What Horse Owners Need To Know About Insurance
Insuring a living, breathing 2000-pound equine and all of the elements that surround him can seem a little overwhelming. We asked Jackie Starnes, owner of Starnes Insurance Agency, Summerton, South Carolina, and Tim Folck of Folck Insurance (affiliated with Marnitz & Associates), Lexington, Kentucky, to help explain what horse owners need to know about insurance.
How an Equine Agent is Different It’s tempting to go to your neighborhood insurance agent to insure your farm and horse-related items. However, our agents say that standard policies might not be meeting your needs as a horse owner or professional horseman.
“Let’s say you purchased a normal homeowner’s policy,” Jackie Starnes explained. “Usually it only covers your property on your premises. If you are at a horse show, you won’t be covered for the theft of your tack or liability if your horse hurts someone or causes an accident. Your equine agent will better understand your lifestyle and work to ensure your coverage protects you on and off the premises.”
It can sometimes boil down to your agent knowing what questions to ask. A good example is your farm owners’ policy. “What you do on your farm plays a big factor in how it will be insured,” said Starnes. “It’s very important to list all of the things you do on your property.”
Tim Folck agrees. “If the agent doesn’t have the experience and knowledge to ask questions about what you’re doing on and off your farm, and the horse owner doesn’t volunteer the information, you can end up with coverage that doesn’t completely protect you,” he said. “We find that local property and casualty agents often don’t know much about the horse industry, so they don’t understand the nuances of horse ownership, including breeding, training, riding lessons, boarding and showing that are different from their usual types of coverage for personal and property liability. Because I’ve been involved in the industry for decades providing specialized insurance as well as sale management and our own showing, breeding and racing program, I get it. I go to great lengths to protect our clientele.”
Equine Mortality: “Life Insurance for Your Horse” Mortality insurance covers the replacement cost in the event of the death of your horse, usually for a one-year term. “It’s really replacement insurance – allowing you to buy another horse and keep going with your plans,” said Jackie Starnes.
All insurers require horse owners to complete a mortality application that documents specific information, including the value of the animal to be insured. The insurance company will want documentation of the purchase price, sometimes including whether the purchase was cash or part of a trade. If you raised the horse, the price becomes a factor of the bloodlines of the sire and dam as well as the insured horse’s show record and that of its siblings and other relatives.
Look for a policy with guaranteed renewal, our experts said. If your horse has a health issue, the policy should, at a minimum, guarantee renewal of your mortality coverage for an additional 12 months after a health event occurs. There are policies available that will guarantee renewal of mortality coverage until your horse turns 16.
Once you get mortality insurance on your horse, it’s important to review your policy each year and update your coverage if you’ve added to the show record or produced successful offspring.
Major Medical: Horse owners are sometimes surprised to find out that major medical insurance cannot be purchased without first buying an equine mortality policy. “Major medical is normally a rider that is placed on the mortality policy,” Starnes noted.
Starnes noted in recent years carriers have raised their major medical coverage limits to the $7,500-$15,000 range. “Major medical is a really good idea if you haul and show, or if you have a horse with a trainer,” Starnes said. “It can save you from having a big out-of-pocket expense.”
Just as matters have become more expensive and sophisticated in human healthcare, so have equine healthcare diagnostics and treatments become more complicated – and not all major medical policies cover the same things. “Major medical can exclude diagnostic procedures and newer treatments such as shock wave, stem cell or hyperbaric oxygen chambers,” Folck said. “Be sure to look closely at what your coverage includes and excludes, and check with your agent before beginning treatment.”
Another major issue with show horses is the so-called ‘maintenance veterinary’ care, Folck said. “Major medical will not respond for routine injections and therapies to improve usefulness,” he said. “However, issues can arise when treatments obscure chronic unsoundness. Major medical is designed for reimbursement, less the deductible, for illness or injury.
