Equine Insurance: Compare Coverages

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Six years ago a woman fresh out of college purchased a horse for $6,000. The Thoroughbred gelding was a stretch to afford and, with student loans, horse care and struggling to find a job, she didn’t think she could afford to insure him. Later that year her horse slipped in an icy field and broke his leg. He had to be humanely destroyed, and she wasn’t financially able to replace him.

Should she have insured him' Probably. Straight mortality insurance for her gelding would have cost around $200 a year.

Equine insurance, like any insurance, is all about risk. How much risk are you willing to take' If replacing your horse (whether worth $5,000 or $25,000) would be a financial burden, then chances are you’re a candidate for mortality insurance.

Where Do You Begin'
Finding the right mortality insurance can seem as overwhelming as buying a car. There may only be a few manufacturers, but there are hundreds of dealerships, and everyone has “the best” product. But, like buying a car, knowing what products are available is the first step to deciding what you need and don’t need. And, like a car, the cheapest one may not include what you’re looking for. You’ve got to look beyond price.

Mortality Insurance
Equine mortality insurance encompasses more than just life insurance. When purchasing mortality there are also endorsements or “add-on coverages” available, such as major medical, surgical and loss-of-use. The cost of straight mortality insurance is based on a percentage rate that is multiplied by your horse’s agreed value.

For example: If your horse is worth $10,000 and the rate is 3.4%, then the cost of straight mortality insurance would be $340 per year. The rate is based on your horse’s age, breed and usage, but we found that usage often dictates that rate. For instance, a nine-year-old Thoroughbred used for pleasure would be a lower rate than a nine-year old Thoroughbred used for eventing.

You may think mortality insurance is all you need, but before you take out that policy you must know that an insurance company will not pay on a mortality policy if you choose euthanasia without making every effort to save your horse. This deters insurance scams; however, let us present you with a real scenario. Your 13-year-old adult jumper Thoroughbred gelding is insured for his purchase price of $5,000. You wisely insured him because it would be a hardship to replace him. He colics, and your vet says there is a 50% chance he can save him if you ship him three hours to New Bolton Veterinary Hospital for surgery.

If he dies while attempting to save him you collect $5,000. But if he survives the surgery, you are left with $5,000 in bills (average cost according to New Bolton). If your vet says your gelding has a chance to live, and you choose euthanasia without attempting to save your horse, you will not be paid. What would you do'

Major Medical/Surgical
Let’s refer back to the above scenario. In this instance you can see where a major-medical endorsement would be beneficial. The full plan would cover you whether your horse lives or dies. It doesn’t leave you with the burden of high veterinary bills in trying to save your horse. The cost for mortality alone would be around $175, and if you add on the $150 for medical your total would be $325.

Your horse would then be covered in case of accident, illness and disease. Although there is a deductible for each claim, it is a minor dent compared to the cost of surgery or major medical treatment.

To understand what medical insurance does and does not cover you should ask your insurance company for a list of exclusions. Equine major-medical is not the equivalent of human health insurance and does not cover “yearly physicals.” As Dick Grossman of Continental Bloodstock explained, “The stuff your mother took care of isn’t covered. When she took you to the doctor or the hospital, basically, that is what’s covered.”

Surgery-Only
“Surgery-only” covers only surgery. It sounds simple, but some people cut corners because surgery-only is cheaper than major-medical. Then they wonder why, when the veterinarian comes to stitch up a gash on their horse’s leg, it’s not covered. People see the surgery-only coverage as $65 a year cheaper, but in the long run that difference translates to only $5 a month or $1.25 a week. So for an extra $1.25 a week your horse would be fully covered with major medical. Most insurance agents recommend the full major-medical coverage, with good reason.

One of the best uses for surgery-only coverage is to add it on to major-medical to receive additional surgical coverage. For example, most surgical-only endorsements cost around $85 for about $5,000 worth of coverage. If you add that to a major-medical policy worth $7,500 then you have just upped your surgical coverage to $12,500. Another good use for surgery-only is adding it to a policy that includes free colic surgery. The free colic surgery limit is usually up to $3,000, and by adding on an additional $5,000 worth of surgical coverage you will raise your colic surgery coverage to $8,000.

This option is an excellent choice for the inexpensive pleasure horse. A $3,000 Western pleasure Quarter Horse may cost only $102 to insure, however, most companies enforce a $150 minimum premium on mortality insurance. Why should you pay $150 and not receive something for that extra money spent' Find an agent who includes free colic surgery and add on the surgical for $85 (or whatever the company charges). Compare the $150 premium to the $187 premium and you will discover that for an extra $37 a year your horse will be covered for death as well as for colic surgery up to $6,800 (assuming the limit on the surgical is $5,000 and the free colic surgery offers a limit of 60% of the horse’s value).

Because colic is the No. 1 killer of horses, we feel that free colic surgery coverage is an important feature to look for, especially if you plan to pursue stand-alone mortality policy. Clarendon National and United National offer Automatic Colic Surgery Coverage. The colic surgery coverage makes available $2,500 (Clarendon) to $3,000 (United) for treatment coverage but not to exceed 50% (Clarendon) or 60% (United) of the horse’s insured value.

