Ansc 440: Horse Management *************************************************************************** Lecture 5: Insurance *************************************************************************** Description: Continuing with the topic of business/financial management, this lecture discusses this issue of insurance. To decrease the risk of a "financial catastrophe" ranging from the death of a "highly invested in" horse, the loss of all property due to a fire, to a lawsuit by a lesson student, the investment in insurance is recommended. There are insurance polices specifically for horses in addition to other policies that are set up to protect "other property" such as buildings and equipment. Lecture Outline: I. Mortality Insurance A. "all risks" mortality policy B. 2 primary types of policies for insuring horse's life 1. "All Risks Mortality" (ARM) or "Full Mortality" 2. Specified peril coverage; Named peril; FLT (Fire, Lightning, Transportation - accidents- (3 perils normally insured against)) C. Premium rates 1. Full mortality 2. Specified Peril D. Humane destruction E. Amount of coverage II. Other types of horse insurance polices A. Loss of Use coverage B. Stallion Infertility coverage C. Breeding mares infertility coverage D. Major medical or surgical insurance II. General insurance (not horses) A. Property B. Liability C. Workers compensation D. Care, Custody, and Control Objectives: 1. Name and differentiate the two primary types of mortality insurance for horses 2. Explain how a horse owner would decide how much insurance coverage they should obtain 3. Explain the difference in property insurance that a "pleasure" horse owner would have to obtain vs. a commercial equine business 4. The equine liability legislation mandates certain responsibilities of the horse owner in order to receive protection under this law. Describe those responsibilities. INSURANCE FOR HORSE OWNERS (HIH 1340-1) *insurance that deals directly with horse owners I. Mortality Insurance A. "all risks" mortality policy = similar to life insurance B. 2 primary types of policies for insuring horse's life 1. "All Risks Mortality" (ARM) or "Full Mortality" a. broader b. more expensive c. coverage for almost all causes of death (incl. sickness, injury) d. not covered: -death by negligence/neglect -death by malicious/willful injuries -death when horse used for another purpose other than that declared by the owner -death by drugs/inoculation other than vet/prescribed 2. Specified peril coverage; Named peril; FLT (Fire, Lightning, Transportation - accidents- (3 perils normally insured against)) a. insures against death resulting from one cause (peril) specified in policy b. other types of perils insured against -windstorm -hail -smoke -explosion -riot -earthquake -flood c. does not cover death due to sickness, disease, injuries or "old age" d. "catastrophic event" policy e. lower cost -typical premium rate (pleasure riding, on C. Premium rates 1. Full mortality a. depends primarily on age (premiums increase with age) -old age 13 or 15 b. young broodmare/pleasure riding horse = 4% $10,000 horse $400/yr c. thoroughbred race horse = 6% $600/yr d. volume discounts with large number of horses e. ex. of deductible request: of $50,000 if have $2,000,000 -much lower premium rates (as low as 1.5%) 2. Specified Peril a. a. typical pleasure riding/ breeding horse = .6% b. horse worth $10,000 = $60/yr D. Humane destruction 1. injury illness not expected to recover; humane destruction provision to prevent undue suffering 2. honor the claim if approved by owners vet and insurance company E. Amount of coverage 1. sufficient amt so could use claim proceed to purchase another horse equivalent to one lost 2. insurance companies assume horse is worth what it costs a. horses may increase in value b. independent appraisal II. Other types of horse insurance polices A. Loss of Use coverage 1. insurance for a "career ending" injury 2. still "pasture sound" 3. typically 60% of horse's value would be paid B. Stallion Infertility coverage 1. first season "congenital" infertility coverage (coverage for serving 1st book of mares) 2. Total and permanent infertility caused by accident, sickness or disease (ASD) (form of "loss of use" coverage) C. Breeding mares infertility coverage 1. coverage if stallions offered on a "live foal" or "no guarantee" basis; mares need coverage 2. barrenness insurance: pays if mare fails to deliver a live foal 3. Prospective foal insurance: coverage usually starts when mare has reached 42nd day of gestation - protects against mare aborting or delivering a dead or defective foal D. Major medical or surgical insurance 1. reimburses vet fees for major surgery/illness/disease 2. not pre-existing conditions I II. General insurance (not horses) A. Property 1. for pleasure horse owners, tack/related equip. covered under personal property section of homeowners policy 2. commercial equine business a. require specific coverage under farm owner's policies or special tack policies b. "all risk" coverage -all buildings, vehicles, tack and farm equip. all under one policy B. Liability 1. will protect against lawsuits from injuries/property damage 2. will provide for legal defense 3. premiums based on payroll of horse operation or rated based on # of horses owned - policy w/$1,000,000 limit = $600/yr 4. should purchase highest amount affordable 5. Equine liability legislation a. new legislation effective July 1, 1995 b. hopes to slow down high costs of liability insurance c. law mandates certain responsibilities of horse owner in order to receive protection under this law: -need to post signs of inherent danger -warning notice also in every written contract entered -tack in good repair/suitable for purpose -evaluate participants ability -survey land/facilities = correct dangerous situations/post signs -no reckless behavior/disregard safety -do not intentional injure participant ***does not eliminate need for liability insurance meant to stop high costs of liability insurance meant to stop frivolous law suits of the past d. can order signs C. Workers compensation 1. some states require/Agr. risks exempt in some states therefore not required 2. provides medical disability (loss of income) and death benefits to injured workers 3. theory governing coverage: worker "gives up the right to sue their employer for negligence in return for maintenance of this insurance" D. Care, Custody, and Control - provides protection for the farm owner for occurrences which cause injury or death to a non-owned horse in the farm owner's control