To realize the great goal of attaining peak carbon in 2030 and carbon neutrality in 2060, agricultural carbon mitigation must be an essential activity in China. Policy-oriented agricultural insurance is accepted as an effective income guarantee and risk transfer tool, which can not only disperse the risk of agricultural operation but also guide green agricultural production. In this study, based on panel data from 2012 to 2018 in China, a multistage dynamic DID model is constructed to systematically explore the effect of policy-oriented agricultural insurance on green agricultural development, primarily to clarify the specific mechanism of the effect. The results show that agricultural carbon emission is increasing year by year and the implementation of policy-oriented agricultural insurance has a significant positive impact on reducing agricultural carbon emissions. We further find that the promotion effect of agricultural insurance on carbon emission reduction increases with the expansion of agricultural technicians and the decrease of agricultural chemical utilization. In terms of spatial heterogeneity, the impact of the policy-oriented agricultural insurance on reducing agricultural carbon emissions is stronger in central and western regions than in eastern regions. At the same time, this paper provides operational suggestions for low-carbon agricultural development and the formulation of relevant macroeconomic agricultural policies. Our findings support the positive effect of policy-oriented agricultural insurance and provide significant policy implications for agricultural carbon emission reduction and control actions in China and other countries.