Value Justification
If you are considering purchasing a horse insurance policy (or even working on renewing your horse’s policy) but aren’t sure how to determine your horse’s value for the Mortality (life) insurance coverage, you are not alone. The process can seem confusing, and while there isn’t necessarily an exact formula, hopefully the following will help.
Recently Purchased Horse
If your horse is a new or very recent purchase, the amount you paid will be the maximum insured value allowed by underwriting. Sometimes clients will ask to insure for a higher amount citing an especially good deal on the horse, which could very well be the case, but this will likely not be taken into consideration. The reason? The purpose of insurance is to indemnify you for your loss, which is to put you back into the same financial position you were in at the time of loss.
So, if last week or last month you paid $5,000 for your new horse, that would be the value underwriting will approve on the horse insurance policy. The application that you complete and submit to your agent will ask for the purchase price that you paid. Make sure to be accurate in providing that information on the application so there are no issues if you find yourself in the unfortunate position of having to file a claim on your mortality policy. Also, be sure to keep your proof of purchase on file – the sales agreement, receipt of payment, proof of a cashed check or wire transfer, as these will be important to have at the time of a claim as well.
Transportation and Agent/Broker Fees
For a new purchase, if the horse is being imported, underwriting will consider certain fees spent for transporting the horse to be added to the purchase price in determining the insured value. In addition, if you pay an agent or broker to help you find your new horse, some underwriters will consider those fees as well. IMPORTANT: You need to make sure you separate these amounts on the application that you submit so that underwriting knows the purchase price you paid from any additional fees so they can determine what value they deem appropriate.
Performance Horse Owned for Several Months or Longer
When it comes to insuring English and Western performance horses, such as dressage, hunter/jumper, eventing, driving, barrel racing, cutting, reining, roping, equitation, and show horses (to name just a few) that you have owned for a while, the basic formula used by underwriting is:
Purchase Price You Paid + Competition Record (including winnings, if applicable) + Money Spent on Training.
The Nitty Gritty
In some sports prize money is not offered at many shows, so underwriters will take into consideration the division/level the horse is competing at, as well as their final scores and placings. For sports where prize money is more common even at the amateur levels, which includes many Western disciplines, underwriting will also look at the amount of prize money (and even prizes) won.
So, as a horse moves up the levels and/or competes successfully over time, underwriters will be willing to consider an insured value beyond the purchase price that you paid.
In addition, if you are paying a trainer to work with your horse, underwriting will review that investment. Keep in mind that this includes the fee paid for training only, and does not include the cost for board or other services from your trainer or others. If you are a professional horse trainer working with your own horses, you can provide the details on the fee you charge clients, and that will be considered.
NOTE: The amount invested in training is not a dollar-for-dollar exchange when it comes to the horse’s value on an equine mortality policy. For example, if you have paid $500 per month for training over a 12-month period for a total of $6,000, underwriting is not going to tack an additional $6,000 on to your horse’s insured value. Instead, generally they will consider a percentage of the amount you have paid.
In addition, the money you spend on the day-to-day costs of horse ownership, from feed, farrier, vet, tack and equipment, hauling, show fees, etc. does not come into play when the underwriters consider a horse’s value. Also, if you have spent significant money on veterinary care due to illness, injury, lameness, etc., those fees will not be considered when addressing your horse’s value.
Active Horses Without a Competition Record or Professional Training
Your horse does not need a formal competition record or to be in paid training in order to be worth a certain value. For example, fox hunters can be worth a significant amount, but will not have a competition record. Underwriters will take into consideration the amount of time the horse has been hunting, whether the horse goes mainly first or second flight, or hill topping, and any other details you can provide.
Working horses can be very value to a working cattle operation, as can seasoned horses used to help young horses learn the ropes, or to lead trail rides. These are just some examples to point out that your horse does not need to be actively competing to be insured for a value beyond purchase price if you have owned him/her for a while.
Rescue or Gifted Horses
It is not uncommon for a client to come to us with a horse that was gifted to them for any variety of reasons, or a horse that they have adopted from a local rescue. In those cases, underwriting will consider the amount paid to the rescue, or with a gift, they will apply a minimal value, such as $500 – $1,000. If you are most worried about Medical/Surgical types of coverage, we work with one company that will still offer those coverages on minimally valued horse, providing the horse otherwise meets underwriting criteria.
Homebred Horses
If you have a recently born foal that you have owned from birth, underwriting will typically consider an insured value of three to five times the sire’s stud fee that you paid. As the foal grows up, value increases could be considered based on money spent on training, show results if the horse is shown in-hand, and/or designations earned through breed registrations, such as various Warmblood testings.
Breeding Stock
If you own a broodmare, the sale prices and performance records of her foals can factor into her potential insured value. For a breeding stallion, the stallion’s stud fee, number of foals produced, and the sale prices and performance records of his foals can be taken into consideration.
Mid-Policy Value Changes
Most companies will consider making changes to the horse’s value during the policy term. You would need to provide the substantiation as discussed above to your agent, and they would then submit it to underwriting for review. The underwriter will determine if they will allow the value increase you have requested, or they may approve a value increase, but not to the amount you have asked for.
Renewing a Current Policy
Some insurance companies will require that you provide value substantiation each year, even if you are not intending to make any changes to the insured value on your policy. Basically, they want to make sure that the horse is still competing at least a bit (for competition horses), in some sort of work for pleasure horses, or being used as a broodmare or standing at stud for breeding stock.
You must complete the applicable portions of the form that is sent with your renewal paperwork, even if the horse is used only for pleasure, and therefore has no competition record or money spent on training. There should be a Comments or blank section on the form where you can give details as to what you and your horse have been up to over the prior 12 months, such as trail riding, schooling in a certain discipline, or taking some time off (if so, you will want to give an explanation as to why the horse is not being ridden). If your broodmare or breeding stallion is not being used as such, you will need to provide details as to why that is. If there is no space on the form for any of this information, provide it on a separate page or email.
Occasionally clients will send back a blank form or a form, or nothing at all, and expect that the underwriters will automatically increase the horse’s insured value. This will not happen. Best case scenario they will allow the horse to continue to be insured at the current value. Worst case they will refuse to renew the policy at all without at least some information from you.
Outliers
Your horse might not fit into any of the categories above, or have been purchased under unique circumstances. Call the office and a representative will be happy to go over the details with you.
Paperwork
Your agent should have a form for you to complete in order to provide value substantiation. It will have sections for performance record, money spent on training, and details on the number of and values of foals produced or sired.
For competition horses, if you have access to an official competition record with a breed, sport, or national association, you can provide that to underwriting as well.
More Information
For more information on equine insurance coverages, please check out our other Blog entries, and visit our PROTECT YOUR HORSE and FAQ pages. To see about a horse insurance quote, go to the QUOTE page or contact our office at 888-687-8555 or info@BroadstoneEquine.com with any questions.
**These blogs are for basic information purposes only, and do not constitute advice from Broadstone Equine Insurance Agency, a division of Marshall and Sterling Insurance, or its affiliates. Contact our office directly at 888-687-8555 or info@BroadstoneEquine.com to contact an agent for complete and current information regarding all coverages.
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