Equine Insurance: Risk Management

Equine Insurance: Risk Management

Major-medical coverage reimburses the policyholder for veterinary costs incurred in the process of diagnosing and treating illness or injury, including surgery, whether the horse is examined and treated at home, at a clinic or hospital, or both.

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Do you need equine insurance and, if so, what type? An experienced owner breaks down the countless options

Own horses long enough and you're bound to encounter one equine-health-related woe or another. Despite your best efforts, these equine friends are all too susceptible to injury and illness. Most of the time the health issues are minor, resulting in veterinary bills that don't cause you to turn pale. But when the really bad stuff strikes, all bets are off--including whether your pocketbook can handle the costs of care.

I'm sorry to say that I speak from experience here. In my horse-owning lifetime I've sent one horse to colic surgery (twice), had another laid up for months with a frustrating unsoundness, and had still another that required a series of expensive diagnostic procedures. I've also had the worst happen, when a mare sustained a freak injury and had to be euthanized.

The only bright spots in these difficult situations were my equine insurance policies, which helped pay the high costs of veterinary care. And in the case of the mare that died, her policy enabled me to purchase a new horse.

Could you benefit from insuring your horse? What kinds of coverage are available? In this article veteran equine insurance agents will help explain the options.

Mortality Coverage: Life Insurance

You might own a life insurance policy, the purpose of which is to help provide for your family or beneficiaries in the event of your death. An equine mortality policy is similar: If your horse dies or has to be euthanized, the policyholder receives the amount of the policy, which is considered to be the current value of the horse. The price you paid for your horse establishes his value; if you can demonstrate proof that his value has increased (e.g., through competition results, extensive training, or the like), the insurance company might allow you to increase the policy amount.

Mortality insurance gives the horse owner "the ability to offset the risk of owning that horse and the money you invested in him," explains Jeff Tebow, of Oklahoma City, Okla, who is a vice president at Andreini & Company, a California-based Markel Insurance Company partner. A longtime Quarter Horse enthusiast, Tebow administers Markel's Quarter Horse Racing Insurance Program and also has a handful of show-oriented clients.

With mortality insurance the horse owner pays an annual premium for the insurer to absorb the risk of losing the horse. "If you're self-insured, you take all the risk," Tebow says.

The premium rate, set by the underwriter, is a percentage of the horse's determined value, Tebow explains. Breed and sex can be factors in determining rates, with the biggies being age and intended use. Not surprisingly, horses in sports considered risky are more costly to insure: A racehorse or a steeplechaser, say, would generally cost more to insure than a pleasure mount or a dressage horse. (Oddly, however, the highest rate Tebow knows of is for halter horses.)

Insurance agents are wary of quoting rate ranges for the record; Tebow will say only that most horses under the age of 15 fall into the 3-8% range, with a few going as high as 12%. (Some quick math for comparison's sake: A $10,000 horse would cost $300 annually to insure at 3% and $800 at 8%.) Markel's minimum annual premium is $200, meaning that the policy "could be more than the horse is worth," Tebow says.

Although an insurer will be happy to write a policy for any eligible horse, "My guideline is $5,000," says Holly Griffin, a jumping and foxhunting enthusiast who's been in the equine insurance business since 1982 and who currently serves as executive director of HUB International's (a large private insurance brokerage) Equine Department, representing Great American Insurance Company in Blue Bell, Penn. "By the time you pay the premium, it may not be worth it (to insure a horse valued at less than that amount)," she says.

As Tebow points out, unlike homeowner's or auto insurance, equine insurance is not mandated; it's up to the horse owner to determine whether purchasing a policy makes good fiscal sense.

Griffin adds, "If you can go out and replace that horse at that value, you may not need to insure."

Simply put: If Dobbin died tomorrow, could you afford to buy another horse of similar value, no sweat? Regardless of whether Dobbin is worth $1,000 or $100,000, if you can afford to drop that amount on a horse again with no worries, then perhaps mortality insurance is superfluous. But if you don't have that kind of money or if spending it would cause you financial pain, then you might wish to weigh the premium obligations against the worst-case scenario of losing your horse.

Just as your own life-insurance policy premium increases as you blow out more birthday candles, your horse's equine mortality premium rises when he reaches a certain age. But there's happy news here: Recognizing that horses are living longer and more productive lives, insurers are offering coverage longer than in years past. "It used to be that horses could only be insured to age 12," Griffin says. "That changed beginning in the early to mid-1980s. (The age threshold) went to 15 and then to 20. Today, at age 21, all coverage drops."

Rates do increase, and often substantially, for horses older than 15 or whatever the insurer's "aged" threshold, so owners of older horses might find themselves reevaluating their policies' return on investment.

Major-Medical and Surgical Coverage: Your Horse's Health Plan

With mortality coverage in place (insurers require the purchase of a mortality policy before you're eligible to buy additional kinds of coverage), you might be given the option of purchasing policy "endorsements." The most common endorsement is an equine health plan of sorts, known as major-medical or surgical coverage.

As Griffin explains it, major-medical coverage reimburses the policyholder for veterinary costs incurred in the process of diagnosing and treating illness or injury, including surgery. The horse can be examined and treated at home, at a veterinary clinic or hospital, or both. Annual reimbursement maximums might vary; Griffin's underwriter, for instance, offers major-medical policies with $10,000 or $15,000 limits, with additional surgical or colic add-ons available. These add-ons raise the dollar limit of what the policy will cover for surgery if the client wants more than the usual coverage amount.

