Do You Need Pet Insurance to Avoid the Risk of Big Vet Bills?Submitted by Castlebar Asset Management on June 25th, 2019
Just a few years ago, the idea of pet insurance sounded a little strange. Although just about 1 percent of all pets in the U.S. are currently covered through a pet insurance policy, it’s a fast-growing market with more pet owners interested in learning about how it could protect against getting stuck with a massive vet bill.
The costs of veterinary care -- especially emergency care -- certainly help make the case for at least considering whether or not pet insurance should be part of your financial plan. The Wall Street Journal reports that in 2017, Americans spent $17 billion dollars on veterinary care for their pets.
With that much money flowing out the door and to medical bills for furry friends, more and more families are asking how they can mitigate costs without sacrificing quality of vet care. Pet insurance could provide an answer.
How Pet Insurance Works
At a basic level, pet insurance works much like your own health insurance does: you pay a monthly premium to an insurance company, which in turn provides a policy that helps cover the cost of medical bills and expenses on behalf of your pet.
PetMD points out that pet insurance has other similarities to your own insurance, including deductibles and co-pays, maximum payouts, and, depending on the policy and provider, waiting periods or no coverage for pre-existing conditions.
One major difference between insurance for you and your pet is the fact that you still have to be able to pay your vet or animal clinic upfront for services and treatment. The pet insurance company then reimburses you after you submit a claim.
You’re also free from worrying about whether your vet is “in network” or not. Pet policies aren’t set up on a network system, so you don’t have to worry about switching vets or going to certain care clinics while avoiding others that your insurance doesn’t cover.
You can find sample pet insurance plans from ASPCA, which provides policies to pet owners. This will give you a clearer idea about what’s covered and what falls outside the bounds of the insurance.
Should You Include Pet Insurance in Your Protection Planning?
Ultimately, whether or not pet insurance makes sense for you is much like asking the question about what kind of insurance the human members of your family needs: the answer is always “it depends.”
What’s more clear is that it’s worth considering the question, even if you decide it doesn’t work for your household. Here are some of the factors to consider to help determine if the cost of pet insurance makes sense:
What kind of policies are available to you? If you work for a company that offers pet insurance as part of your employee benefits, it might make sense to explore this option. Group policies are often cheaper than private ones,
What kind of animal do you have? The cost of a policy will also depend on the age and breed of your pet. Breeds prone to hereditary health problems will likely cost more to insure than mixed-breed animals with no “family history” of conditions or ailments. Similarly, older animals will cost more than younger ones.
How risk-adverse are you? If paying $300 a year for a pet insurance policy will help reduce stress about your finances (and the threat of unexpected vet bills), it might make sense to simply insure your pet and rest easier.
Know that you may only break even or you might pay a bit more for a policy than you would had you simply paid any vet bills out of pocket -- but there’s intangible value in worrying less in your day-to-day life.
Understanding how you emotionally process risk can help you make a better decision here.
Does your pet require more than routine care? While emergencies can happen, you need to keep the odds in mind. If you currently only pay for routine vet care for your pet and the probability of a serious health issue seems low, paying for a pet insurance policy could cost more than simply paying your vet out of pocket.
Routine care for a dog costs about $257 per year. Care for cats is about $182 per year. A pet insurance policy may cost $300 or more per year, which means you probably want to self-insure instead of dealing with premiums.
How to Self-Insure Against Big Vet Bills
If you decide to forego pet insurance and pay vet bills out of pocket, then at the very least, consider setting up an emergency fund to cover animal care costs. This can be built into your current emergency fund, or you can set up a separate savings account for clear organization.
Doing so allows you to be “self-insured,” because you have a fund you can use to cover expenses as needed -- rather than having a trip to the emergency vet or increasing costs of an aging pet eat into cash flow.
Keeping some cash set aside and earmarked for pet care is a best practice even if you carry pet insurance. Remember that while these policies may reimburse you for covered expenses, you still have to pay your vet in full first.
How much to keep in your pet emergency fund will, again, depend on your specific situation and furry family members. If your pet is more prone to medical issues, as certain breeds are, then you can expect to pay more in veterinary costs over time -- which demands a bigger emergency fund.
If your pet is relatively low-maintenance with no history of health problems, you may want to set aside a smaller amount of money to use for standard vet visits plus a little extra to cover anything unexpected.
The bottom line is that, whether you decide to pay for pet insurance or not, most of us consider our animals to be part of our families -- and that means we need to consider them within the context of our financial planning, too.
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.