Pet insurance is the personal finance blog topic of the hour. Most of the posts I have read declare pet insurance to be a bad investment. I have a different opinion, though–I say buy it!
The Cost of Pet Ownership
Let’s make no mistake about it, pets are obscenely expensive. From the food to the veterinarian bills, to finding a place for them when you go out-of-town, dogs and cats can be as pricy as a human child.
Most costs are routine; dog food is flat-rate, heart worm, flea and tick, and other supplements are also regular, mostly fixed-price purchases. However, not all expenses are ordinary, and it is these items that make owning a pet so ungodly expensive.
But we love them! According to BusinessWeek, Americans spend some $41 billion on their pets each year.
Pet Insurance Quotes
Catastrophic pet insurance policies designed for only very large and abnormal veterinarian bills cost roughly $.50-$1 per day, per pet. For the sake of simplicity, we’ll make that $20 per month. I like round numbers.
I called a few pet insurance companies and this is what $20 will buy you:
- Up to $10,000 in annual, $15,000 lifetime benefit cap
- Deductibles of only $250 on a per incident basis
Total costs are $240 per year, or roughly $2,880 over the (12-year) life of the pet. But what’s the gain?
Well, all expenses over any $250 are covered entirely by the pet insurance company. Keep in mind, this is coverage only for expenses over and beyond the regular, routine pet care. Pet insurance isn’t going to pay for nail trimming any time soon.
Why Not Self-Insure?
Hmm, so why not self-insure? That’s a good question, and one that was brought up by Sierra Black from GetRichSlowly. She came to the conclusion that the $1 per day for a pet insurance policy would be best saved for her own self-insurance.
There are some benefits to her plan:
- Savings can be used for anything, pet insurance cannot
- The cash stays in your possession and accrues interest
- There is no risk of using less than what you’ve paid for
But there are potential pitfalls, as well:
- Pet costs may ultimately prove more expensive than pet insurance premiums
- You may have to choose between your finances and your pet
Whoa, Whoa, Whoa!
It is that last item, “You may have to choose between your finances and your pet,” that makes me believe that any dollar paid for pet insurance is a dollar well spent.
I’m a wub when it comes to animals, and I don’t think I could draw a line between my finances and my pet–I really don’t.
Pet insurance allows for up to $15,000 in total life time coverage, which should be enough for the vast majority of pets, I’d imagine. Below that figure, I would pay only $250 for each incidient–practically nothing.
- Risks are limited to $250 per incident
- Lifetime cap seems nearly impossible to reach
- Financial stress is taken out of what is a traumatic event
- It costs only $20 per month
It is easy to say that no one, on average, ever gets back more from an insurance company than they pay in premiums–and that is very true. The point, though, is that the amount you pay over and beyond the actual benefit levels is (for me) worth the separation of pets and emotions from personal finances.
Assuming a payout ratio of even 60% (not including administration, just payout) you would receive $12 per $20 payment. That’s a lot of utility for $8…and having to put down a dog before (though not due to finances,) that’s $8 well spent for avoiding even the temptation of dollars before dog. I realize that isn’t a cost worth bearing for some people, but for me…I can name thousands of places I’ve spent $8 without the same level of satisfaction or benefit.
Questions to you:
Do you have pets?
What price is too high to pay for their health?
Comment below! I’d love to hear what you have to say.