Equine Insurance: It’s All About Protection

Like any insurance, it seems like a waste of funds, until you need it.
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Like any insurance, it seems like a waste of funds, until you need it.

Mention the word “insurance” to most people, and you’ll likely encounter an excitement level similar to that of a horse on ace. Let’s face it. The topic of insurance is boring, and insurance salespeople have a reputation for being some of the most tedious people in the world. Or as comedian Woody Allen once said, “There are worse things in life than death. Have you ever spent an evening with an insurance salesman?” Click here to download a PDF of this article.

Determining the honest value of your horse is critical.

Determining the honest value of your horse is critical.

However, when you’re confronted with an injured or dying horse or if you’ve just been slapped with a lawsuit, it’s amazing how quickly insurance becomes important.

START WITH THE AGENT. Finding a reputable agent who specializes in and is knowledgeable about equine insurance and your type of horses is your first step. This may involve some research. Most underwriters and agencies have websites and advertise, locally and nationally. You can also get quotes by e-mail or phone if you complete a questionnaire, but this may not be your best option.

Equine attorney and author of The Complete Equine Legal & Business Handbook  Milton Toby suggests you talk to veterinarians, equine clinic staff and barn managers/trainers. “You can’t beat word of mouth references,” said Toby, who added that equine insurance is a niche industry, which means most insurance companies try to provide good service to their clients. If they don’t, they usually don’t stay in business very long.

SIGN AT THE X. Remember that a policy is a contract, a legally binding agreement between you and the carrier. As such, both parties owe certain duties to the other.

You, the insured, must know what the terms of the policy are and what they mean. Since insurance policies have been written by lawyers in boring legal prose, most people don’t read them, or if they do, they may struggle to understand what they mean. Milton Toby says ask for clarification. “You need to know what you’re signing,” he said. Click here for information to help you understand your insurance policy.

You must also notify the underwriter and agent of any changes in the horse’s physical condition, location and/or use as soon as possible. This is particularly important with mortality claims and renewals.

Honesty on the application is imperative, according to Jorene Mize of the Jorene Mize Insurance Agency, who has been selling equine insurance for over 20 years. If you misrepresent or falsify information, especially the value of your horse, you may find the insurance company denies your claim.

In return, your insurance company should promptly respond to calls and answer questions. Your agent should explain your policy terms and advise you on what types of insurance and limits you need and pay claims quickly.

MORTALITY INSURANCE. Many people call mortality coverage equine “life insurance.” However, since equine mortality insurance only pays for the value of the horse (either “agreed upon” or “fair market value”) rather than a horse’s anticipated lifetime future earnings, the analogy isn’t accurate. Mortality insurance helps you recover the financial loss from your horse’s death. Click here to learn about “Major Medical” insurance for your horse.

Proper, daily care may be required in order to insure the horse.

Proper, daily care may be required in order to insure the horse.

Depending on the carrier, equine mortality insurance can be obtained for a horse that is 1 day to 20 years old. However, some insurers impose an increase in premiums after age 14. Beyond age 18, carriers may restrict coverage only to theft or deaths resulting from certain “acts of God” (i.e., lightning, earthquake, flood or fire).

Equine mortality insurance may provide for “full mortality” or “limited mortality” coverage. Full mortality insurance covers death directly or indirectly from most accidents, illnesses or diseases, and will cover death from euthanasia done to prevent further suffering. (Note: Mortality insurance will not cover economic euthanasia.)

Because colic is a common, often fatal, condition that is often amendable to surgical treatment to preserve a horse’s life, you’ll usually need to also purchase an emergency colic surgery supplemental rider with the full mortality policy. Expect to pay an additional premium for this.

Colic supplementals usually have a monetary limit ($3,000 or 60% of the insured value of the horse) and may also cover the cost of transportation of the horse to a surgical facility and aftercare. However, colic supplemental may not be available if your horse has a history of colic prior to being insured.

Along with colic coverage, most mortality policies offer an automatic “Guaranteed Coverage Extension,” which provides mortality coverage for a period of time (usually up to 12 months) after expiration of the policy, if the condition causing death occurred and was reported to the insurer during the policy period.

The less comprehensive “limited mortality” policy, also known as “perils” insurance, only covers deaths under limited circumstances, such as fire, lightning or floods. Because this type of policy is narrower in scope, it’s generally less expensive and may be a reasonable choice when a horse owner cannot get insurance for other reasons.

A mortality insurance policy won’t cover a horse’s death if it’s due to owner neglect or intentional misconduct. Some policies also require that your horse be under daily care and supervision. Watch for other limits, such as no coverage if the horse leaves the continental United States, unless you have written approval from the insurer. Check your insurance company before sending your horse on a cruise.

