Do I Need Pet Insurance?

I read an article about pets this morning. The highlight was that the typical pet owner spends $4,800 per year on their pet. Of that, $1,200 is spent on visits to the vet.

If you’re like me, you’re saying “no kidding”. Our dog Rosco has had 2 ACL surgeries, a broken toe-nail that needed surgery, and he’s got chronic allergies that require regular visits and come along with the occasional skin infection.

Add that to the required treats and toys, boarding when we travel (which is infrequent because of Rosco – bad dog). It’s not that surprising that we’re spending $4,800 per year.

Quick aside: Opportunity Cost

Before I even thought about the insurance aspect of this, I thought about the opportunity cost1. $4,800 per year is $400 per month. What if instead of investing in Rosco, we invested $400 per month in an S&P 500 fund. Taking a smaller than average estimate of returns (say 8%, the average over the last 90 years or so is closer to 10% annual return). You could have $237,579 after 20 years. We love Rosco dearly, but, wow!

But anyway, we’re not likely to give up our pets, but this is certainly something to think about for those considering pet ownership.

More realistically, it is worth thinking about ways that we can reduce the financial burden created by our furry friends. Pet insurance is one way to do this.

The Bull Case for Pet Insurance

I had never really considered pet insurance with my prior 2 dogs (Kaos and Porkchop), or for Rosco initially. After we shelled out $5,000 for the first ACL, I had a change of heart. Especially since the doctor told us that after one ACL, it was highly likely that the 2nd will need surgery at some point.

So off I went to hunt for pet insurance. That’s where I met up with the dreaded pre-existing condition clause. Every pet insurance website I visited had some version of this stipulation that if there were evidence of an injury or condition in the pet’s medical history, that condition would be excluded from coverage.

With some digging I found an insurance provider who would not consider the 2nd ACL as a pre-existing condition, but only if the 2nd ACL injury were more than 12 months after the first. I signed Rosco up and began paying the monthly premium.

We did end up requiring a 2nd ACL procedure, for which he was covered at 90% after a $250 deductible. Yay!!

Shop for bargains, but don’t forget the dreaded pre-existing condition clause

We happily continued with our insurance carrier until a year or so later when the premium increased by 40%. I began shopping competitors and found similar coverage with another carrier at the same price I had been at prior to the increase. Sign me up!

The new company was great to deal with. They made sign-up easy and they contacted my vet for Rosco’s records.

While I thought nothing of this at the time, 6 months later Rosco had an allergy issue. I took him to the vet, submitted my claim, and it was rejected as allergies were a pre-existing condition. This made sense to me, but was something I hadn’t thought about during the transition to the new provider. Allergies were not a pre-existing condition with the 1st provider. They would have been covered for life.

Did I Really Save?

So now I’m building spreadsheets and doing math to see if the money I saved in switching to a lower cost provider is going to be enough savings to fund the additional expenses as Rosco’s allergies worsen.

As I’m sure you all expect, I have also created a spreadsheet for medical expenses v. insurance premiums and I’m happy to say that with premium payments over a 7 year period, we’ve had more than the premium’s value in reimbursed expenses, so we’ve saved money. Your mileage may vary.

Peace of Mind Matters

For me it was certainly worthwhile financially, but more so for the peace of mind the insurance provided. Insurance is meant to protect you from a catastrophic financial outlay. For me, I try to minimize what I pay for insurance (car, house, umbrella, pet), but make sure I have enough coverage to assure that I can meet my expenses, and prevent me from dipping too heavily into savings, in the event of an accident or illness. For the first ACL injury that Rosco suffered, we were able to pull together $5,000. We certainly weren’t thrilled about it and we talked about what we’d do if he had a 2nd. Having pet insurance provides a level of comfort that you’ll be able to handle a large pet health expense.

Wrap-up

That’s my story and my opinion on pet insurance, but there is no right answer. It’s hard to gauge whether you’ll break even, and how do you assess the value of peace of mind? I’d love to hear your thoughts.

1 Opportunity cost: We all make choices every day. Opportunity cost is the value you forego by choosing one course of action over another.

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