Horse insurance can be confusing. Full mortality, named perils, major medical, and surgical coverage all come with their own terminology and fine print. For owners, however, the most important question is actually quite simple: what financial risk are you actually trying to protect yourself against? Do you need to protect the value of the horse or do you need help covering the vet bills if something goes wrong, or both?
“Horses get themselves in trouble all the time,” says Mike King of Acera Insurance. “Even in the best-managed barns, horses are remarkably good at finding ways to injure themselves. Insurance is really about deciding how much financial risk you’re comfortable carrying yourself, and what risks you may want to defer to an insurance provider.”
Mortality & Named Perils Coverage
Mortality insurance protects the financial value you have invested in your horse if the horse dies or must be humanely euthanized. There are generally two broad forms of mortality insurance: Named Perils and Full Mortality.
Named Perils coverage insures the horse only against specific causes of loss listed in the policy. Full mortality is broader and generally includes death resulting from accident or sickness, subject to the policy’s terms, conditions and exclusions.
“Insurance is really about deciding how much financial risk you’re comfortable carrying yourself, and what risks you may want to defer to an insurance provider.”
“Full mortality includes all the named perils, but is not limited to that,” explained King. “Fundamentally, the difference is sickness – named perils policies do not typically include sickness coverage.”
Full mortality premiums are commonly calculated as a percentage of the horse’s insured value, often around 3% annually, although rates can vary by age, use and discipline.
Whether mortality insurance makes sense ultimately comes down to your tolerance for financial loss. If you paid $30,000 for a horse and losing that horse tomorrow would create a significant financial hardship, insuring its value may make sense. If you could comfortably absorb the loss, you may decide to assume the risk yourself.
Major Medical & Surgical Coverage
While Mortality coverage protects the value of the horse, Major Medical and Surgical coverage helps pay eligible veterinary expenses when the horse becomes sick or injured.
“Medical claims are where we see the greatest frequency,” says King. “A horse doesn’t have to suffer a catastrophic injury to generate a significant veterinary bill. A bad step, an eye injury, a cut or a case of colic can become expensive very quickly.”
To obtain coverage for medical and surgical expense, the horse must be insured under a Full Mortality policy.
But major medical insurance is not the equivalent of an unlimited veterinary expense account. Policies normally establish a maximum amount the insurer will pay during the policy period, and there may also be limits for specific diagnostic procedures or treatments.
“Insurance doesn’t mean every diagnostic test or every dollar of veterinary expense is automatically covered,” King explains. “There are limits, and owners need to understand those limits before they’re faced with a claim.”
For example, an insurer might establish a maximum reimbursement for an MRI even if the veterinary clinic chosen by the owner charges substantially more. The owner can still choose that clinic, but will be responsible for the difference.
“One of the biggest misconceptions surrounding mortality insurance is that owners can simply choose the value they would like to insure. They cannot.”
Diagnostic expenses can also be treated differently depending on what the testing ultimately reveals. If extensive diagnostics identify a condition that leads to an eligible treatment, those expenses may fall within the policy’s coverage. If testing results only lead to rest or management changes, some policies may place a lower cap on the amount they will reimburse for diagnostics.
That makes understanding your policy before a problem occurs extremely important.
How Much Can You Insure Your Horse For?
“One of the biggest misconceptions surrounding mortality insurance is that owners can simply choose the value they would like to insure. They cannot,” noted King. Insurance is intended to compensate for a financial loss, he explained, not create a profit.
When a horse is first purchased, its insured value will be tied closely to its purchase price. If you buy a horse for $10,000, for example, you cannot immediately insure it for $50,000 simply because you believe you found a bargain. But that does not mean the value can never change.
“We have a process where the valuation can be looked at to increase where it’s justified, show record, trainer’s assessment, training,” said King. Noting that a horse that was purchased green may become considerably more valuable after training or competition.
Owners should also remember that values can move in the opposite direction. Age, health, soundness and changes in the marketplace can all affect a horse’s value over time.
So, What Does Your Horse Actually Need?
There is no single answer that applies to every horse. A useful starting point is to consider the financial consequences of three different scenarios:
Your horse dies tomorrow. Can you afford to replace that investment? If the cost of purchasing another horse would be a serious blow, full mortality insurance may be worth considering.
Your horse suddenly needs $10,000 or $20,000 worth of veterinary care. Can you afford to pay the bill yourself? If not, major medical and surgical coverage may provide the protection that matters most.
Above all, read the policy rather than simply looking at the premium. Ask about the medical limit, exclusions, diagnostic caps, and age restrictions. The least expensive policy is not necessarily the best value, and the most comprehensive policy is not necessarily the right choice for every horse.
“There isn’t one insurance package that every horse owner needs,” concluded King. “It comes down to the risk you’re comfortable carrying yourself and the financial loss you need insurance to protect you from.”
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