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Insurance generally is the equitable transfer of a risk of loss from one entity to another in exchange for a premium or a guaranteed and quantifiable small loss to prevent a large and possibly devastating loss.
Agricultural Insurance is a special line of property insurance applied to agricultural firms or businesses. Agricultural insurance is applied to crop, livestock, brood stock, forestry, aquaculture, and greenhouse.
Read: Problems of Beef and Dairy Production in Nigeria
Why Agricultural Insurance Is Considered As a Special Line Of Insurance
There are many features of this type of insurance that justify it being considered as special line of insurance. Some of these features are:
• Difficulties in achieving adequate diversification because of the nature of the risk
• Asymmetries of information in underwriting
• Geographical dispersion of agricultural production
• Complexity of the biological processes of production
Also read: Why Entrepreneurs Go For Cheap Labour
Why Do You Need Agricultural Insurance?
Agricultural insurance is important and needed by entrepreneurs to reduce the risks associated with production, processing and marketing. These risks are in different forms and can affect efficiency and profitability of the farm as a result of conditions which are mostly beyond the farmer’s control.
Agricultural risks can wipe out a whole investment especially those that occur through natural disasters like flood, excess rainfall, drought, pest, diseases and fire outbreak.