The first step to insuring your horse is deciding on the amount you should insure them for, this is referred to as the sum insured or value to insure.
To decide on this amount you need to determine your horses Market Value. In the first of our Insurance Insight articles we look at Market Value, what it is, how it is determined and its relationship with the sum insured.
Market value is the price at which the horse would change hands between a willing seller and a willing buyer when all relevant facts are disclosed.
If you are insuring a recently purchased horse, the purchase price would be a true reflection of the horse’s market value at that point in time.
Deciding the market value of a horse that you have owned for a while is more difficult. To help determine this you can look at advertised horses of a similar age, sex, breed, ability and experience, with the assumption that the advertised horse is in good health and would pass a veterinary examination.
Why is market value so important?
To understand the importance of market value in relation to the sum insured you need to understand how insurance works. An insurance policy is an indemnity policy, meaning it is intended to compensate you for your loss at the specific time of loss by putting you back in the same financial position as you would have been before the loss occurred. You should not profit from an insurance policy, the policy does not work on a new for old basis – you will be reimbursed for the actual value at the time of the loss up to the sum insured.
It should be noted that the sum insured and the market value do not need to be the same, however there are some rules that apply.
Horses must not be over insured, with policy holders profiting from the policy. Horses must also not be significantly under insured, as cover benefits such as vet fees, are rated according to the horse’s value, in line with the risk to Underwriters. Under insuring would mean the policy was rated incorrectly and Underwriters would be receiving the incorrect premium for that risk. Claims are settled from the collective ‘pool’ of premiums so if horses are repeatedly under insured the ‘pool’ will not be maintained to meet future claims, and premiums would have to be significantly increased across the board.
The market value of a horse will change over time, factors such as training, competition record, the horse’s health/veterinary history and age all play important roles. As the market value of your horse changes, so should the sum insured, if your horse is competing well, its value will increase and conversely a serious injury or illness will decrease it. You should always reassess your horse’s market value at renewal of your insurance policy and if necessary adjustments to the sum insured can be made mid-term. If you are increasing the sum insured of your horse your Insurer will ask you for a justification of value such as competition results to back up the new value.
In the event of a claim.
If you have an agreed mortality claim then you can expect to receive the sum insured as stated on your certificate insurance as long as this is a true reflection of the horse’s market value. Your policy terms and conditions contain wording specific to this section of cover, again referring to market value in relation to the sum insured. Each insurer’s wording will vary but at KBIS we state that we will pay the market value of the horse, not exceeding the sum insured stated on your certificate. So, as long as you have insured your horse for a realistic value there should be no dispute.
If you have over insured your horse in relation to its true market value then Underwriters will seek a true value from an experienced, independent valuer and you will be offered this sum in settlement. Any premium paid above the settlement figure offered will be refunded once a settlement is agreed. Whilst a good insurance company should be happy to explain to you any areas of cover you are unsure about, ultimately the decision of the sum insured rests with you. All of us who own horses are probably guilty of letting our horse’s emotional value to us impact on their actual value.
Whilst of course to us they are priceless, when it comes to insurance the most important consideration is their market value.
KBIS can provide insurance for horses from 90 days to 30 years of age whether companions, riding club or competition horses. We offer one of the widest choice of vet fee cover options and all of our policies provide 15 months cover as standard across mortality, vet fee and permanent loss of use insurance. You can get a horse insurance quote online or call 0345 230 2323.