Why Pet Insurance is Worth the Money

by JT McGee

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, dogs, cats, worth the money

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.

Summary
  • 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.

{ 10 comments… read them below or add one }

Mark February 3, 2011 at 14:44

We bought pet insurance for our puppy. Before that, we had an experience where we had spent thousands in vet bills our dog only weeks before complications meant he left us.

While he had a great 12 years on this planet, my wife and I decided that a pet insurance policy would help spread out these non-routine costs over a the life of our puppy. The puppy has coverage, our finances have coverage, and it costs us hardly anything.

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JT McGee February 5, 2011 at 13:27

Sometimes the small premiums are worth the comfort. 🙂

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Anne Sales February 3, 2011 at 15:25

Oh, aren’t those the prettiest dogs I’ve ever seen? Well, $20 or £15 a month to spend on a pet isn’t really much if you think of their welfare. You could spend more if you don’t get an insurance for them. Just as you would ensure your phone or laptop which can be easily replaced, why not a pet?

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JT McGee February 5, 2011 at 13:28

Why not insure a pet, I agree. It really just comes down, to me, as a way to remove the financial stress of a very traumatic experience. Do you pay for it? Sure, but get the comfort and feeling of safety…something you can’t always put a price on.

Thanks for stopping by!

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Money Reasons February 3, 2011 at 19:23

I’ve seen a lot of my friends pay a few thousand dollar for dog surgery!

You might think, oh that won’t happen to me, or I’ll just live with the problem, but when you have little kids, they love the dog/pet as a family member. So you have to pay the big bucks!

So no pet insurance makes more sense to me, vs when I was much younger.

I have a chocolate lab. And we would spend the money to make sure she’s okay…

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JT McGee February 5, 2011 at 13:29

We have three mixes. Two are lab mixes and one is a golden retriever mix. We love them dearly.

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Everyday Tips February 3, 2011 at 20:36

If I had a pet, I would consider it. It is a tough decision because some animals seem incredibly high maintenance, and other can go years without an issue!

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LaTisha February 5, 2011 at 07:35

I really want a pet but I realize the cost for owning one is high. I never realized how much went into actually owning one though. Maybe one day I’ll be rich enough…

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Evan February 8, 2011 at 10:56

The Wife and I always have had pet insurance for 6 year old dog…sometimes we get a good amount back when we put in a claim, sometimes we don’t…but not ever having to make the decision “can I afford to keep her alive?” is well worth the monthly bill

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My Money Mess February 8, 2011 at 23:40

I have a dog. She’s a great pet. However some of the things I’ve heard of people doing (and spending) to keep pets alive a little longer are a little too extreme for me.

To be honest with you, and myself, I don’t know where the line is in terms of extreme care for my dog. I do know that the determining factor in making the decision about some kind of surgery or cancer treatment or ?? is going to be the vet’s answer when I ask what kind of quality of life she will have after the operation/treatment. I’m pretty sure money won’t be the deciding factor.

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