What is horse insurance and how does it work?
Within this article, we will try to demystify insurance terms and hopefully help you to decide on the appropriate type and level of insurance for yourself and your horse.
What is Insurance?
The point of a horse insurance policy is to indemnify you in the event of a financial loss. Put more simply, this means that it is intended to compensate you for your loss by putting you back in the same financial position you would have been in before the loss occurred. For example, your horse presents with symptoms suggesting it may have gastric ulcers, you call your vet, have your horse scoped and the ulcers confirmed. You are then given gastroguard to treat your horse. As long as your horse has not previously presented with ulcers before the policy began and you have selected an adequate level of vets fee cover you would be paid out for the cost of the vets fees less your chosen excess. Therefore, putting you back in the same financial position you were in before the symptoms of ulcers occurred – except paying the excess.
It must also be noted here that the purpose of insurance is to cover you for the unexpected or unforeseen circumstances, any problems pre-existing the start date of the insurance policy will not be covered and an exclusion will be put in place. This is because insuring your horse after a problem has occurred, such as lameness is like insuring your car after you have had an accident and expecting your insurer to pay out the costs of that accident. If insurers were to cover pre-existing conditions the potential ‘risk’ to Underwriters would be so great that it would make premiums unrealistically high and not a viable option for horse owners.
Insurance premiums go into a ‘pool’ which is used to pay claims. The ‘pool’ must be maintained to allow claims to continue to be paid. Underwriters set the premiums at what they believe to be an appropriate price to keep the ‘pool’ at the correct level to continue to pay claims. The majority of the claims we pay are for vets fees, these are the most expensive part of the policy as they cost the Underwriters the most amount of money in claims. The premiums that Underwriters set for vets fee insurance is directly related to the cost of veterinary fee claims. In the current environment (with new diagnostic equipment and technology) the cost of veterinary treatment is going up quickly and at a rate well above inflation. This means that insurance premiums for vets fee insurance have to increase at the same level to cover the cost of veterinary fee claims.
What Should I cover?
There are many different cover options that you can include on your policy, so it is worth understanding them as some may be more important for you and your horse than others.
This covers you for the death of your horse, through accident, sickness or disease. It must be noted that if your horse does not die of natural causes and requires euthanasia, the BEVA guidelines must be met for it to be a valid mortality claim (i.e. you receive payment from your insurers for your horse’s mortality). Put simply, you must have no other option but euthanasia, if you choose to euthanise your horse rather than treat the problem then your horse will not meet the guidelines and your claim will not be paid. More information about Mortality Insurance can be read here. A post-mortem must be carried out to determine the cause of death, the cost of this is the policyholder’s responsibility.
You can buy mortality only policies as well as limit the cover to accidental external injuries only. Other options of cover can also be included and most policies with veterinary fee cover will require you to insure for mortality cover as well.
Deciding on the value to insure your horse for can be difficult, you can read our article about how to determine your horse’s market value and its relation to the sum insured for more information.
Veterinary Fee Cover
Veterinary fee insurance is the most popular cover and usually the reason why people take out horse insurance, it is also the cover that varies the most between insurers so it is important to check the options available carefully.
Choosing the level of veterinary fee cover you want to take out is a very personal decision and will be affected by your view on risk, previous experience of veterinary treatment and the amount of money you wish to spend on your insurance policy.
At KBIS we offer one of the widest range of vet fee cover options, varying in excess, incident limit and additional cover benefits, such as complimentary treatment and hospitalisation. This allows our customers to pick and choose as much as possible.
The first decision is your incident limit, this is the total amount you are able to claim up to per incident, you will find that these generally range from £3,000 to £6,000. A higher incident limit will increase your premium but when opting for a lower level, in the event of a serious injury or illness requiring expensive diagnostics or ongoing treatment, you will need to be prepared to cover some of the costs yourself after your limit has been exceeded.
Next, consider the excess that you are comfortable with. The excess is the initial amount of each claim you will pay, for example, the first £175, £275, £350 or £500 of diagnostics and treatment. By opting for a higher excess your insurance premium will be reduced but in the event of a claim, you will need to pay out that higher excess. Co-insurance should also be a consideration for people looking to reduce their premium, this is where the client would pay a certain percentage of the vets fees after the excess has been paid, this is commonly set at 75% co-insurance, meaning that the client pays 25% of the vets fees after the excess and the insurance company pay 75%.