The influences of policy-based agricultural insurance on farmers’ food production behaviors and national food security have been widely concerned. Based on a rural household survey data of “double hundred and double thousand” in Rural Vitalization of Jiangxi Province, this paper applied the two-step clustering method to optimize farmers’ differentiation types, analyzed the influences and internal mechanism of policy-based agricultural insurance on rice yield by the Least Square method, and discussed the Moderating effect and the boundary conditions of policy-based agricultural insurance. Results show that the proportion of farmers responding to purchasing policy-based agricultural insurance is only 47.4%, while the proportion of traditional farmers and specialized farmers purchasing policy-based agricultural insurance is low. The rice yield of farmers who purchase policy-based agricultural insurance reaches 7.087 t/hm2, surpassing that of farmers who do not avail themselves of such insurance. The purchase of policy-based agricultural insurance by farmers has significantly enhanced the rice yield, which had been validated through endogenous and robustness tests. The mechanism analysis reveals that the purchase of policy-based agricultural insurance can enhance rice yield through expanding the planting area and proportion of rice to achieve intensive production, adopting agricultural green production technology to improve soil quality and introducing new varieties to enhance rice disease resistance. Further analysis shows that farmers of new agricultural business entities, main grain producing counties and double-cropping rice planting significantly strengthen the rice production effect of policy-based agricultural insurance. Therefore, under the dual goals of grain security and increasing farmers’ income, this paper suggests: accelerating the development of policy-based agricultural insurance, reducing agricultural land circulation, agricultural green production technology and new rice varieties acquisition cost, and increasing the intensity of policy-based agricultural insurance subsidies for new agricultural business entities in grain production, major grain producing counties, and double-cropping rice cultivations.