Alabama Insurance Adjuster Practice Exam

What is needed to set a yield guarantee for Maren's insurance policy?

1. A record of her last year's crop yields

2. A record of the last four years of her crop yields

3. Records of market prices for her crops

4. Weather pattern history over the last four years

The correct answer is: A record of the last four years of her crop yields

To set a yield guarantee for Maren's insurance policy, it is necessary to have a record of her last four years of crop yields. This historical data provides a comprehensive view of the variability and performance of her crops over multiple growing seasons. It allows for a more accurate assessment of the average yield, taking into account any fluctuations that may have occurred due to factors such as adverse weather, pest infestations, or changes in farming practices. Using a longer timeframe, like four years, is crucial because it helps mitigate the risk associated with anomalies in a single year, such as unusually good or bad weather. This approach ensures that the yield guarantee is based on a more stable and reliable estimate of what Maren can expect in terms of expected crop production. The focus is on establishing a baseline that reflects her average efficiency and productivity, which is essential for determining both risk and premiums in agricultural insurance policies. Other options, while they may contain valuable information (such as records of market prices or weather patterns), do not directly contribute to determining the yield guarantee, which is primarily about historical yield data.