Mortality insurance also covers theft of your horse. Before a company will pay for that, the horse must usually be gone for at least 30 days after the incident of theft has been reported to the insurer. You, as the horse owner, must report the theft to law enforcement.

LOSS OF USE. Often added to mortality insurance is a Loss of Use policy, much like disability insurance in people. It provides coverage for a horse that suffers a permanent injury that leaves him unable to perform his intended use but doesn’t require euthanasia.

Use the same care choosing your insurance underwriter as you do your equipment.

Use the same care choosing your insurance underwriter as you do your equipment.

This type of insurance is geared toward the expensive performance horse. Most limit their Loss of Use coverage to 50-75% of the Full Mortality insurance value of the horse. In some instances, the policy may allow them to take ownership of the horse or the owner will have to accept a lower payment amount if they wish to keep the horse.

FAIR MARKET VALUE VS. AGREED UPON VALUE. Ask most horse owners what kind of price tag they would put on their horse’s life, and they’re likely to say it’s priceless. However, in insurance, a horse’s value is about real dollars and cents, not affection. When buying mortality insurance, you must establish the actual monetary value of your horse. It’s critical to know whether your policy is based on an “agreed upon value” of your horse or the “fair market value” of your horse at the time of its death.

“Agreed upon” value is a dollar amount determined by the horse owner. Obviously, the higher the value of the horse, the greater the insurance cost to you will be. However, should your horse die while being insured under a mortality policy with an agreed-upon value, the carrier will pay you the full amount of the agreed-upon value.

Under a “fair market value” mortality policy, the value of a horse is the amount the horse was monetarily worth at the time its death. Predictably, legal conflicts may arise when an insured loses a horse and expects to be compensated for what they thought the horse was worth at the height of its career but only receives a fraction of that amount because, at the time of death, the horse was a retired pasture ornament. For that reason, it’s wise to opt for an “agreed upon” value mortality policy.

WHAT’S THE COST? The current economy is making most people look carefully at their budgets, so insuring your horse may seem a low-priority expense. However, having mortality insurance can soften the financial blow of losing your equine investment.

If you have a relatively inexpensive recreational horse and aren’t concerned about paying the veterinarian if your horse colics, you may not need mortality insurance at all. However, if you have a horse in which you’ve invested your money and your time in training and showing, or a horse, which if lost, means a significant financial hit to you, mortality insurance is wise.

Generally, insurance carriers calculate yearly mortality insurance premiums using a formula of 2.5% to 4.5% of an agreed value (or $25- $45 per $1,000 of coverage) depending on the age, breed and discipline. An additional major medical policy usually adds $150 to $250.

WHEN THE TIME COMES. As cold as it may sound, if you have a mortality policy on your horse, you must include your insurer in your decision as soon as your horse has died or euthanasia is indicated.

Because illnesses and injuries can quickly worsen to the point of being fatal, notifying your insurer at the very first sign of illness or injury is extremely important. Failure to do so may result in your insurer denying your mortality claim later on. “You can never go wrong by notifying too often,” said Milton Toby.

Furthermore, insurance companies may refuse to pay if you fail to get reasonable care from a licensed veterinarian to preserve your horse’s life prior to its death. This fact makes a strong case for purchasing a major medical policy with your mortality insurance.

If you have only mortality insurance and must do all you can from a medical standpoint to save your horse or risk having your mortality claim denied, the result could be a deceased horse along with a pile of out-of-pocket veterinary bills.

In cases where a horse must be euthanized immediately, insurance carriers will generally not require pre-notification that might prolong the horse’s suffering. However, you should have clear documentation that immediate euthanasia was necessary. This can get sticky.

Know your insurance policy’s requirements for notification and have this information, the policy number and the company’s phone number readily available wherever your horse is at the moment. It can be invaluable during a crisis. Click here for information about Insurance Underwriters.

Be sure you know what your policy’s specific requirements are following your horse’s death. You will likely be required to have a licensed veterinarian perform a post-mortem necropsy, and you may be required to preserve your horse’s body pending examination by a veterinarian from the insurance company. Some insurers require a sworn proof of loss statement to be submitted by the owner within 60 days and the company may also reserve the right to question the owner under oath within 30 days.

BOTTOM LINE. Whether your horse is a beloved family member or a business investment, compensation for its loss can assist you with financial recovery. However, you need to understand the policy you’ve purchased thoroughly, so you’re prepared if and when the time comes that you need to use it. It isn’t just the price of the policy that matters.

Article by Susan S. Quinn, Esq.