“Most major insurance companies over the past few years have been experiencing 100 percent to 300 percent loss ratios on major medical claims, so they are forced to become tougher and scrutinize claims and add higher deductible limitations as well as co-insurance to coverage, so horse owners really need to ask questions and get their current coverage provisions in writing,” Folck said. “Unfortunately, the rapidly rising cost of veterinary medical care is driving this reaction in the market.“
Loss of Use: Although loss of use coverage isn’t something every horse owner needs, it is important to some owners. Essentially, the policy pays when the animal is no longer able to perform – helping the horse owner recoup the investment in that animal.
Folck noted that the loss of use endorsement generally pays 50-70 percent of the mortality limit and the “use” must be specific. “The horse must be permanently incapable of performing the use specified in the policy,” Folck said.
Care, Custody and Control: Another type of insurance that professional horsemen and boarding facilities need is Care, Custody and Control. “If you are caring for someone else’s horse and it becomes sick, hurt or dies, this policy covers the loss,” Starnes said. “This coverage will pay all sums you are legally obligated to pay for damages to non-owned horses up to the limits chosen.”
Stallion Accident, Sickness and Disease (ASD) Coverage: Stallion ASD coverage pays out if a stallion becomes permanently unable to service mares due to an accident, illness or disease. As a general rule of thumb, the maximum coverage takes the purchase price of the stallion, or in the case of a horse raised by the owner, value can be based on show record and bloodlines, plus value of potential breeding fees. After a few years, the agent would look at the stallion’s stud book and use a multiple that might reach 3-4 times the annual book for the insured value.
Folck suggests stallion owners can self-insure by collecting and properly storing frozen semen to use in the event of the loss of a stallion on their own or outside mares. “However, this could reduce the amount the carrier would pay on your ASD claim,” he said.
Farm and Commercial Liability Insurance: If you own a few acres with a house and a barn and a horse or two, you really need more than the basic homeowners policy – you need a properly written farm owners policy that can insure your home, barn, outbuildings or other structures, farm equipment and tack – as well as provide personal liability coverage both on and off the premises.
“For most people, the biggest investment in your life is your house, barns, tack and equipment,” Folck said. “A recent survey by Equine Law & Business found that more than 60 percent of farms have inadequate insurance. So it’s important to really be pro-active and take the time to completely evaluate your assets (all locations) and exposures, then review your coverage with a knowledgeable equine insurance agent.”
Liability on and off a horse farm is a serious concern. “We live in a litigious society, and horses are big animals that can cause harm or property damage to someone else, and not just on the farm,” Folck said. “Even though most states have an equine liability statute, most laws were designed and written to protect equine professionals and businesses, not individual horse owners. So both small and large horse owners still need to protect themselves and be very vigilant.”
A farm owner’s insurance package typically includes their home, household property (contents), farm personal property (equipment, miscellaneous tools, tack) as well as farm barns, outbuildings and other structures. “You want to be sure that your policy includes an endorsement that covers your property on and off the premises and get that in writing,” said Starnes.
Folck suggests scheduling all major tack items ($1000 or more) so you have specific identification in the event of a claim. Western show saddles, for example, can be rather expensive, so retain the bill of sale or an appraisal within three years. “I’ve seen policies with a $10,000 blanket endorsement for tack, which when the owner actually had to replace it all did not nearly cover the loss from theft, fire, etc. You should also request replacement cost on newer equipment.”
Folck also noted that horse owners often underestimate the replacement cost of their dwellings and farm barns. “A responsible agent will conduct a cost estimation to determine the replacement cost of the building,” he said. “Agents that don’t do this are really doing their customers a disservice, because it might cost twice what they have in coverage to actually rebuild their house or barn, especially on structures with advanced building features such as an office or lounge, apartment, bathroom, tack room or wash rack.”
If you train, give lessons or board horses, your insurance coverage can be written on a farm owners or commercial equine liability policy. Even having more than two or three horses might take you into a commercial farm policy pending companies’ underwriting rules even if you don’t operate a horse business, Folck said. “Most people start out with one horse, build a barn, maybe show the horse and keep it with a trainer. But over time they might buy more horses, breed a mare or two, and before they know it they’re selling horses and showing more competitively. Most companies view that as a business pursuit and will exclude all homeowners and farm owners policies unless declared on the application.”
