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Originally Posted by Rupert Pupkin
Let's figure that Bernardini is worth about $60 million. The insurance premium is usually about 5% of the horse's value. So if Bernardini is worth $60 million and they want to insure him for $60 million that means it would cost about $3 million a year to insure Bernardini.
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I understand that profitability can easily revolve around a 5% expense. But still...I can't help thinking that it just might be okay to end up with $57 million for Bernardini rather than $60 million, and have the pleasure of watching him run as a 4-yr-old. (and that assumes that he would only break even on costs/income while running).
I understand there are other risks, too. Mainly, that a horse like Bernardini may not live up to expectations as a 4-yr-old, thus reducing that $60 million estimate of worth.
Perhaps that is the main reason horses are rushed to stud--fear that they are not as good as the market currently values them.
--Dunbar