Podcast #35 - How Does Pet Insurance Work and How to Factor it Into Your Budget
Updated: Jan 9
-What does pet insurance cover -What are the costs for pet insurance in your budget -What types of insurance plans and dedcutibles that you can get
-Things that you need consider before opting for insurance coverage
This week's Financial topic has to do with America's biggest extension to their families.
Mr. Pudge Rodriguez . . . our dog
Yes we're talking about mainly dogs and cats but also people who own birds and snakes and even mice, so we wanted to have a subject mainly around a dogs and cats if you will, because of they are the most popular animals. So are going to about taking care of them more from a standpoint of deciding if you need pet insurance?
Cindy Can you take a crack at how many dogs and cats are in the United States?
Well surveys vary but one says that there are 90 million dogs and 94 million cats and another says 77 million dogs and 58 million cats; so a lot!
David That doesn't surprise me as everyone you know has a pet or had a pet at some point. For the most part it's just a staple of American life.
Cindy Growing up we had my dog Rodger who was a black lab mix; he was the coolest dog. He was found dumped on the side of the road, and friends of ours had found him and brought him to us and knew we’d fall in love with him; which we did.
What I don't remember is my mom or dad taking him to the vet a lot. I know they did and he had some issues. He hated being in the car and that was always a challenge, but I didn't really didn’t think about him needing pet care.
In my case we had a few pets. I remember my grandparents having a dog and I don't remember him ever going to the vet. It was more like you fed the dog and it was always around. I was young and I believe he lived until 16. I think his name was Pudgy, believe it or not.
No way! My dad grew up with the dog named Pudgy too!
Yeah, so I do remember when the dog died; we went into the backyard and buried him. This may be tied to my West Virginia heritage with my grandparents . . . It’s like when you're cooking; you’d give the dog a bone rather than going to like a Petco or a PetSmart. I just don't remember those stores being around when I was a kid. Things have picked up immensely in the world of taking care of your pets and having the ability to buy so many things for them.
All right cool. So let’s segue and get into what it costs to maintain a dog or a cat.
Anyone who owns a pet knows that there's more costs involved than you might initially think; and while these costs average about $190 per year for cats and $356 for dogs, they can easily multiply several times over with an unexpected illness or injury with a single visit to the vet. It is estimated to be about $574 for a dog and $337 for a cat, and we know people who have spent thousands of dollars on their pets.
To add onto that, here’s another morsel. The average lifespan for a dog at 12 years means you will pay between 5 to $20,000 for its lifetime care. So this leads into the common question of should I get pet insurance? The plan that most people execute is to help out with unexpected injuries or an illness or an accident . . . things like that; you can pay a pretty low monthly cost relatively speaking to help out with these bills that can be thousands of dollars when you bring them in to get a surgery or major treatments.
All right, cool so that shift gears and let's get into some basics about how pet insurance works.
So pet insurance is a policy that helps protect you financially in the event that you have an unexpected cost and every month you pay a premium to the insurance company just like we do for our own health insurance or life insurance in exchange for that coverage. So if your pet has an illness or an injury you can submit the bill to the insurance company for either partial or full reimbursement.
Well, the cool thing is dogs have seven years of aging relative every one human year, so when they hit 65 years of age they can roll into Medicare. (Cindy . . . laughing).
So far this insurance sounds just like human insurance; it becomes more fragmented as we look further into it.
Typically you need to pay an annual deductible before the insurance company can start covering the cost; again very much like human insurance so, from that point on all eligible costs will be covered up to the annual limit.
So let's get into some basics here in that pet insurance covers different types of treatments depending on the plan that you choose. You can get accident only policies that result from injury. For example if your dog gets hit by a car or swallows a screwdriver or something like that; and there's illness policies that cover things such as cancer; but here's the main thing that people need to understand in that, if you want just a wellness plan most insurance companies don't offer that meaning that you have to get some basic plan like we just mentioned a few seconds ago and then can you add on a rider for the wellness portion of the policy.
