Insurance: Not Sexy, But Essential
- Jan 1, 2008
Insurance: It's not sexy. No one wants to think about it. Heck, I wasn't all that keen to write about it. But when something happens, aren't we glad we have it?
Let's face the ugly truth. In today's litigious society, insurance is a must. While we routinely insure our houses, cars, lives, and our health, many of us neglect to insure our horses and our horse-related businesses. And that's false economy, because horses by their very nature ratchet up the risk factors in our daily routines. It just makes sense to purchase protection against the unforeseen.
The good news is where once horses were considered a fringe interest, potentially protected only by a livestock rider on your homeowner's or tenant's insurance, today there are dozens of insurance companies that understand the horse business and offer insurance packages specifically tailored for your situation. From the rider who owns and boards a single animal, to the 200-head racing stable, to the outfitter taking tourists on wilderness trail rides, there's a company that will write a policy to protect you from financial ruin if something goes wrong.
There's more good news: purchasing insurance is easier than ever in the 21st century. Some agencies even offer quotes online. Simply fill out the form, click "submit" with your mouse, and a quote will be e-mailed to you immediately. Or if you prefer, you can pick up the phone, describe your horse, property, or situation to your insurance agent, and get an answer right away.
Tracey Miller, owner of Equine Insurance Center in Liberty, N.C., says, "If you have nothing else, you should at the very least have mortality insurance on your horse and liability insurance to protect you in the event your horse causes bodily injury or property damage to someone else."
Mortality insurance is the most basic coverage you can purchase for your horse. Like life insurance for yourself, it provides you with some financial compensation should your horse die of natural or unnatural causes. It will also protect you if you are forced to euthanatize your horse due to illness or injury. Theft is also covered.
Most mortality policies are renewed annually and are based on a percentage of your horse's mortality limit, which is determined using several factors. Purchase price or assessed value (which can sometimes be dramatically different than the purchase price, based on advancements in training, increasing age, or soundness issues), his age, and sometimes his intended use (horses used for racing or three-day eventing, for example, might be assessed at a higher rate than those being used for lower-risk activities such as dressage) are all factored in to the horse's mortality limit.
Basic mortality coverage will not, however, help you with veterinary bills for a major medical issue, nor will it help you replace your horse if he comes up with a career-ending condition. For those instances you need major medical insurance and/or a loss-of-use policy. Major medical, which includes coverage for surgical costs (usually up to $7,500, with a deductible), is a worthy addition to a mortality package, according to Miller. "Ninety-seven percent of the mortality policies we sell include major medical," she says, "and it usually only costs about an extra $250 per year."
Susan Travis is vice president of Morningstar Insurance Brokers in Arcadia, Calif., which specializes in equine insurance (under its division All-Equine Insurance). She says a major medical endorsement can be added to a mortality policy, but usually it cannot be purchased on its own. Most insurance companies will not provide major medical to horses over the age of 15, although you might be able to purchase surgical insurance (which will cover surgical costs, but not long-term medical bills outside of surgery) for older animals up to the age of 20. She says, "Major medical is much more comprehensive than surgical only. In addition, racehorses generally aren't eligible for major medical."
It's often worth shopping around for mortality and major medical coverage because the upper age limits vary from insurer to insurer, but Travis also cautions, "Most companies won't write a new policy for a horse over 16."
Loss of Use
As for loss of use, it's valuable insurance to have if your horse goes from high-performance to being a permanent pasture ornament, but doesn't need to be euthanatized. It can help you purchase his competitive replacement and provide for his retirement expenses. However, it's expensive--generally in the range of 100% or more of the cost of a mortality policy, according to Travis. And the policy is limited to certain types of show horses such as dressage competitors (barrel racers, eventers, and racehorses, for example, might not be eligible). There also might be a minimum value of the horse ($15,000 to $25,000) that plays into getting a policy.
Liability insurance, on the other hand, is something every horse owner should investigate. Given that horses are legendary for being accidents looking for a place to happen, the probability that your horse will damage someone else's horse, fence, dog, trailer, or toes at some point in his life is relatively high! If your horse never leaves your property, you might be covered for such eventualities by your homeowner's or tenant's policy, but if you attend shows or clinics, go trail riding, or board your horse on someone else's property, then a personal liability policy is a good idea.
Says Miller, "An individual horseman's liability policy can cost as little as $150 a year for $300,000 worth of coverage, or $200 a year for $500,000 worth. It will cover your horse anywhere it goes in North America, while your homeowner's rider may not cover you if you are away from home."
Travis adds, "In a boarding facility you don't always know what's going on minute by minute. A couple of times a year we get a 'horse on the highway' claim because someone left a gate open.
"If you're boarding, you need to find a carrier who offers a policy compatible with what your boarding facility requires; not all provide the additional insured endorsement that some facilities request," states Travis.
