Is Pet Insurance Worth It?
If you have pets, you understand what wonderful additions they can be to your family. It’s hard to imagine that a costly medical issue could happen to our furry friends, but considering this possibility when planning for the future can help you become financially prepared. Setting aside money in your emergency fund for unexpected pet expenses is a good start. It’s also worth considering whether pet insurance makes sense for you.
A Brief History of Pet Insurance
Pet insurance was first introduced in Sweden in the late 1800s by Claes Virgin, who wrote the first policy to protect horses and livestock. Eventually, pet insurance made its way to the United States, where Lassie became the first animal insured in the country.
Today, pet insurance is becoming increasingly common as veterinary care becomes more advanced, and in turn, more expensive.
What Does Pet Insurance Cost?
On average, pet insurance costs about $70 per month for dogs and $36 per month for cats, although premiums can vary significantly.
Dogs are more likely to be insured and typically visit the veterinarian more often than cats. However, when cats do need veterinary care, their bills can be comparable to those of dogs.
Pet insurance can be especially valuable in situations involving emergencies, serious illnesses, or a cancer diagnosis. However, if your pet remains relatively healthy, you could spend thousands of dollars on premiums over the years without receiving much in benefits.
Pros and Cons of Pet Insurance
Pros
Peace of mind: Pet insurance can provide reassurance that you’ll have financial help if your pet experiences a serious illness or injury.
Predictable expenses: Paying a monthly premium can be easier to budget for than an unexpected, significant veterinary bill.
Coverage for major expenses: Depending on the policy, pet insurance may cover a wide range of unexpected medical expenses.
Cons
Pre-existing conditions are typically excluded: Most policies won’t cover conditions your pet had before coverage began.
Premiums generally increase with age: As your pet gets older and becomes more likely to experience health issues, insurance can become more expensive.
Routine care may not be covered: Vaccinations, annual checkups, dental cleanings, and other routine expenses typically aren’t included unless you purchase additional coverage.
What Does Pet Insurance Pay For?
Pet insurance typically helps cover unexpected medical expenses such as hospital stays, surgeries, prescription medications, and diagnostic tests. However, routine care such as vaccinations, annual checkups, spay/neuter procedures, and dental cleanings are generally not covered under a standard accident and illness policy.
It’s also important to understand that pet insurance usually doesn’t reimburse 100% of your veterinary expenses. Policies often have deductibles, reimbursement percentages, annual limits, and other restrictions that affect how much you’ll ultimately receive.
Pre-existing conditions are also generally excluded. In other words, pet insurance is designed to cover new injuries and illnesses, rather than conditions your pet experienced before you purchased the policy.
An Alternative to Pet Insurance: Self-Funding
If you’d rather not purchase pet insurance, another option is to self-fund your pet’s potential medical expenses.
We often recommend that clients maintain an emergency fund in a high-yield savings account to prepare for unexpected expenses such as a job loss, major vehicle repair, or other financial emergencies. You can also set aside a portion of that savings specifically for your pet.
For example, if you would have spent $50 per month on pet insurance, you could instead direct that $50 toward your emergency savings. Over time, those contributions can build a dedicated reserve that you can use if your pet needs unexpected care.
Of course, the trade-off is that you’re taking on the risk yourself. If your pet has a major medical emergency shortly after you begin saving, you may not have had enough time to build up the nest egg needed to cover the bill.
One way to think about pet insurance is similar to how you might think about term life insurance. With term life insurance, you pay premiums in exchange for financial protection if a covered event occurs during the policy term. If that event never occurs, you may never receive a financial benefit from the policy, but that doesn’t mean the insurance wasn’t valuable. You were paying to transfer a financial risk you didn’t want to take on yourself.
Pet insurance works similarly. You may never need to use it, or you may not need it for many years. But if something serious does happen to your pet, the coverage could become extremely valuable.
So, Is Pet Insurance Worth It?
There isn’t one right answer for everyone. The decision ultimately comes down to your pet, your finances, and how comfortable you are taking on the risk of a large veterinary bill.
Pet insurance may be worth considering if:
Your pet is young and healthy.
You don’t have enough in your emergency fund to comfortably cover a large veterinary bill.
A major veterinary expense would create financial stress.
Having insurance would give you peace of mind.
Pet insurance may not be as valuable if:
Your pet is already a senior or has significant pre-existing health conditions.
You have enough savings to comfortably handle a large veterinary expense.
You’re comfortable taking on the risk of paying for veterinary care yourself.
You would prefer to invest the money you would have spent on premiums into your own savings.
Ultimately, pet insurance is less about whether you’ll “get your money’s worth” and more about how you want to manage financial risk. For some pet owners, the peace of mind is worth the monthly premium. For others, building their own savings provides greater flexibility.
If you’d like to talk more in depth about pet insurance, incorporating your pet into your savings plan, or other financial planning considerations that come with owning a pet, reach out to your financial advisor.