It's very important as well to check on these items beforehand but here are some typical things that a wellness plan will cover: vaccinations, flea and tick, heartworm, spay or neuter, exams, teeth cleaning, and microchipping . . . things like that.
I think if your dog swallowed a could screwdriver you have big problems to worry about. (Cindy laughing . . . )
Well we actually had some friends that had this dog and it had a genetic problem where it was constantly hungry and so they had to constantly tell the dog not to eat things. It was jumping on the grill and trying to eat the spatula or it would eat the couch or anything lying around. I don't know how they managed this; I think they had to drug the dog to manage his habits.
Cindy Remember we were getting ready to go home from their house? I had bought strawberries earlier in the day and I forgot I left him in the back seat; so when we were getting into the car the dog was so trying to get at the strawberries out of the backseat of the convertible? How he could smell the strawberries I have no idea because we were in the backyard and we came out and literally the entire circumference of the car was just scratched.
It was the paint, it was the leather, it was the trim. We actually lost a friendship over that.
Yes we did . . . unfortunately.
We had a comprehensive deductible and we just asked if they would be willing to help contribute to pay for it and they just didn't want to pony up for it. Anyway so they just faded off and we course took care of it; but we digress.
So here's some other costs to think about as well when it comes to vet visits when going to the emergency room:
Consultations and exams range from $100 - $150 in price. Blood work up to $200, x-rays up to $250, ultrasound up to $600; hospitalization for one to two days can be up to $1,700 and up to five days, $3.500. So these are just items that we generally researched; it can vary on where you live, so if you're in Manhattan it might be more pricey than someone who lives in Topeka, but these are the types of costs that you could face or probably some of you are aware of these based on your experience.
So let's talk about how expensive it is . . . the cost of pet insurance really depends on many different factors. First and foremost your pets age, size, and breed of course which can affect the likelihood that they will become sick or require veterinary attention. Your monthly premiums will also depend on what the annual limit is. Is there a deductible? What is that deductible? What is the reimbursement percentage that you choose when you sign up for the coverage? Finally of course each company has its own pricing. So among the top insurers we reviewed the average cost for a two-year-old dog ranged anywhere between $11.95 to $47.18 per month.
And adding to this, if you choose the wellness portion of the plan you do need to get an allowance amount; for example with your premium you could be allowed up to $250 or $450 or $650 and of course the lower allowance you choose for the wellness, it's going to cost you more for the premium. The difference is that if you eclipse that $250 for example, you will be responsible to kick out the rest of that money, so it's important to try to understand how much you're going to need for your pet's care and then choose the plan that works for you.
And hey we always talked about budgeting so if you have any type of pet ownership, this really should be one line item that gets captured in your monthly cost or another option is you can choose to factor that into your rainy day fund.
So what’s really necessary for you to figure it out is . . . if you don't have a pet yet and you want to get one, it is important that you do your research. The most common thing is the breed. They’re not just going to say hey, I have a flat rate meaning that you simply have a cat or dog or a bird or whatever. They want to know what the breed is because there are some pets that cost more than others to maintain. So for example, if you have a dachshund, the price is really low but if you have a rottweiler it's very expensive so they're going to take this into effct when determining the premium.
And since we've been a little partial the dogs here are some of the most common health problems for dogs that you might find: Cataracts; this is a big one especially with older dogs as well as arthritis. Ear infections are very common in dogs especially if your he/she spends a lot of time outside. Other items may include . . . if you're boarding them they might get kennel cough or diarrhea, fleas, ticks, or heartworm. There are so many different things that can happen to your dogs.
So here's the most important things that we feel that you need to think about if you're choosing to get pet insurance. As soon as you get your pet, you should get insurance as soon as possible especially for the more expensive breeds; and here's the thought process: the older your dog is, the more likely it's going to cost you more to have the insurance.
So if we started insurance for Pudge they're going to say that he's 10 years old and the likelihood of something happening to him is much greater. So this is just like it would be for a human. So if I am going to get a policy for term life insurance for example at age 30, it's going to be a lot cheaper as opposed to me obtaining one at age 50. So it's just logical; it’s just math.
