How does STAX work?
STAX provides coverage for up to 20 percent of the expected area revenue in increments of 5, 10, 15 or 20 percent. Loss payments begin when area revenue falls below 90 percent of its expected level – although a lower loss trigger may be selected. Loss payments reach their maximum when area revenue falls to 70 percent of its expected level – unless your companion policy has a coverage level above 70 percent in which case payments end sooner. Like other area plans of insurance, the amount of coverage may also be increased or decreased by selection of a protection factor so that growers may better tailor their coverage to their risks.
The amount of STAX coverage depends on the expected yield, projected price, coverage range, and protection factor. The expected yield for STAX will be based on the historical average of yields in the county reported to RMA by insured growers. In areas where the yield data are thin, counties will be combined in order to accumulate enough data to determine expected yields and premium rates. STAX pays a loss on an area wide basis, and an indemnity is triggered when there is an area loss in revenue.
It is easiest to explain how STAX coverage is determined through an example shown in the tables below. We’ll use cotton with an expected crop value for the area of $538.20 per acre (690 pounds at $0.78 per pound). Assume the grower also purchases a Revenue Protection policy with a 75 percent coverage level – this is the ‘companion policy. The purchase of the Revenue Protection policy is not necessary to purchase STAX.