Is Pet Insurance a Smart Idea?

Dear Team, 

My wife and I recently adopted a dog. After our first visit to an emergency vet we quickly realized how expensive these visits can be. Now that she is ok and we received the credit card bill the financial reality has set in. My question is how can we best prepare for these unforeseen circumstances? I don’t want to use a credit card to pay vet bills in the future. I talked to a friend of mine and they have pet insurance. Do you think this is something we should consider? 

I’m so happy to hear your dog is ok. I understand how scary these emergency visits can be. Unfortunately, I also understand the price tag that compliments an after hours visit. In the moment, you aren’t worried about how the financing will come through for your pet. However, as it has in your case, when the dust settles sometimes the financial remnants can feel overwhelming. 

More often we live in a society where we treat pets like family. Phrases like “dog mom” and “fur babies” fill our social media news feeds. In a time where we place so much love and care into our companions we also feel emotional responsibility for their wellbeing. This emotional responsibility often can rear its head as financial responsibility. To answer your question, I think preparing for these financial and emotional road bumps can be different for different families. In most cases, a “sinking fund” or separate savings account works best. 

In an attempt to financially prepare for how much your fur baby might cost start by adding up what you think you spend over the course of a year. Make sure to add in monthly medications, preventive treatments like heartworm or flea and tick, food, treats, and maybe an extra vet visit or two. Don’t forget to include the cost of annual vaccinations. Once you tally all of these costs expected over the year divide this number by 12. The final amount is what you should be placing in a separate account for your pets each month. Of course you aren’t spending this amount each month but this allows you to build the cash for those more expensive times throughout the year. What if your pet ends up at the vet more than once or twice a year? For many, that’s when they begin to consider pet insurance. 

Depending on where you live, what kind of pet you own, and what conditions they have your vet visits can easily equate to hundreds of dollars. Many owners choose to transfer this financial risk to an insurance company. I’m not here to recommend one company over another. To be honest with you, I’m not super fond of the industry as a whole. It’s very new and I think there are a lot of kinks that need worked out before I place my trust and confidence in this monthly premium. If you are considering pet insurance make sure you do your research before choosing a policy. 

There are a few different kinds of plans available which can be found with many companies. By paying a higher monthly premium you can find plans which will have no maximums, no exclusions (think cancer or hip dysplasia), and have reasonable coinsurance (commonly 80-20 or 90-10). As mentioned this type of coverage comes with a higher monthly cost. 

Many companies offer what they consider their “middle of the road” plan. This type of plan often has a moderate deductible and might exclude certain conditions, like cancer or breed specific illnesses. In addition these plans might have a cap on what the insurance company will pay per year or per condition. However, as a result of these limitations the monthly premium is cheaper on this type of plan than the plan with no caps.

Lastly, some companies offer what I would call a “standard care” plan. These plans usually have very low monthly premiums but only cover an annual wellness exam or two, flea/tick preventative, and a few miscellaneous expenses. In addition there is usually an annual cap for what the insurance company will cover. The plan is the most like a savings account as it has the least potential for financial reimbursement.

Keep in mind there are variations of all of the plans mentioned above. Each insurance company is likely to have a variation of one or more of these offerings. It’s important to know that regardless of the company or plan your pet can be subject to an initial wellness exam and/or you might have to provide your pet’s vet records. Often “preexisting conditions” are excluded from coverage. If your pet has a lengthy medical chart they might even be denied coverage. Policies are commonly written for 12 months of coverage. After each year the policy is subject to underwriting/adjustment. At each renewal your premium can be changed and there is not a limit for how much your premium can rise. Just because the premium could increase doesn’t mean it will. But it is important to know at what point this insurance no longer makes financial sense. 

As I’m sure you can tell by the previous couple paragraphs, I’m not an advocate for pet insurance. However, I can sympathize for the want to transfer a financial risk if possible. If you do decide to purchase pet insurance make sure you read plenty of reviews and understand the limitations of your policy. Be aware of your pets medical history and understand there may be limitations in coverage as a result. Most importantly, know if the transfer of risk makes financial sense. Just because you can buy insurance doesn’t mean it’s a great financial move. Calculate what you can anticipate to spend on your pet and weigh this annual amount against your anticipated out of pocket cost with pet insurance. 

There is a pretty direct correlation between the cost and quality of care. Just like in caring for your family members, it's important to financially prepare for your pets medical expenses. You might find saving monthly for these expenses works best for your family. Or, you might decide to transfer this risk to an insurance company. No matter the route you choose you will be more financially prepared as a result.