Abstract: Reforms to full-cost insurance and income insurance are important measures for enhancing the level of agricultural insurance coverage and improving the agricultural support policy system. Based on differences in insurance coverage levels and arable land endowments, this paper constructs a theoretical analytical framework for examining the impact of agricultural insurance policies on farmers’ income. Treating the pilot programs for full-cost insurance and income insurance as quasi-experiments, the study utilizes panel data from 638 major grain-producing counties across 20 provinces in China from 2013 to 2021. Employing multi-period difference-in-differences and dual machine learning methods, the study examines the income-increasing effects of the policies and their underlying mechanisms. The study finds that the policies significantly increased rural residents’ per capita disposable income, a conclusion that holds even after multiple robustness tests. Mechanism tests indicate that the policies promoted an expansion in grain planting area and an increase in grain yield per unit area, supporting both income-increasing pathways. Heterogeneity analysis shows that the policies have significant income-increasing effects across different terrain types, risk levels, and regional groupings, with relatively higher estimated policy effects in mountainous areas, high-risk regions, and the central and western regions. This study provides empirical evidence for optimizing agricultural insurance systems with high coverage levels and improving income protection mechanisms for grain farmers.