Theoretically and empirically, it has been often argued that production uncertainty affects the farmers’ production efficiency. Insurance can play an impactful role in reducing the uncertainty and, consequently, increasing the investment. Using multilevel models, we examined the effect of agricultural insurance programs on investment in the agricultural sector of Khorasan Razavi Province. The cross sectional data was collected by using the two-stage cluster sampling method in 2012-2013. The results indicated that the insurance background, insured cultivation area, compensation payments, and all of the socio-economic variables as well as the county and climatic situations affected the farmers' willingness to invest. Hence, insurance policies should be based on climatic conditions and particularized for the local situations of the specific counties. In addition, the payments of the compensation should be on time to encourage the investments.

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