Insurance Concerns
As an owner, you will need to decide whether or not to insure your
equine investments and activities. Insurance can be purchased or an
owner can choose to self-insure. We recommend you consult with an
equine insurance professional before deciding whether and how to
insure your equine activity.
As an owner, you should be familiar with several types of insurance.
Types of Insurance
Full Mortality
This policy insures the horse in the event of death, not against
injury. The premium varies with the horse's age, use (racing or
breeding) and with the insurable value of the horse. For a policy
covering a horse of racing age, premium rates range from 4.5% to
6.5% of the horse's value for one year's coverage. In most
instances, coverage is subject to a veterinary examination.
Mortality insurance covers your horse in the event it is lost,
killed or has to be destroyed for any reason, such as in transport,
as a result of poisoning or kidnapping, or from severe injury or
disease. However, any mortality that is inexplicable or could
conceivably be "malicious or willful injury caused by the insured"
-- i.e., a slaughter for economic motives -- will be heavily
investigated, and the claim likely be denied.
Post-mortems are required in mortality claims. They must be ordered
by you in a timely fashion and performed by a private vet at your
expense. Also, "necessary destruction," whether on the track or in
the barn, is not a matter of discretion up to you or your trainer:
You must have two licensed racing veterinarians vouch -- either
before or after the horse's destruction -- that your animal could
not survive its injuries, or was in a state of suffering that could
not be relieved. (You will need this proof not only for your
insurance carrier, but also for the official veterinarian at the
track, who will require a full inquiry into the death of any animal
in his purview, whether it's an exercise pony or a million-dollar
stakes horse.)
No matter what you consider the value of your horse and no matter
what value the horse is insured for, the insurance company will
assess the "market value" of your horse at the time of its death and
may adjust the reimbursement DOWN accordingly. The insurance
company, however, will NOT adjust reimbursement up if you have been
paying the premium on a lower dollar amount than your horse was
worth.
For example, you have a $50,000 mortality insurance policy on your
racehorse. As racing luck would have it, he has not been competitive
at higher levels and has been dropped into a $25,000 claiming race.
If the horse dies as a result of the race, you will only be
reimbursed $25,000, the market value of the horse at the time of
death.
FLT
FLT (Fire, Lightning and/or Transportation) is a more limited policy
of insurance than full mortality. It provides coverage only in the
event of death due to fire, lightning and/or transportation
accidents. It does not cover death due to sickness or disease and is
therefore less costly than full mortality insurance.
Claiming Insurance
If you already have a horse (or horses) at that track which are
covered by an annual policy, ask your broker whether or not your
policy extends to other horses you may suddenly acquire. If not, you
may want to inquire about claiming insurance before you enter a
claim on a new horse. You may not be able to get it because claiming
insurance is the loss-leader in equine insurance. It is extended
only as an accommodation to owners with large stables already
insured, or to trainers with good histories and good relationships
with the insurance carriers. If you can get it, claiming insurance
will generally cost 0.85% to 1% of the claiming price of the horse.
General Liability
A general liability policy protects a horse owner against liability
arising form any loss, damage, accident or injury to persons or
property caused by their horse. This type of coverage is almost
never included within a standard homeowner's policy. Given that your
stable constitutes a business activity, you will generally need to
obtain a separate policy covering this commercial activity. General
liability insurance is bought in increments (up to $2 or $3
million), with premiums based on the number of horses being insured
at one time.
Workmen's Compensation
In some states, including Maryland, New Jersey and New York, the
owner of a racehorse is considered the employer or the co-employer,
along with the trainer, of the jockey. In those states, an owner is
required to purchase workmen's compensation insurance. Regardless of
the state in which you race, make certain your trainer has workmen's
compensation coverage, and that coverage under that policy extends
to you for any injuries to his/her employees. Keep in mind, rates
and requirements vary by state, and coverage does not transfer from
state to state.
