When it comes to equine-related insurance, misconceptions have plagued the horse industry for years. Most people do not understand what they bought, what they need, whether they have the coverage they think they do, and how to keep their coverage intact. Insurance is an important and expensive purchase. Part One of this series explored some common misconceptions regarding equine-related insurance. Part Two, the conclusion, addresses misconceptions and provides practical suggestions for avoiding misunderstandings and disputes.
More of the Common Misunderstandings Regarding Equine-Related Insurance:
“My horse got sick and had to be put down. Now I can call the insurance company that issued a mortality insurance policy on my horse.”
This person is, quite possibly, making a very costly mistake. In fact, most mortality insurance policies require “immediate” or “prompt” notice of an insured horse’s injury, lameness or illness. Those who fail to comply with this duty risk losing their mortality insurance coverage. Since notice requirements can vary from company to company, make sure to read your insurance policy carefully and make reasonable efforts to comply.
“When the time comes to notify the company that issued my mortality insurance policy, I’ll just call my insurance agent.”
Giving notice to the wrong person may be treated the same as giving no notice at all. As you check your insurance policy for the name and phone number of the person or company designated to receive notice, you will be surprised to learn that the agent who sold you the insurance is probably not the right one to call.
If your horse’s health should take a turn for the worse, make sure that you have quick access to your insurance company and policy number and the phone number of the right person. Keep this information in many different places, such as on your horse’s stall, barn office, tack trunk, wallet, truck, trailer, and car.
“My horse went lame after I bought a mortality insurance policy, but I can renew the policy next year without a veterinary certificate.”
As a condition to the annual renewal of a mortality insurance policy, many insurance companies require an updated veterinary certification. This tells the company that the horse remains in good health. Other companies may not require the certification. If a company’s renewal requirements are important to you, evaluate them before buying the insurance. Also, it is important to keep in mind that your insurance policy will likely require you to notify the insurance company of your horse’s lameness condition.
“If I bring a valid claim after my horse dies, the mortality insurance company will pay me the full policy limits.”
Depending on the type of policy you bought, an insurance company could be justified in paying you less than the policy’s face value. This can, and sometimes does, happen if you bought an “actual cash value” mortality insurance policy. Policies of this type are designed to pay you the fair market value of your horse around the time of its death. By comparison, “agreed value” policies provide coverage for a specifically agreed-upon amount.
“I can buy mortality insurance in any amount—even if it exceeds my horse’s real value.”
Mortality insurance policies are meant to insure the amount your horse would likely command in today’s market. Before issuing this insurance, and before agreeing to increase the policy limits, the company will seek facts and information about the horse you want to insure, such as its age, use, health, condition, and show or race record. The company will rely on this information in determining whether to insure your horse for the amount you requested.
“My horse is sore, but I can still recover 100% of his value under a loss of use policy.”
Unlikely. Loss of use policies are really not designed to pay 100% of the value of a horse simply because the horse is disabled. Unlike mortality insurance, which pays a sum if your horse dies or is stolen, loss of use insurance applies if your horse is alive but suffers from a physical condition that renders it permanently unable to perform the specific function for which it was insured (such as showing or racing).
Before they will issue payment under a loss of use policy, insurance companies require proof that the horse is “totally and permanently” unable to fulfill its intended use. Under this standard, a temporary soreness condition will not make your horse a candidate for payment under a loss of use policy. Insurance companies can also require opinions from two veterinarians just to make sure. Also, if you qualify for payment under a loss of use policy, your policy might require you to surrender your horse to the insurance company.
“My major medical and surgical insurance will pay all expenses involved in keeping my horse alive.”
Major medical and surgical insurance is extra insurance coverage that many companies offer along with a mortality insurance policy. For the extra amount you pay, you could be covered for the expenses of surgery and also, up to a certain amount, diagnostic tests, non-surgical illnesses, and certain other medical care that your horse receives from a licensed veterinarian. Major medical insurance covers expenses reasonably associated with serious, costly care of a horse — such as colic surgery — but not unrelated costs, such as Coggins Tests.
Major medical and surgical insurance policies only pay up to policy limits. A common policy limit for this type of insurance is $5,000 but some policies may pay $7,500. If your veterinary expenses exceed the limit, you will be responsible for paying the excess on your own.
Avoiding Problems in the Future
Read your insurance policy carefully. A policy of insurance is a contract between you and the insurance company. The policy describes the coverage the company will provide, as well as the “exclusions” in which certain perils, persons, activities, or circumstances will not be covered. The policy will also specify certain conditions or duties with which you are expected to comply. Years ago, insurance policies were impossible to understand, but policies have been re-worded in recent years to prevent this problem.
Turn to people “in the know” for advice. Your friends can give useful advice on effective split boots and saddle pads. When in comes to insurance policies, however, stick to the advice of a reputable insurance agent who understands your needs and knows equine-related insurance well. Insurance policies are detailed documents and their provisions can differ from company to company.
Work effectively with your insurance agent. Don’t hesitate to ask your insurance agent to explain your policy to you. Should the agent insist that your insurance covers something important, but the agent cannot find the exact policy language to support it, ask him or her to confirm the explanation in writing (preferably on his or her professional stationery).
This article does not constitute legal advice. When questions arise based on specific situations, contact a knowledgeable attorney.
Julie I. Fershtman, Esq.
About the Author
Foster Swift Collins & Smith PC
One Northwestern Plaza
28411 Northwestern Hwy., Ste. 500
Southfield, Michigan 48034
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