When it comes to Equine Insurance, understanding the nuances of different coverage options is essential to make informed decisions. In the leisure horse market, it is common for the insurance to be based on a sum insured or market value basis, whichever is lower. Therefore, it is important to understand the difference between these two methods of valuation. In this article, we’ll delve into the difference between the sum insured and market value in horse insurance, helping you choose the right coverage for your equine companion.
Difference Between the Sum insured and the Market Value in Horse Insurance:
Sum Insured:
This is the monetary amount that you have advised the Insurance Company as representing the value of your horse. This figure will therefore appear on your schedule of insurance and is the monetary amount that the premium is calculated on. If you have a claim under the Death or 100% Permanent Incapacity sections, then this is the amount that any claim settlement will be based upon. A good starting point is to initially insure your horse for its purchase price, as this reflects your initial outlay. Changes in valuation from the purchase price are dealt with below.
Market Value:
Market value refers to the current price that your horse could fetch in the open market. Unlike the sum insured, the market value of your horse may fluctuate over time due to factors such as changes in demand, horse health, performance, and the equine market’s general conditions. In the event of a claim, the insurer will assess the horse’s current market value and provide compensation accordingly.
Justifying the Value of Your Horse
When considering Horse Insurance the decision on the sum insured is an important one. Here are some factors to consider when making your choice:
- If you have just purchased your horse, the current market value aligns with what you have just paid, so this is a justifiable sum insured.
- Young Horses: Obviously buying young horses is an economic way of purchasing a horse but there are resultant training costs, which increase the value. As your youngster progresses in their training, such as being backed, shown or competing, it is possible to ask for a higher sum insured. You will usually be asked to provide a written justification for this increase such as detailing the training you have undertaken. You might have an independent valuation of your young horse that can be considered. Be aware that this will increase your premium slightly and certain value increases may require a vetting.
- Competition Horses: Obviously if you and your horse have a good competition record, you might want to increase the value to reflect the purchase price of similar level horses i.e. the market value. Again, this is possible upon justification by submitting proof of a competition record and will result in an additional premium being charged. It is possible that vetting will also be required.
- Health issues and injuries and long-term lameness: If your horse suffers from a significant injury, it is worth reviewing their value at the renewal of your policy. If you ensure that this value reflects a reduction due to the injury etc., you will potentially pay a lower premium and the market value is less likely to be queried in the event of a claim.
- Older horses: As your horse passes into the veteran era which for insurance tends to be about 16 years of age, it is worth reviewing the sum insured to reflect their actual market value. These days with modern care and veterinary techniques, some horses are able to continue their active working lives through their teens and into their twenties. If you have a claim, you may well have to justify the sum insured. It is easier to review this at each renewal, rather than trying to do this at the emotionally difficult time of making a claim.
- Under Insurance: We are often asked if we can insure for less than the value. Whilst we appreciate that in some cases this is a way of keeping premiums down, it also could affect any payout. You will never receive more than the sum insured and be aware that if you underinsure, some policies will penalise you for this and only pay a proportion of the sum insured compared to the true value. You need to check with your Insurer whether or not they are prepared to let you do this, as there may be conditions within the policy that reduce the amount paid out if you underinsure.
- Over Insurance: If you insure your horse for more than the purchase price or market value, you will pay the premium on this higher value but will only ever be paid out the market value in the case of a claim. Therefore you will not receive the higher amount insured for.
Remember: When requesting a Horse Insurance quote, providing accurate information about your horse’s value, health, and intended use is essential. Insurance providers will factor in these details along with the chosen coverage option to calculate a personalised quote tailored to your horse’s specific circumstances.
Consulting with Equine Insurance professionals can help you make an informed decision and ensure that your chosen coverage provides adequate protection for your beloved equine companion.