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TeachMeFinance.com - explain Disaster payments Disaster payments The term 'Disaster payments' as it applies to the area of agriculture can be defined as 'Direct federal payments provided to crop producers when either planting is prevented or crop yields are abnormally low because of adverse weather and related conditions. The Federal Crop Insurance Act of 1980 greatly expanded crop insurance coverage in an attempt to permanently replace disaster payments with government-subsidized insurance. However, between 1988 and 1994, ad-hoc disaster legislation was enacted in each year that provided a total of nearly $10 billion in direct disaster payments to farmers. These large payments prompted the enactment of the Federal Crop Insurance Reform Act of 1994, which included provisions to broaden the federal subsidy of the federal crop insurance program, in an effort to increase farmer participation in the program and lessen the pressure for ad-hoc disaster payments. The 1994 Act also created a permanent noninsured assistance program (NAP) that makes payments to farmers who grow a crop that is ineligible for crop insurance. NAP pays eligible farmers 60% of the market price of the crop on losses in excess of 50%, but only when the farmer’s area experiences a minimum crop loss of 35%'.
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