What is the threshold yield and indemnity level in PMFBY in simple terms?

Think of it in two steps. The indemnity level is a chosen protection level for a crop, commonly 70, 80 or 90 percent, fixed for your crop and area. The threshold yield is the guaranteed yield you are protected up to, and it is worked out by taking the average yield of past good years for that crop and multiplying by the indemnity level. For example, if the past average yield is high and the indemnity level is 80 percent, your threshold yield is 80 percent of that average. At harvest, crop-cutting experiments measure the actual yield of the notified area. If the actual yield falls below the threshold yield, a claim is triggered, and the shortfall as a fraction of the threshold is applied to your sum insured. So a higher indemnity level means a higher threshold and easier triggering of claims. The exact indemnity level and the years used for the average are notified each season, so confirm them for your crop and district on the PMFBY portal or with your agriculture office.