Loss-Of-Use
This endorsement is quite expensive, will only pay out 50 - 75% of the horse’s value, and is limited to when it actually pays out. The coverage differs from company to company, but the bottom line is that your horse must have a permanent injury leaving him unable to perform his intended function. If he is a jumper he must never be able to jump again. If she is a broodmare, she must never be able to carry a foal again.

A horse that is simply laid up for a few months due to a temporary injury, but will return to showing or breeding at some point, will not collect under loss-of-use. You can, however, collect if your jumper can never scale a fence but can be ridden as a pleasure horse, or if your broodmare can’t breed but can be ridden.

Loss-of-use most often offers you two options when you go to collect. Most companies will give you 75% of the horse’s value if you surrender your horse to the company, or they will pay you 50% if you choose to keep the horse.

If you are wondering why the company would take the horse, Andy Beauchamp of Equine Insurance Specialists explained this best: “Imagine you get into an auto accident and more than 50% of your car is totaled. If your auto insurance company pays you for a total loss, or up to the policy limit, they can try to recoup their losses by turning around and selling the car for parts. What the equine insurers may do is turn around and try to sell the horse, if it can still be ridden as a trail horse.” Most insurance agents concur that most customers choose to keep their horse and take the lower percentage.

Considering the high cost and low return you m ay wonder for whom loss-of-use is intended. According to Beauchamp, the number of people needing this endorsement is limited. He said, “Most of the time when we sell loss-of-use it is for animals valued above $15,000 because it is very expensive. It’s normally about the same as the mortality insurance. We sell it more to people in high-level dressage, for grand prix jumpers, to cover expensive breeding stallions or horses that are owned by a syndicate. It’s not something I really recommend often.”

Horses’ Value
The easiest way to determine the value of your horse is purchase price. Other methods include cost of stud fee (for foals), offspring’s show record (for breeding stock), training costs, show records, money won, etc.

The process of determining the value will be a joint effort between you and your agent, which is one reason why an agent with horse knowledge is valuable. The value of your horse, or the amount you insure him for (which can be less than the value but never more), should be what you get paid if that animal dies. We say “should” because there are instances in which insurance companies will pay less.

If you have an “Agreed Value” policy and your horse dies, the loss will be paid based on the agreed amount stated in the insurance policy. The underwriter and the owner will have agreed on the value when the policy was issued and that value establishes the amount paid. That is what you want.

If, however, you own an “Actual Cash Value” policy and your horse dies, the loss will be adjusted based upon the actual value of the animal at the time of death, not to exceed the amount of insurance on the policy. The time of your horse’s death is not the time you want to be trying to prove his financial worth.

Choosing An Agent
Let’s face it, you wouldn’t go to a car salesman to buy a horse so why go to your local car insurance provider to purchase equine mortality insurance. We highly recommend dealing with an agency specializing in equine insurance because you will need someone who understands the business. You don’t want to spend time explaining what you do as a three-day eventer; you want your agent to be explaining what you need. The first thing to realize is that there is a three-tiered hierarchy:

1. Insurers: The companies that back the policy you buy.
2. Underwriters: Establish the rates and rules.
3. Broker/agent: Sells the insurance policy.

For example: United National is the insurer while American Equine Insurance Group is their underwriter and Equine Insurance Specialists is one of their brokers.

Sometimes the insurer is also the underwriter, as in the case of Markel and American Bankers, and sometimes you can purchase insurance from an underwriter like American Equine Insurance Group.

But above all else don’t panic when you start seeing a multitude of ads for equine insurance agents across the country. Remember that there are not an equal number of agents and rates. There is only as many rates as there are insurers, and there are only a handful of insurers.

You will find that after comparing the facts and narrowing down the companies by need, what really becomes important is which agent you feel most comfortable dealing with. Take a few minutes to talk to the agent and find out what area of horse sports they are in. Find out how long the agent has been in business and be certain they are licensed to do business in your state.

All insurance companies are rated by A.M. Best. The A.M. Best Company scale of financial strength and ability to meet obligations to policyholders rates the companies from A++ and A+ (Superior) to A and A- (Excellent) down to F (In Liquidation). We recommend sticking with a company rated A or higher.

In your search for insurance you may discover a line of insurance called excess and surplus lines carriers. We are wary of surplus line carriers because, although their rates can seem less expensive, there are taxes added to the premiums. Most important, if a surplus company defaults, the state insurance will not back your insurance claim.

This is not to say that all surplus lines carriers aren’t stable. Equisure, affiliated with the AHSA, is a surplus lines carrier who uses Lloyds of London as the insurer. Lloyds is a reputable company; however, no state backing is usually something to consider in choosing a policy.

Bottom Line
We want an insurance company that offers a policy with:

1. An insurer with at least an A rating from A.M. Best;
2. Automatic/free colic surgery coverage;
3. A helpful agent who has an in-depth knowledge of horse sports;
4. An insurance policy that offers “agreed value” coverage, not “actual cash value.”

These qualifications are met by a number of agents. Using our charts as a comparison, you should be able to ask similar questions for comparing rates and coverages with your choice of an insurance agent to meet your individual needs.

Also With This Article
Click here to view "Equestrian Multigard."
Click here to view "Insurance Rates And Coverage Comparison."
Click here to view "Euthanasia."
Click here to view "Comparing Insurance Rates From Agents."