What if you're the boarding stable manager? Or a free-lance coach, going from barn to barn? Or the owner of a stallion at a facility where mares ship in to be bred?
If you're operating any sort of business in which other people's horses are in your care, even if only briefly, then you need a commercial general liability policy. "(Commercial liability) is based on the number of boarders, students, or clients you have and is reviewed on an annual basis," explains Miller. "It will also cover you if you're shipping other people's horses, as long as you're not doing it on a full-time commercial basis."
You can also purchase short-term liability policies for special events. Say, for example, your farm is hosting a weekend schooling show or clinic. You'll want additional coverage for those 48 hours when the population on your property swells from 20 to 200 critters. If your facility hosts a show every weekend, it might be better to factor that use into your commercial general policy, but if it's an infrequent occurrence, you'll likely save by just purchasing extra coverage for the days you need it.
Free-lance trainers and coaches who visit several properties each week should make sure their commercial liability policies list each of those properties by name. Otherwise things can get fuzzy when a claim is made. Such lists can be updated annually or as necessary.
Something else to consider: "A commercial liability policy protects your property, but not the animals themselves if you are proven negligent," says Travis. "For that, you need a 'care, custody, and control' policy, which will help defend you if a horse in your care is injured or killed as a result of your negligence."
Even if you have never left a gate open in your life, it's worth investigating the cost of care, custody, and control insurance if you're in any sort of commercial enterprise. Remember, few judges have experience with horses and they might not reach verdicts that make sense to horse people!
Care, custody, and control policies are generally purchased in conjunction with commercial liability, not as stand-alone policies.
Many readers will recall the unfortunate case of superstar racehorse Cigar, who turned out to be a dud at stud. His multimillion-dollar infertility insurance protected his owners, the late Allen Paulson and Coolmore Stud, when tests showed his sperm swam in circles, so to speak. However, they had to forfeit the horse to the insurance company in order to cash in on the claim. (Cigar now lives peacefully at the Kentucky Horse Park, where he is celebrated for his achievements rather than his failures.)
Owners might choose to buy infertility insurance for just their most valuable animals, but even the lowliest backyard beasties can be protected to some degree by a limited-perils policy, which pays when a horse is killed by fire, lightning strike, or (in some cases) flood. Still, for the majority of horse owners, Miller says, a mortality policy is the best bet because it protects against a much wider range of circumstances.
Worker's compensation insurance is something else you must consider if you have employees. It covers lost wages and medical expenses for a worker injured on the job.
Many of us are admittedly outside of our comfort zones when it comes to shopping for insurance. We want it to be simple, and we want it to be over with as quickly as possible. But it's worth putting a plug on your impatience and doing a little comparison shopping. You want to find an agent who will have the answers at his/her fingertips, will be available to you when you need those answers, and who is willing to help you find the best deal. Ideally, you should deal with a brokerage that specializes in equine insurance (there are several dozen in North America) and an agent who's actually a horse person and has some idea what you're talking about if you tell her you would like to insure your second level dressage horse or your four-goal polo pony.
It's also important that the brokerage you ally yourself with deals with more than one company. Each company might have slightly different policies, restrictions, options, and prices, so neither you nor your broker should necessarily leap at the first one you see. Again, shop around a bit to find the best fit for you.
A creative broker can also help you get the best insurance for your budget. If your finances are limited, for example, she might suggest you insure your horse for less than his full value in order to keep the premiums affordable. You wouldn't be able to replace him with a comparable horse at a comparable level if he died, but the payout could at least help you purchase a prospect with potential to be his successor.
Before you sign on the dotted line, find out what the policy includes and what it doesn't. Will your major medical insurance, for example, pay to have your colt castrated, or is that considered elective surgery? Will the policy be voided if it turns out your horse had a pre-existing medical condition? What sort of exemptions are likely to be slapped on the policy after you've made a claim?
If you're not sure, ask questions. Investigate thoroughly so there will be fewer surprises down the road.
There's no benefit, Travis says, to being less than honest with your broker about the type of riding you do, the scope of your horse business, or anything else, for that matter. When such details come to light after you make a claim, they could void your policy.
"You should know going in whether you're covered," she says. "When you're being sued is the wrong time to find out!"
It's a good practice to purchase as much insurance as you can reasonably afford. "At the end of the day, making decisions about insurance is all about how much you're willing to pay versus how much you have to lose," says Travis.
How much do you have to lose?
About the Author
Karen Briggs is the author of six books, including the recently updated Understanding Equine Nutrition as well as Understanding The Pony, both published by Eclipse Press. She's written a few thousand articles on subjects ranging from guttural pouch infections to how to compost your manure. She is also a Canadian certified riding coach, an equine nutritionist, and works in media relations for the harness racing industry. She lives with her band of off-the-track Thoroughbreds on a farm near Guelph, Ontario, and dabbles in eventing.
POLL: Saddle Fitting