As an owner, you will need to decide whether or not to insure your equine investments and activities. Insurance can be purchased or an owner can choose to self-insure. We recommend you consult with an equine insurance professional before deciding whether and how to insure your equine activity.
As an owner, you should be familiar with several types of insurance.
Types of Insurance
This policy insures the horse in the event of death, not against injury. The premium varies with the horse's age, use (racing or breeding) and with the insurable value of the horse. For a policy covering a horse of racing age, premium rates range from 4.5% to 6.5% of the horse's value for one year's coverage. In most instances, coverage is subject to a veterinary examination.
Mortality insurance covers your horse in the event it is lost, killed or has to be destroyed for any reason, such as in transport, as a result of poisoning or kidnapping, or from severe injury or disease. However, any mortality that is inexplicable or could conceivably be "malicious or willful injury caused by the insured" -- i.e., a slaughter for economic motives -- will be heavily investigated, and the claim likely be denied.
Post-mortems are required in mortality claims. They must be ordered by you in a timely fashion and performed by a private vet at your expense. Also, "necessary destruction," whether on the track or in the barn, is not a matter of discretion up to you or your trainer: You must have two licensed racing veterinarians vouch -- either before or after the horse's destruction -- that your animal could not survive its injuries, or was in a state of suffering that could not be relieved. (You will need this proof not only for your insurance carrier, but also for the official veterinarian at the track, who will require a full inquiry into the death of any animal in his purview, whether it's an exercise pony or a million-dollar stakes horse.)
No matter what you consider the value of your horse and no matter what value the horse is insured for, the insurance company will assess the "market value" of your horse at the time of its death and may adjust the reimbursement DOWN accordingly. The insurance company, however, will NOT adjust reimbursement up if you have been paying the premium on a lower dollar amount than your horse was worth.
For example, you have a $50,000 mortality insurance policy on your racehorse. As racing luck would have it, he has not been competitive at higher levels and has been dropped into a $25,000 claiming race. If the horse dies as a result of the race, you will only be reimbursed $25,000, the market value of the horse at the time of death.
FLT (Fire, Lightning and/or Transportation) is a more limited policy of insurance than full mortality. It provides coverage only in the event of death due to fire, lightning and/or transportation accidents. It does not cover death due to sickness or disease and is therefore less costly than full mortality insurance.
If you already have a horse (or horses) at that track which are covered by an annual policy, ask your broker whether or not your policy extends to other horses you may suddenly acquire. If not, you may want to inquire about claiming insurance before you enter a claim on a new horse. You may not be able to get it because claiming insurance is the loss-leader in equine insurance. It is extended only as an accommodation to owners with large stables already insured, or to trainers with good histories and good relationships with the insurance carriers. If you can get it, claiming insurance will generally cost 0.85% to 1% of the claiming price of the horse.
A general liability policy protects a horse owner against liability arising form any loss, damage, accident or injury to persons or property caused by their horse. This type of coverage is almost never included within a standard homeowner's policy. Given that your stable constitutes a business activity, you will generally need to obtain a separate policy covering this commercial activity. General liability insurance is bought in increments (up to $2 or $3 million), with premiums based on the number of horses being insured at one time.
In some states, including Maryland, New Jersey and New York, the owner of a racehorse is considered the employer or the co-employer, along with the trainer, of the jockey. In those states, an owner is required to purchase workmen's compensation insurance. Regardless of the state in which you race, make certain your trainer has workmen's compensation coverage, and that coverage under that policy extends to you for any injuries to his/her employees. Keep in mind, rates and requirements vary by state, and coverage does not transfer from state to state.