Starnes adds that even with state liability laws, horse businesses often don’t follow the letter of the law to avoid liability. “A lot of times the state liability law requires the horse business to have a contract which they often don’t. Or they don’t have their customers sign a liability release form like they’re required to,” he said. “It’s important to do all of the things the law says are required in your state.”
The bottom line, Folck noted, is to be smart and pro-active about your horse business. “Educate yourself about the levels of coverage that are available to you and ask your agent specific questions. Don’t assume you’re covered – get confirmation in writing. Remember that the right insurance should serve as a safety net for you. It’s all about managing risk.”
Personal Liability Insurance: What if you own a horse but don’t have a farm to keep it at? Or if you are an instructor on a farm but don’t own it? Individual horse owner’s liability or commercial stable liability insurance is a way that you can protect yourself from liability claims when you don’t own the property.
“Legal liability insurance is essential in protecting your investment,” said Folck. “The insurance attorney first must defend you and pick up the legal costs incurred and judgment up to the limits written into the policy. Obviously it still doesn’t protect you from gross negligence, but in today’s litigious society, it can protect you from a life-changing experience if you are held legally liable for property damage or bodily injury to others.”
“Personal liability insurance is very reasonable in cost, and I have many clients who get it. It gives you some additional peace of mind,” said Starnes.
Insuring Your Towing Vehicle and Trailer: Although you can insure ATVs, tractors or other machinery on your farm owners’ policy, you can’t insure vehicles that go on the road. That means you have to purchase automobile/truck, trailer and/or RV insurance.
There are many different types and levels of coverage as well as deductibles. You can even get reduced coverage on vehicles that you use on a limited basis or keep in storage. “You at least want to be insured to meet your state’s liability requirements,” said Folck. However, Starnes adds, “You want to get full coverage on your truck and trailer. You want to make sure you’re covered.”
Folck noted that today’s customized towing vehicles can present an additional challenge to insurance companies. “It can sometimes be difficult to determine the value on these customized towing vehicles, but this is another area where an equine agent has an advantage over a local auto/property/casualty agent. We can go to comparable vehicles in the marketplace to show their value,” he said.
If your truck and/or horse trailer is financed, your lender may require you to carry collision and comprehensive coverage and provide proof of the insurance. “The banks see their trailer loans as similar to mortgage loans, so they have developed similar insurance requirements,” said Folck.
It’s also important to note that if you are hauling horses for others for money, you must purchase commercial all-tow insurance – not just the normal private auto insurance. “If you have private auto insurance, and are in an accident while hauling horses as part of business, you could be in trouble,” Starnes said.
Final Tips: Report changes to your horse’s condition prior to a policy renewal. Failure to notify your insurance company about claims or changes in condition in a timely manner could result in denied coverage.
Bring all of your insurance policies to one equine agent for evaluation and you can often save on premiums as well as consolidate policies and close coverage gaps.
Call your agent or insurance company as soon as you know there is a problem. If you are on your way to the veterinary clinic, call the emergency number on the insurance card and your agent, if possible. Discuss your coverage limits with your agent before diagnostics or treatments begin.
Report all potential claims to the adjuster and/or agent as soon as possible. Be sure to report to your agent if an illness or injury to your horse requires the services of a veterinarian more than once, whether your mortality coverage includes major medical or not. You should also report property damage, theft or bodily injury to your agent as soon as possible.
Take the time to complete and disclose all details on the insurance application. An error or omission will leave you exposed and the insurance will not respond in your time of need.
Keep your coverage current with property replacement costs. The cost to replace and rebuild structures increases almost continually – so the coverage you established a few years ago may not be enough today.
Shop around by checking with knowledgeable, independent equine agents who offer choices with multiple companies to discover the best coverage and service available to you. Remember that the lowest rate may not be your best option.
To reach Tim Folck, call 859-223-6728, ext. 107 or e-mail firstname.lastname@example.org