Ensuring farmers’ income to boost their production enthusiasm is vital for agricultural growth. The Chinese government has innovated by establishing a tripartite income security mechanism for farmers, comprising price support, agricultural insurance, and direct transfers. This diversification has enhanced policy flexibility but also introduced new requirements. The government must select policy tools based on planting conditions and market environments, making location-specific adjustments. To maximize farmers’ motivation to produce, it is crucial to compare the incentive effects of various policy tools, significantly differing in their inception and crop applicability. Hence, this paper establishes a unified evaluation system and enriches the horizontal comparative research on policy tools.

The study shows that optimizing income security policies requires accurate risk estimation. Numerical simulations suggest that crops prone to the “bumper crop paradox” suit revenue insurance; high-risk yield crops benefit from combining cost and price insurance; crops with weak price-quantity correlations need flexible adjustments, though revenue insurance is preferable to minimize frequent policy changes. Additionally, the study finds that cost insurance combined with protective price purchasing underperforms against combinations of cost and price insurance or revenue insurance alone but acts as a safety net. Managing both yield and price risks is more effective than only cost insurance.

The novelty of this paper lies in its research perspective, focusing on comparison rather than measurement. It also concentrates on agricultural insurance and price tools rather than on farmers’ direct payments, which, despite being well-studied due to readily available data, are not the focus of this study. Methodologically, it employs theoretical models and numerical simulations for normative analysis. To enhance the objectivity of the normative analysis, this paper compares simulation results with actual observations to test the explanatory power of the model.

This paper advises that the government should cautiously choose policy tools to optimize income security policies and further motivate farmers’ production enthusiasm. While promoting “insurance plus futures”, target price subsidies, and revenue insurance, it should avoid a “one-size-fits-all” reform of the minimum purchase price. In driving adjustments in planting structures, it is crucial to ensure coordination among price support, agricultural insurance, and direct transfers.