Q6) What are the different types of coverage?
A. Loss of Use Insurance
Loss-of-Use insurance is, in effect, a disability policy for a horse. This is
generally quite expensive, whether it is purchased as an extension of the
mortality policy or as separate coverage, and is therefore most appropriate in
those cases where the horse earns income when performing its stated use, and
where the horse's owner would suffer loss of income if the horse became unusable
for its purpose as described in the policy.
This insurance will pay if the horse sustains an illness or injury that makes
it unfit to perform the use that was stated when the policy was acquired. This
applies when the horse is injured and effectively disabled, but can be saved,
and does not qualify for humane destruction under the mortality policy. The
typical payout would be approximately 60% of the horse's worth.
An example of loss-of-use would be a horse whose owner insures it as a
jumper, and who may then collect payment if the horse sustains an injury that
makes it unable to gallop and jump. The horse may be retired to pasture, or
perhaps recover enough to be hacked out. The same would be true of a successful
racehorse, if an accident ends the horse's racing career.
B. Breeding Stallion Infertility Insurance
This covers the loss of the stallion's ability to breed because of
infertility. Such policies are commonly used when a new, young stallion is
purchased by a breeding farm. If this new, unproven stallion is not fertile, the
farm would have purchased a worthless animal, and would therefore suffer a great
financial loss without such coverage. Although these policies are extremely
complicated, it is generally safe to say that under the normal terms of such a
policy, the stallion will be considered "fertile" during his first
breeding season if, no later than 45 days following the last breeding, sixty
percent of the mares bred are determined (upon examination conducted by a
licensed veterinarian) to be in foal.
For a proven breeding stallion, there is also a policy called an AS&D
stallion infertility option. This means that the insurance company pays if the
stallion becomes totally and permanently infertile or impotent because of
accident, sickness, or disease.
C. In-Foal Insurance/Broodmare Barrenness Insurance
"In-Foal" or "Unborn Foal" insurance is becoming
steadily more popular within the racing/breeding industry, as more and more
stallion seasons are being sold as "no guarantee." Such insurance was
not necessary when seasons were sold on a "live foal" basis, but now
mare owners need to protect themselves financially against the possibility of
the mare (a) not being impregnated, or (b) slipping the foal. Without a
guarantee of a live foal or a free return, the mare owner must pay the fee
whether or not the mare produces a foal from the breeding.
In-Foal insurance generally covers the foal to a date thirty days after
birth; for an increased premium, the coverage will continue throughout the first
year of life. The company pays if the foal is aborted because of natural causes.
D. Workman's Compensation Insurance
If a stable or other horse operation has employees, it is likely to be
required to carry Workman's Compensation Insurance. All racing operations must
carry such coverage, although other horse-related operations may be classified
as "agricultural" and are therefore exempt from the requirement.
For those operations where this insurance is not mandatory, it is still an
excellent idea to carry it for protection in case an employee is injured on the
job. Many horse farms, in fact, find that such coverage is attractive to
potential employees. Actual requirements vary by state, so business owners
should check with their state's Department of Labor for more specific
E. Extended Perils Insurance
"Extended Perils," "Limited Perils," or "Restricted
Perils" insurance is a form of Mortality insurance that costs less and
offers less comprehensive coverage. Although the price may be tempting, horse
owners should be aware that this form of coverage only pays if the horse's death
is accidental and due to natural planet causes, not to illness. This form of
insurance is popular among horse-owners with one or two pleasure horses, as it
applies to horses of any age, and does not require a veterinary examination. The
insurance would pay if the horse drowned or were struck by lightning, for
example, but not if it died of colic.