So in the same right you need to think of it this way when it comes to your pet. If you don't do this and you want coverage, and your pet has a problem . . . say it gets hip dysplasia and you fix it, that becomes a pre-existing condition and then when you seek insurance, most carriers won't cover that past type of treatment meaning you're going to be on the hook if another problem arises.
All right before we go any further, we've done some research and we read about the common complaints; the common caveats; things that people need to understand when they look into a policy.
So I think you just said it perfectly . . . is that the biggest complaint is that people who are pet owners didn't fully understand what was or wasn't covered and became shocked when they learned that a claim was denied.
So each insurance company offers a slightly different product; like we said before you can't assume one policy is like the other so maybe some claims were denied because accidents happened while the dog was jumping which was excluded in the fine print. So I think one of the biggest things to consider is that if you're looking at pet insurance, just be sure you are reading all the fine print; you know exactly what you're signing up for; making sure that you're going through that with the insurance company so there's no surprises.
A couple other points to note, is that you need to understand the lifetime cap which is the maximum amount the insurance will pay for the life of the insured pet and the other is the period cap which says you're only going to get so much covered under a certain period of time which is probably a year as you up your annual insurance. Also, is the per incident cap. So that's a limit for each incident. So for example, if your dog gets hit by a car and your cap is five grand and the vet says the cost is $6,000, you’re going to be on the hook for $1,000.
So I think the question becomes, is pet insurance worth the cost. It's impossible to say whether pet insurance will ever pay for itself simply because we have absolutely no idea how to predict the future and ideally your pet will never suffer anything major. We've been so lucky with Mr. Pudge where he’s not required extensive veterinary care.
So here's one more point of note; getting insurance for the nominal fee that you pay every month means that you can eliminate the risk of having to pay thousands in the unlikely event that your pet does face a critical emergency at some point in his or her life. Within reason it's no different than the insurance that we have. Don't look at it in terms of how much it costs you, providing that you're willing to get it. So regardless of what your health insurance costs are, you never want to use it. The point is that if you need it, you have it, so once you choose to make this decision, then just have to live with the cost and hopefully you don't have to use it that often.
All right so that was a lot of information so I think that it's time we should do the recap. Number 1 - David
First and foremost around 60% of the population owns a dog or a cat. However, if you factor in all the other types of animals such as gerbils, birds, snakes, and yes and even mice or ferrets; who knows, then this equates to the majority of the population meaning they have or will have a pet at some point in their life so it's very important that you factor this into your budget.
Number 2 - Cindy
If you choose pet insurance there are several factors to consider and in some ways it’s very similar to insurance for humans. Most insurance plans right off the bat do not cover pet wellness because they want you to own a policy for accident/illness and then you can add the pet wellness rider.
Number 3 - David
Insurance can range widely and based on what we've researched. It can cost you anywhere between $12 - $48 depending on the breed of your pet. It is important that you perform some research to know what kinds of breeds are less maintenance. For example, as we pointed out earlier it's less expensive to own a dachshund as opposed to a rottweiler.
Number 4 - Cindy
Here are two important factors: One is that if you choose to have pet Insurance consider obtaining it as soon as possible so that your pet is covered in the case of an unfortunate event. Or look at it this way, the older your pet is the more expensive it will probably cost you to have the insurance plan; and one more thing . . . is that many insurance plans will not cover pre-existing conditions.
Number 5 - David
As we've been alluding to, the budget is a very important thing when it comes to your pet, so do some research. Make sure that you know what you want. Make sure that you know what you're getting into and make sure that you can handle what it takes to own a pet.
So we did talk about it already and other things that you need to factor in are food, vet wellness, toys, bedding, and grooming etc. but the other thing is that if you travel, you also have to consider boarding or pet care while you're gone. For example, doggy daycare is a big thing or just someone that's coming in to watch your pet in your home while you're gone. So we cannot stress enough to factor all of these things in your budget so your little babies can be well taken care of.