Some horse owners think that "surgical coverage" covers only surgery, but the name actually refers to the fact that covered charges must be incurred at a surgical facility, according to Griffin. As a result, unless you happen to live next door to a clinic or hospital, a surgical endorsement is likely to be more limiting than a major-medical endorsement.

These forms of equine health insurance are so popular that "everybody buys major-medical or surgical (along) with mortality," Griffin says. Well, maybe not everybody: According to Tebow, racehorses aren't eligible for such coverage because surgeries to remove bone chips are so commonplace in that industry.

Other Kinds of Coverage

Do you own a breeding stallion? You can buy infertility insurance to protect against the stud-fee income you won't collect if he experiences a decline in fertility due to injury, illness, or age.

Is your broodmare expecting a valuable foal? Prospective foal (in utero) coverage insures against foal death until the foal is 24 hours old--potentially useful if the stud fee didn't come with a live-foal guarantee, Griffin says. The unborn foal can be insured for up to 2.5 times the stud fee, according to Tebow. Once the foal reaches 24 hours old, you'd have to buy him a foal-mortality policy, which lasts until he's 30 or 45 days old, after which he can be issued a standard mortality policy, Griffin and Tebow say. Foal policies are more expensive than standard mortality because the first weeks of life are the riskiest, they explain.

Loss-of-use coverage is a "permanent disability" endorsement that (at least in theory) compensates the policyholder in the event that his or her horse becomes unable to perform in his intended discipline. Some of these policies contain language stating the insurer can opt to take possession of the horse (as fraud protection). However, Griffin cautions, "Loss-of-use is very hard to prove, and I generally don't recommend it."

Air-transit coverage protects against loss during air travel, including import or export between the United States and a foreign country.

Although it's not equine insurance per se, Tebow encourages farm and boarding stable owners to purchase sufficient "farm and ranch" coverage to protect them against liability in the event of an accident or injury. Liability coverage is also available for riding clubs (i.e., anything from a horse show to an organized trail ride), special events, and other situations, he says.

"I see people with huge (liability) exposures," Tebow says. "Sometimes they need to be more concerned about liability than with individual mortality coverage. Your homeowner's insurance generally doesn't cover (horse-related) liability. Farm-and-ranch policies offer liability and defense coverage; even if a farm owner wins a lawsuit, the costs of defending a case can be very expensive."

The Fine Print

Your own health insurance policy contains carefully crafted language spelling out what it does and doesn't cover. Likewise, equine policies and insurance companies have their own "exclusions" and fraud protections.

For instance, if you buy a horse with a known health condition, the insurer might exclude that condition from coverage. Exclusions can also occur while you own the horse: If you submit a claim for, say, treating a suspensory ligament injury, your insurer might choose to exclude said ligament from coverage when you renew your policy. According to Griffin, if a horse requires colic surgery but bowel resection (removing a diseased or damaged part of the bowel and reattaching it) is not necessary, his policy will probably be slapped with a colic exclusion for a year. But in cases of resection, the colic exclusion may well be permanent. And arthritis treatments, such as joint injections, are usually excluded after one round, Griffin says.

Most insurers require policyholders to notify them of illnesses or injuries, with most maintaining 24-hour toll-free numbers for this purpose. (I don't report every boo-boo, but if the situation is serious enough to warrant summoning my veterinarian, I generally pick up the phone.)

Insurers require various forms of documentation as guards against fraud. For starters, you can't insure that $1,000 horse for a million bucks. Underwriters require a copy of the bill of sale or the canceled check (as proof of the animal's value) and a signed statement attesting to the horse's health and condition before they'll issue a mortality policy. (For a horse costing more than $100,000, a copy of the prepurchase exam report also might be required, says Griffin.) And to renew your policy, you'll need to submit an updated condition statement, with supplemental documentation if you wish to increase the policy value.

In the 1990s several cases of equine insurance fraud made headlines when high-profile horsemen were convicted of scheming to kill several valuable horses and make the deaths appear accidental to collect on the mortality policies. For reasons financial as well as ethical, insurance companies frown on this sort of thing. They require assurance that a horse either died of natural causes or, in a case with poor prognosis for recovery, was humanely destroyed to avoid prolonged suffering.

In the case of my critically injured mare, the veterinarian gave my insurance company a statement attesting to the need for euthanasia. Doing so kept the red tape to a minimum--and made the painful process a little less stressful.

Know What You're Buying

To avoid unpleasant surprises, understand what you're buying and what your insurance company requires of its policyholders. Read policy language and lists of covered and excluded expenses carefully. For best results, choose an agent who's familiar with your breed or discipline. You'll "speak the same language," and the agent will know which endorsements best suit your situation.

If you keep your horse at a boarding or training stable, make sure the person in charge knows your horse is insured, and give him or her a copy of your insurance card along with the emergency notification number. You might even consider posting the number on your stall door.

As they say in the insurance ads, you hope you'll never need it; but if you do, you might be glad you have it.

About the Author

Jennifer O. Bryant

Jennifer O. Bryant is editor-at-large of the U.S. Dressage Federation's magazine, USDF Connection. An independent writer and editor, Bryant contributes to many equestrian publications, has edited numerous books, and authored Olympic Equestrian. More information about Jennifer can be found on her site, www.jenniferbryant.net.

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