Understanding Your Equine Insurance Policy

Whether you own an elite show mount or a favourite trail horse, equines are a valuable part of our lives. Although no horse owner wants to think about their horse being injured or having to be euthanized, it is important to consider purchasing equine insurance to cover the market value of your horse.

There are a wide range of equine insurance companies available to horse owners, each having their own unique policies and procedures. As a horse owner, it is important that you are familiar with your equine insurance policy and make sure you understand what is expected of both yourself and the insurance company, as this knowledge may become crucial during a claim.

Agreed or Actual Cash Value?

Is your horse insured for “agreed value” or “actual cash value” (fair market value)? With agreed value, if your horse is insured for $10,000 and it dies, the insurance company will pay out $10,000, as long as there is proof of value. Proof of value is normally provided to the insurance company before a policy is purchased and can vary from submitting show results, a bill of sale, or simply filling out a Justification of Value form for the insurance company along with your equine mortality application.

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With actual cash value, you may be paying premiums on a $10,000 valuation for five years, but if your horse dies, the insurance company will only pay out what your horse is worth at the time of death, which is also known as fair market value. For example, if your horse is older and has not been competing for several years or was laid up with an injury at the time of death and the fair market value is only $6,000. that is, unfortunately, all the insurance company will be willing to pay out on the claim.

Most horse owners are under the impression that if they insured their horse for $10,000 and they have paid their premiums every year that they will get $10,000 if their horse dies. Unfortunately, this is not always true, so it is important to understand the type of policy being purchased and to review the value of the horse on the policy each year to ensure the horse is insured to its correct market value.

The Big Three

Most insurance companies offer three major types of equine insurance policies: Mortality, Surgical/Major Medical, and Loss of Use. Each type of policy comes with its own restrictions and rules, so it is important to discuss them thoroughly with your insurance broker.

Mortality

Basic equine mortality insurance is available as “Named Perils” or “Full Mortality.” As explained by Mike King, owner/operator of Intercity Insurance Services/Capri Insurance, “Named perils insures the life of the horse for death arising from a defined list of causes [the “named perils”]. These perils will typically include fire, lightning, theft, transport, entrapment, collapse of a building, attack by wild animals, drowning, and perhaps other external causes. For this type of policy, the age of the horse or the health of the horse is not critical, because this type of coverage usually does not cover any death arising from natural causes or sickness. As a result, the cost is usually quite low and this type of coverage can often be found as an extension to a farm insurance policy or stand-alone through a specialty broker insurer.”

The second type of basic equine insurance is full mortality. This type of insurance policy covers a horse from named perils as well as any type of illness, disease, or accident. According to King, “Because these policies cover more, they usually cost more.” It is important to note that most insurance companies only offer full mortality equine insurance to horses under the age of 16. Horses over the age of 16 are normally only eligible for named perils coverage.

Most equine insurance premiums can range anywhere from 3-4% of the total value of the insured horse. For example, if an owner wants to insure their horse for $5,000, they are likely to pay between $150-200 per year for equine insurance. Many insurance companies have a $150 minimum charge for basic equine insurance premiums, so it is important to discuss these fees with your insurance broker.

Surgical/Major Medical

Surgical or major medical equine insurance policies are normally one and the same. Kelley Cote, an insurance broker with Hallmark Equine Insurance Agency in Illinois, states, “Major medical/surgical coverage is designed to cover the cost of medical and surgical procedures as a result of an accident, illness, injury, or disease. These normally cover such items as diagnostics, treatments, and medications.”

It is important to realize that surgical or major medical coverage is normally purchased in conjunction with an equine mortality insurance policy. Rates for surgical coverage can range anywhere from $200-400, depending on the type and amount of coverage needed. This amount is in addition to the mortality premium for your horse. Cote explains that, “If a horse is not eligible for major medical/surgical [too old or declined due to health history], they may be offered the surgical-only coverage instead. This provides for the actual cost of a surgical procedure and for some aftercare medical fees. It is less expensive than major medical/surgical because the coverage is not quite as extensive.”

Loss of Use

Loss of use insurance coverage can be very complicated. As a result, some insurance companies do not offer this type of insurance coverage to horse owners. The intent of loss of use coverage is to cover a portion of the value of a horse that is no longer able to perform or compete in their designated discipline. Insurance companies which offer loss of use policies will normally only pay up to a maximum of 60% of the horse’s insured value.

It is important to understand that the loss of use must be permanent. If a dressage horse suffers a suspensory ligament injury and a veterinarian has recommended the horse can start back into training after six months of stall rest and then start competing again, this horse would not qualify for a loss of use claim, as the injury has not been considered permanent or career-ending.

When deciding whether to purchase a loss of use policy for your horse, it is important to find out what will happen to your horse if a loss of use claim is filed. Some loss of use policies state the ownership of the horse is transferred over to the insurance company after a claim has been paid out. As a result, the insurance company then has control over the fate of the horse. Due to the complexity of this type of policy, it is important to discuss loss of use policies in detail with your insurance broker.

Your Duty as a Horse Owner

Regardless of which type of policy you choose for your horse, it is important you contact your insurance company immediately if your horse becomes sick or injured. Waiting to see whether a problem gets better or worse before contacting the insurance company is not recommended.

Contacting your insurance company in an emergency is always a condition of coverage for insurance policies. Failure to report an illness or injury can cause an insurance policy to become null and void. Notifying the insurance company of a problem does not obligate the owner to make a claim, but it simply makes the insurance company aware of a potential problem.

Cote recommends that, “It is very important that the owner notify the company as soon as possible in the event of an injury or illness to their horse. While we always advise that the horse be attended to immediately in the event of an emergency, they should contact the company at the first available moment so that a claim can be started. They risk the claim being denied if the company is not contacted within a timely fashion.” Insurance companies offer a 24/7 claims line for after-hour emergencies. Cote advises, “Even if no information as to the extent of the injury is available at that time, it is better to get the notification on record so that the claim process is already started when more information is available.”

Make sure to keep good records on your insured horse(s), including photos, videos, and show records … and remember to keep them updated. Keeping track of the training put on your horse or the awards won can help prove the value of your horse. This is important whether your horse is insured for agreed value or actual cash value.

Equine insurance can help protect your asset, but it is important to understand your insurance policy and read the fine print, as this will benefit both you and your horse if a situation arises.

Know Your Policy

We asked two Canadian equine insurance specialists the biggest mistakes people make when purchasing insurance for their horses.

Stephanie Kirton, vice-president and associate at BFL Canada, says in her experience they include:

Not reading your policy wording to review exclusions and sub-limits in coverage that may apply to their coverage;
Not notifying the company about a serious sickness/injury or putting a horse down without permission from the insurance company.

Sarah Hansen of Henry Equestrian Plan Insurance Brokers Ltd. offers these tips:

People being too shy to ask questions if they don’t understand something. One of the biggest disappointments a policy holder can experience is filing a claim only to find out their policy does not cover the particular situation they are in. There are no silly questions!
Liability coverage can be added onto the equine insurance policy and will be activated if the policy holder is sued because the horse on the policy hurts someone or damages someone’s property. This coverage is often included in a provincial equestrian federation membership, but for those people who are not members you can add the coverage onto your mortality policy instead.

Some loss of use policies state the ownership of the horse is transferred over to the insurance company after a claim has been paid out. As a result, the insurance company then has control over the fate of the horse.