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    “Loss of Use” The Most Misunderstood Coverage

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    September 04, 2018
    When insuring your equine investment, many folks want the broadest and most comprehensive coverage available. The basic (required) coverage is mortality and theft. Then, there are numerous options; the most frequent addition being major medical coverage.  But how can you protect your investment if the horse sustains an injury so bad that he can’t perform, but it isn’t so bad that euthanasia is an option. This void is filled by a coverage known as “Loss of Use” (LOU).
    Because each carrier has their own forms and guidelines, it can be very confusing when considering this option (which can also be somewhat costly).
    So, here are the basics you need to know;
    • For the coverage to kick in, the covered injury or illness must be so bad that the horse is permanently and totally unfit for the “use” (discipline) described in the policy. So, if your horse has multiple uses, the first one you list could be extremely important.
    • Not all disciplines are eligible for LOU coverage.  Each carrier will normally have a list of eligible disciplines. Generally, pleasure, breeding, racing, endurance, and halter are some of the notable activities not eligible. Some carriers might use verbiage that the horse must be in competition, or in training for competition in an approved discipline.
    • LOU does not pay the full value of the horse. The days of 100% coverage are past, and today the norm is usually 60% or 70%.
    • Most, but not all, carriers will retain ownership of the covered animal when they pay a LOU claim (in much the same fashion as the insurance company retains the salvage when they total your car).  Potentially, in this scenario, you may be paid 60% of your horse’s value, and then loose the horse too! It is vital to know beforehand if you will find yourself in a position where you have to “buy back” your own horse. This is not always true, but ask before you buy.
    • All carriers will require you to carry a major medical option when including LOU coverage.
    • Some carriers will offer a couple of different versions of LOU. There may be an accident or injury option, sometime known as “external injury” or “limited” LOU. Then there is a full version that covers accident or injury, plus disease or illness. Perhaps an oversimplification might be the first option is external causes, while the second can be external and internal causes.
    • If you think there may be a chance that your horse may be sold before the end of the 12-month policy period, ask at inception if you will be entitled to a refund. Some carriers consider it to be fully earned at inception, and won’t refund your money if canceled mid-year.
    • Ask what the requirements will be to add the coverage. Some carriers will require a vet exam to qualify, and you may even need x-rays (especially for the full version) or blood tests, depending on the value of the animal.
    Being informed can prevent a lot of disappointment down the road. As always, I urge you to purchase coverage from an independent equine insurance specialist, who represents several companies.  Equine mortality policies are not standardized, so know what you are buying and ask lots of questions.  No one company fits all. And, don’t shop for the cheapest price. Trust your agent to present you with the best value for your insurance dollar.

    Rich Maggard
    (541) 504-8686