Is pet insurance worth the cost of the plan? Or, would we be better off just putting that money in a saving account to use if and when it is needed?
The cost
The average monthly pet insurance cost can be anywhere between $30 a month for a small mixed breed pup to over $110 a month for the more expensive larger breeds like Great Danes. These costs can be even higher depending on the insurer, age of the dog, where you live, the percentage paid by the plan and the deducible. If you add up the costs for 12 years, the general life span of a Great Dane, you are looking at spending over $15,000 in premiums!
Just imagine what you could do with $15,000. But $15,000 is an extreme and let’s face it, everything is expensive with the large breeds from the cost of feeding them to the extra-large beds they require.
So let’s look at the most common breed of dog, the mixed breed. Mixed breed dogs are generally less expensive to insurance due in part to hybrid-vitality. Meaning mixed breed dogs are less likely to inherit certain genetic conditions. The premium cost for a small mixed breed dog for a 12 year period is $4,325. This is less than a third of the cost for large breeds. But still $4,000 is a good amount of money, which I am sure, we could all think of something to do with it. Like, maybe a nice vacation?
What the experts say
If you do a little research on the web, you will find a handful of articles that weigh in on whether pet insurance is worth the cost. The answer is often no.
Many of these articles suggest that you should save the monthly cost for pet insurance instead. They come to this conclusion by taking various common medical conditions and determining the cost that is paid under the plan. They then compare the amount paid out for the medical condition to the total cost of the plan over the animals estimated life. Not surprisingly the cost of the coverage is often more than the cost of the medical treatment.
Shifting risk
But we need to remember that insurance, any type of insurance, is not about making money or even saving money. It’s about shifting risk and ensuring that you have the funds when you need it. Have you ever purchased car insurance with the thought that it will save you money in the long run? Of course not, no one wants to get into a car accident. We have car insurance to make sure we have the funds to repair our cars and take care of anyone that might be injured if an accident were to occur.
The same thing goes with pet insurance. Saving $4, 000 over the life time of your dog is not going to help you when your 1 year pup decides to eat their favorite toy and needs to have it surgically removed. At this point you will only have saved $360 which is most likely not enough money to cover the cost of surgery.
You just don’t know what your dog might do or when they might become sick. I recently met a woman whose dog decided to eat cotton balls and had to have it surgically removed. The pup was less than a year old when it happened. Our previous Golden Retriever started limping one day out of the blue. It turns out he had a mass growing in his joint. That happened over twenty years ago and it costs us over two thousand dollars. I can just imagine what it would cost to remove today.
Is it ever a good idea to skip the insurance and save the money instead?
As I said before insurance is all about shifting risk and ensuring you have the money when you need it. But when you shift that risk you also agree to pay the insurer a premium to take on that risk, which means you will generally pay more in the long run.
So if you already have money saved in the bank that you can use in an emergency, you can self-insure your risk. This is often an option used by wealthy people. This simply means you are taking on the risk of an accident or illness.
Buyer beware
A lot has changed since the first days of pet insurance but just because the concept of Pet Insurance is a good one it does not mean all pet insurance are good buys. Over the last few years more companies have gotten into the Pet Insurance business which helps drive prices down and keep insurers honest. But there may still be some companies that are trying to sell you a less than fair policy.
Do your homework and know what you are buying.
For more tips on buying pet insurance check out my other posts: