Premiums & Settlements
Producers pay a premium to receive forward price coverage; if the market price falls below the coverage price, in the time frame selected, the producer receives a payment.
Volatile market prices along with basis and the Canadian dollar all influence the financial return to a livestock operation and can be hard to manage. Livestock Price Insurance offers a wide range of coverage, which allows a producer to tailor their level of protection to the risk they want to insure, and premium to the budget that they can afford. Premiums are strongly influenced by market volatility and can increase due to factors facing the market. Premiums can also be quite economical when market volatility is relatively low.
Whether the market is high or low, there is still the need to protect one’s equity. LPI is a risk management tool meant to mitigate risk throughout the entire market cycle. When the market drops, LPI provides producers with a floor price; if prices increase over that period of time, a producer can benefit by selling livestock as he or she sees fit. LPI doesn’t limit producers to the floor price if the market goes up.
If the fund goes into a deficit position, the Government of Canada and your provincial government cover the program. Producers have no risk that policies are not paid because the fund is in a deficit position. Existing policies will be honoured even in the case of a border closure or similar catastrophic market event.
