cases. Total premium costs do play a role, so operations that choose lower-premium policies may find it easier to take on the risk.

When looking at a policy and its estimated historic performance, how do you feel about the risk versus the potential indemnity checks?

2. How Is Your Operation's Fiscal Health?

If you rely on debt capital to run your operation, PRF insurance indemnity checks could help you pay off loans and put your operation in a better position to avoid future debt. On the other hand, be aware that if you end up owing a premium the first year, your cash flow may be affected.

Overall, you want money available to pay down long-term debt and increase your net worth versus simply covering annual operating loans. Will a PRF policy help strengthen your balance sheet?

3. How Volatile Is Precipitation in Your Area?

It's helpful to understand that PRF policies generally don't perform well in areas where precipitation stays close to average. Because this insurance pays out indemnity checks based on lack of rainfall, bigger indemnity payments are typically seen in regions of the U.S. with more volatility in precipitation. This is why access to quality analysis software is so important, and a good insurance provider will use it to help you maximize the benefits of your PRF policy.

Redd Summit Advisors is an insurance agency specializing in making PRF easy for ranchers. Their proprietary software tracks net performance across 20+ years, analyzes how consistent indemnity checks have been, and how much volatility a policy might expose a producer to. You can start the quoting process now at reddsummit.com/quote with 3 instant, no-obligation quotes for your area.

Getting A Policy That Fits Your Operation

Are you ready to look into a PRF insurance policy? Redd Summit Advisors can help you assess your risk based on historical rainfall data and will give you the tools to decide if a policy would be beneficial to your operation. Our experienced agents use industry-leading software to give you the best information available and can offer you a no-obligation policy preview so you can see how it could perform on your operation.

Whether you're trying to stabilize cash flow, protect against another dry season or simply take one more risk off your shoulders, PRF could be the missing piece.

Contact Redd Summit Advisors today for a consultation at 1-800-825-2355 or reddsummit.com.