Good afternoon bloggers!
Today we want to share an article with you from our Australian insurance agent friends, Gowgates Insurance Co., about justifying a fair value for your horse in regards to your insurance policy. Many times when we write a new policy for a client, they are unsure how to get a proper value for their horse for the policy. This brief article will help explain how that process is derived, and what you can expect.
As always, if you have any questions please feel free to reach out to us! We are here to help with all of your equine insurance needs!
Have you ever been asked to provide a Justification of Value for your horse?
From an Insurance point of view you need to bear in mind that when you insure your horse the majority of Equine Mortality Programmes are arranged on a Fair Market Value Market Value Market Value basis.
FAIR MARKET VALUE means the price at which you could FAIR MARKET VALUE sell the horse to a willing buyer who has reasonable knowledge and relevant facts of that horse.
The Insurance provides cover for the Insured Value Insured Value Insured Value OR Fair Market Value at Fair Market Value atthe Time Of Loss Time Of Loss Time Of Loss, whichever is the lesser.
Many people are under the misconception that they have an Agreed Value policy; if they insure their horse for $50,000 then, without question, if the horse dies they will be able to claim $50,000.
Yes, Insurers will pay a claim up to the INSURED VALUE, however if the horse’s FAIR MARKET VALUE is less than the INSURED VALUE at the time of loss then Insurers will only pay the amount it is actually worth at that time.
In addition, you cannot claim more than the INSURED VALUE either, so if the horse is actually worth more it is important to bear in mind that you should increase its INSURED VALUE accordingly.
In summary:-
• The INSURED VALUE is the maximum amount claimable under an Insurance Policy. • If your horse’s FAIR MARKET VALUE is less than the INSURED VALUE at the time of loss, you will only be able to claim the FAIR MARKET VALUE.
• If your horse’s FAIR MARKET VALUE is more than the INSURED VALUE at the time of loss, you will only be able to claim the INSURED VALUE. Values can always be increased or decreased, with your premium being adjusted accordingly, so that should the worst happen
and your horse dies the claim will be as straightforward as possible. Losing a horse is both stressful and emotional and you want your claim to be paid without question. Adjusting the values throughout the policy, when necessary, ensure that you will always be able to claim the CORRECT amount, being the true value of your horse.
METHODS OF JUSTIFYING YOUR HORSE’S VALUE METHODS OF JUSTIFYING YOUR HORSE’S VALUE
The easiest way to determine value is when you have just bought a horse. This is termed PURCHASE PRICE. This is the most common form of value indication.
If you have bred the horse yourself it is more difficult to quantify but generally you can look to insure your youngster at around twice the amount paid for the sire’s stud fee. As the horse gets older and develops through training, you can alter its value. If you have a Breeding Stallion you can apply the following formulae:
(SF X M) X 3 for established Stallions
(SF X M) X 2 for young Stallions in their first or second season
SF = Stud Fee / M = Average number of mares covered per Season
The most important indicator would be, that if you were to sell your horse tomorrow, what would somebody pay for that horse?
WHEN TO INCREASE VALUE? WHEN TO INCREASE VALUE?
You should look to increase your horse’s insured value in a number of circumstances:
• Your horse has been competing consistently well and you have a Competition Record as evidence.
• You have had an offer from a third party to purchase your horse over and above what it is currently
insured for, and you can provide evidence of this offer.
• You first insured this as a young horse in training and now it is currently competing / training at a
higher level.
• You have had an independent valuation carried out and the resulting value is higher than it is
currently insured for.
• You provide insurers with a Statement from your Trainer or another experienced Professional who
confirms that in their professional opinion the horse’s value is now higher, and the reason for the
increase in value.
N.B. Increasing the Insured Value does not guarantee that amount will be paid in the event of a claim,
however, it does increase the Maximum amount you for which you can claim.
WHEN TO DECREASE VALUE? WHEN TO DECREASE VALUE?
You should bear in mind that if your horse’s value is lower at the time of loss than the value it has been insured for, Insurers only have to reimburse the current FAIR MARKET VALUE at time of loss, not the full amount you have been paying the premium on. The responsibility to advise us of any change in value lies solely with the you as the policy holder.
As much as values need to be increased as a result of the above mentioned, it should also be decreased in some circumstances:
• Your horse is currently not in work due to injury or your own personal circumstances – a prolonged
gap in your Performance Record often raises questions when justifying a horse’s value.
• Your horse’s performance has been diminishing in recent weeks.
• Your horse has sustained an injury and whilst back in full work is unable to compete at the same
level or to the same degree as previously.
• You invited an expression of interest for your horse but failed to obtain an offer you wanted, and
that all the offers you did receive were lower than what your currently have the horse insured for.
• Your horse is getting older, generally beyond the age of 16, however this is judged on a case by case basis.
Disclaimer: The information in the above article is intended as a guide only and should not be relied upon without the seeking independent professional advice.
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