Does Pet Insurance Make Financial Sense?
Pointer Financial Group is getting a new mascot – a Brittany (pointing) puppy! (Photos coming soon).
With the new member of the team, we figured there’s no time better than now to dig into the costs of pet insurance to see if it makes fiscal sense. With various factors like pet age, coverage, deductible, and reimbursement rate, pet insurance prices will vary. To make this simple, we looked at an example from Petco Nationwide Insurance for a Labrador Retriever, age 0, male.
Using these assumptions, premiums would be $83.54 per month. This plan includes:
- $5,000 for accident coverage
- $5,000 for illness coverage
- 70% reimbursement coverage
- $250 annual deductible amount of $250.
To estimate coverage for the lifespan of the Labrador, we calculated 12 years of insurance, costing $12,029.76 ($83.54 x 12 months x 12 years).
Our team ran an analysis, and to simply break even with the cost of insurance, your pup would need to have multiple (3 or more) expensive procedures throughout your pet’s life. For example, a $7,400 procedure would pay out around $5,000 in benefits after deductible and reimbursement. Coverage would be capped at this level. It’s important to note that standard pet insurance (accidents or illnesses) does not include things like routine check-ups, vaccines, medications, or dental – these would be additional add-ons to insurance.
Unless your pet is predisposed to certain conditions or a high-risk breed, pet insurance may not be worth the added expense. Even in those situations, your pet would need to be virtually guaranteed to require multiple high dollar procedures to make the insurance worthwhile.
Insurance, by definition, is intended to help protect against large losses that are unexpected and detrimental. While veterinary expenses may be large and can be emotionally difficult, pet insurance is structed to be more of a savings plan than true insurance. A better solution to afford these kinds of expenses (pet, household goods, car repairs, etc.) would be through self-funding with an emergency fund. Instead of paying premiums on an insurance plan, use an emergency fund which can cover a much broader range of concerns and can earn interest if unused.
While you can get almost anything insured today, that doesn’t mean that you should. While you might come out ahead every so often, in the long run, you would be better off having a well-funded emergency fund which allows unlimited flexibility and saves on unnecessary insurances. If you are considering this type of insurance and would like a custom analysis, don’t hesitate to reach out to us.
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