Crop insurance may be taken by farmers to reduce or control the various risks associated with growing and harvesting crops. Such risks typically include crop loss or damage caused by weather, hail, droughts, frost damage, insect, or disease.
Index-based crop insurance uses models of how extreme climates affect crop production and define how certain climate triggers that, if surpassed, have a high probability of causing substantial crop loss.
When harvest losses occur associated with exceeding the climate trigger threshold, the insured farmers are entitled to a compensation payment from the insurance policy.
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