Bought on the Cheap – Price Paid vs Insurable Value in Equine Mortality InsuranceApril 22, 2015
Justifying the insurable value of your new (perhaps underpriced) horse for Equine Mortality Insurance.
“I paid $10,000, but she’s worth $15,000”, said nearly every horse owner ever, (or at least a phrase very similar). While you may be the recipient of a good deal in the marketplace, this may complicate matters if, and when, you attempt to buy a mortality policy on your newly acquired steed. Insurance companies consider what your horse is worth in terms of insurable interest or insurable value while you may have plans to breed a new mare that would influence your program in intangible ways. Although the purchase price was $10,000 in our previous example, the potential of that mare’s financial impact could be much greater.
An important fact to bear in mind is that companies providing Equine Mortality Insurance don’t factor truly hypothetical situations of income potential and/or sentimental value. When you pay for your new horse, the insurance company considers that insurable value of that horse on that day and your payment amount becomes your own insurable interest in the animal. Presumably, (and perhaps overly simplistic), you could purchase another horse of similar breeding, training and quality for the same price you paid for the horse you lost. Justifying an insurable value which is over purchase price on the day of purchase is nearly impossible. But, in the days, months and years after, what are your options?
How to Justify a Higher Value for Your Insured Equine Post-Purchase
While there are multiple ways to justify a higher value for your insured equine, most of them take a bit of time to substantiate.
Enter Competitions and Report Winnings
The first, and easiest way, is to put your horse into competition and report its winnings to the insurance carrier. When the horse has post-purchase show winnings to its credit you have now added to its “resume” and additional value can be justified over purchase price; relative to the level of competition and the extent of winnings.
Invest in Training and Report Progress
Another way to successfully justify and substantiate value on a newly acquired horse is to put the animal into training. Keep track of your training costs; these can be used to show that your horse has additional insurable value over purchase price. Another example would be your horse progressing from Level 1 Dressage to Level 2. When this occurs, its insurable value has increased. Purchasing a replacement horse of similar breeding and/or conformational quality with Level 2 dressage training versus one with Level 1 training would presumably cost more money. These additional training levels can be used as value justification.
Track and Report Breeding Record
Lastly, a horse’s breeding record over time, whether stallion or mare, can influence the insurable value of the animal. A stallion purchased for $10,000 with a breeding book of 25 mares, at $1,000 per breeding, could easily justify a value above and beyond the $10,000 purchase price. Likewise, a mare with an average offspring sale of $20,000 could justify a higher insurable value than $10,000. Additionally, the performance record of offspring can be used as a value justification for horses of either sex. Insurance carriers will also allow insureds to use the sales price or performance records of full and half siblings to justify the value of foals that are bred and raised by the insured.
Work with an Agent Experienced in Equine Industry
An agent with experience in the equine industry can be a valuable asset when attempting to substantiate a value increase of a horse over the purchase price. Uncovering and revealing all of the areas in which you have added value to your animal are imperative in order to protect yourself from an underinsured loss.
Because the development of a horse is both a time and monetary commitment, insuring for the purchase price alone is, in many cases, under insuring your loss exposure. Replacing your financial loss is usually the point of purchasing an insurance policy and completing a value justification is an excellent way to determine what amount of actual financial loss you may face in the unfortunate event your horse succumbs to accident, illness, or disease.
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Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.