Tuesday, April 20, 2010

Pet Insurance for Dummies? Not Necessarily...

Among caring and intelligent dog owners, there is no debate about pet insurance:

Get some.

Having said that, do not misunderstand what I am saying.

I am NOT saying you should rush out and get corporate for-profit pet insurance.

In fact I have not done so, and I will not do so.

Instead, I have self-insured my dogs with a dedicated bank account.

Of course, most people have no discipline. For these people, and for those who are young and/or of limited means, for-profit pet insurance might be the right idea.

But it might not be too.

Why the hedge?

Simple: If you think human insurance is confusing and poorly regulated, I can assure you pet insurance is far worse.

As Consumer Reports notes in an article entitled Why Pet Insurance Is Usually a Dog:

The most important thing you need to know about pet insurance is that it is a form of enforced savings that almost never covers the entire bill. You can accomplish the same thing by paying the same monthly premium to your savings account.

The advantage: If your pet has little cause to visit a vet beyond annual checkups, the amount saved belongs to you, not an insurance company. The risk, of course, is if you run into unusually expensive veterinary needs...

The problem with pet insurance is all its fine-print pitfalls. Indeed, buying a policy may end up increasing a pet owner's total expenditures on veterinary care by thousands of dollars, according to our analysis of five plans. That's because on top of deductibles required by all the insurers, plus any co-pays, unreimbursed costs, and exclusions--all of which you pay out-of-pocket--you also pay premiums. Seemingly small $11 to $50 per-month premiums can add up to $2,000 to $6,000 or more over a pet's lifetime.

See the entire article to see how pet insurance plans make money, on average, by costing pet owners more money, on average.

To summarize the Consumer Reports example:

"Lucky" had 9 claims over 11 years--a broken leg, an ear infection, a cut requiring stitches, an eye infection, hypothyroidism requiring years of drug claims, and a torn knee ligament. Total cost of care: $3,301. The insurance plans below would have cost Lucky's owners an extra $497 to $3,380 for care.

Wow. That sure sounds like pet insurance is the wrong idea.

But it's not that simple in the real world.

You see people are involved, and people are often a problem.

In the real world, as noted before, pet insurance may make sense if you are poor, young or (let's admit our personal weaknesses here, eh?) undisciplined.

Here's a test:

Do you have $2,000 cash in the bank right now, from which you could draw to fix your car's brakes and transmission? And NO, you cannot use a credit card or liquidate a portion of your 401-K to fix your car. Do you have the cash?

Do you have $5,000 in the bank, right now, to pay for an emergency home repair (a new roof, a new boiler, or a new air conditioning system)? No, you cannot use a credit card or liquidate a portion of your 401-K. Do you have the cash?

If your answer to these questions is NO, then you need pet insurance, because you do not have enough discipline to cover YOUR OWN emergency needs, right now, much less your dog's.

And the good new for your dog, is that while you cannot buy discipline, you can rent it .... for a price.

You might notice that the poor and undisciplined are going to pay more, and probably get less, than those who save and have cash on hand.

Yes, that's right.

As a general rule, the poor and undisciplined also have bad credit, need to borrow more, pay higher interest rates, and are more likely to pay the minimum on their credit cards as well.

Not for nothing does the Bible say the poor will always be with us.

The good news is that while you are the problem, you are also the solution.

All you need is discipline. Get some. It's the cheapest kind of canine health insurance there is.


Lindsay said...

Good post!

Gina said...

I'm a strong believer in lower-cost, high deductible catastrophic coverage that pays out based on actual costs, not a "customary rate schedule." And that do not exclude breed-common conditions. A customary rate for a old-fashioned vet in Alabama isn't a fraction of the cost at a specialty center in urban California.

Some people are happy with Ol' Doc Johnson with a pred shot in one hand and antibiotics in the other, and that's fine. But I choose cutting-edge care for my pets.

Preventive and routine care I can budget for. It's the emergencies that kill me.

It's really important to compare companies and plans, because they vary a great deal now.

Karen said...

I have the same feelings regarding pet insurance. It can be a rip-off depending on the plan that you choose. I wrote a pretty ranty post on my blog which you can read here;