You bought a prospect for $50,000. Two years later, he hasn’t panicked out, has some arthritis, and is really only worth $15,000. He dies of colic. You have been paying premiums on $50,000 coverage. The insurer wants to pay you $15,000 (“Actual Cash Value”).
Key Takeaways
- Agreed Value: This is the magic phrase. It means if the horse dies, they pay the face amount of the policy, regardless of current market value.
- Actual Cash Value (ACV): Standard practice for some insurers. They pay the lesser of the policy limit or the current fair market value.
- Justification of Value: To get Agreed Value, you must prove the horse is worth it (show record, training bills, purchase price) at renewal.
- The Renewal Trap: If the horse is stepping down in level, you should lower the insured value to save premium. The insurer won’t tell you to do this.
The “Why” (The Trap): Over-Insurance
Insurers do not want you to profit from a horse’s death. If a horse is worth $5k but insured for $50k, it creates a “moral hazard” (you might want him dead).
The Clause:
“We will pay the Agreed Value stated in the Schedule… provided the value has been substantiated.”
The Investigation: Policy Types
I checked the wording for Markel and The Hartford.
Markel (Agreed Value)
- Policy: They are strong on Agreed Value. Once they accept the value at the start of the policy term, that is the payout number for that year.
- Requirement: You must submit a “Value Substantiation” form at renewal if the value exceeds the purchase price or if market conditions change.
Budget Carriers (ACV)
- Policy: “Fair Market Value at time of death.”
- Scenario: You bought him for $50k. He went lame. He died. They argue a lame horse is worth $1k. They pay $1k. You wasted years of premiums.
Comparison Table: Valuation Methods
| Scenario | Agreed Value Policy | Actual Cash Value (ACV) Policy |
| Horse Value Rises ($50k -> $80k) | Pays $50k (Limit) | Pays $50k (Limit) |
| Horse Value Falls ($50k -> $10k) | Pays $50k | Pays $10k |
| Horse Retired | Pays $50k | Pays Meat/Pet Value |
[IMAGE: Chart showing Market Value line dropping vs. Agreed Value line staying flat]
Step-by-Step Action Plan
- Read the Definition: Does your policy say “Agreed Value” or “Actual Cash Value”?
- Update Value Annually: If the horse won a championship, raise the value. If he is semi-retired, lower the value to save premium money.
- Keep Records: Save show results and training invoices. This proves the value wasn’t just “sentimental.”
- Don’t Over-Insure: If you know the horse is worth less, lower the coverage. Paying premium on “phantom value” is throwing money away if the policy has an ACV clause.
FAQ
Can I insure for more than I paid?
Yes, if you put training into him. Usually, insurers accept a value increase of cost + training fees + show record.