Breeder's Insurance Policy

Breeder's Insurance Policy

Investopedia / Candra Huff

What Is a Breeder's Insurance Policy?

As its name suggests, a breeder's insurance policy is a type of insurance that caters to the unique risks faced by animal breeders. Because breeders' livelihoods depend on the health of the animals they breed, this type of insurance is often viewed as an essential business expense that is similar to commercial general liability insurance purchased by many business owners.

Key Takeaways

  • Breeder's insurance is a type of insurance that protects breeders against risks related to their animals.
  • It commonly focuses on the risk of injury and its related medical costs, although many other areas of risk are also considered.
  • As with other insurance policies, breeders can customize their policy terms to suit their risk tolerance and financial priorities.

How Breeder’s Insurance Policies Work

Breeder's insurance is designed to protect against specific risks that can be very damaging to the animal breeding business. Perhaps the most obvious risk is the premature death of the animal itself. When this happens, the breeder loses the ability to sell the animal after investing in care for the animal throughout its life.

Other significant risks animal breeders face include the risk their animals become ill and require expensive medical treatment; the risk their animal could injure a third party, resulting in a lawsuit; or the risk their animal might require costly fertility treatments. All of these risks can be covered by a breeder's insurance policy, with the monthly premiums rising or falling depending on the level of coverage obtained.

As with all insurance policies, those shopping for breeder's insurance can customize the terms of their contract depending on their financial situation and priorities. For example, a breeder with modest savings but predictable income might opt for a lower deductible in order to reduce the risk of large out-of-pocket expenses. On the other hand, a breeder with ample savings but less predictable income might prefer accepting higher deductibles in exchange for lower monthly premiums.

Real World Example of a Breeder's Insurance Policy

Emma is a professional breeder specializing in rare varieties of dogs. Although the dogs she breeds sell for very large sums, they are also expensive to raise and maintain throughout their early lives. Of special concern are certain critical illnesses to which some breeds are especially vulnerable. When these diseases arise, the costs to Emma can quickly reach into the thousands or even tens of thousands of dollars.

Emma reasons that, although her breeding business is profitable under normal circumstances, she might be driven out of business should more than a small number of her dogs contract such an illness at the same time. To protect against this risk, she decides to purchase breeder's insurance.

When structuring her insurance policy, Emma is careful to ensure she is substantially covered against the kinds of illnesses most likely to affect her dogs. At the same time, she obtains insurance for other sources of potential losses, such as the risk that her animals might harm a third-party. In the end, Emma’s breeder's insurance increases her monthly costs because of the monthly insurance premiums she must now pay. But from her perspective, this cost is well worth paying in exchange for the knowledge that, if major insured risks were to arise, her business would be able to weather the storm.