By Tom Collins
And, so I don't get in trouble with our speaker from the FTC, Mary K. Engle, please note that Yvonne and I have a paying gig working with BlogPaws sponsor PurinaCare Pet Health Insurance on their blog.
Now, Edie compellingly made the case for why you should get health insurance for your pet — and especially why you should start it when the pet is young and healthy. In her follow-up post, she and guest author Susanne Fritz added guidance on what to look for in a policy (and what to "look out" for).
The part that's been bugging me is the argument I've seen in several places (e.g., MSN Money; Dollarish) that pet health insurance is a bad "investment," claiming you'd be better off putting the monthly premium into a savings account.
My reaction: DU-U-U-U-U-H!!!
Health insurance is NOT an investment! It's protection against financial disaster. That includes pet health insurance.
What finally prompted me to spill this out of my head and onto the blog was the excellent collection of pet industry stats and financial info recently posted by Ellie Nelson over at the Pet Insurance Center blog, with the very relevant title, Who Ate My Money? U.S. Pet Industry Expenditures. Here's one of the charts, showing a breakdown of how much the average dog and cat owner spends annually:
If you add the Surgical Vet Visits and "Routine Vet" lines together, the AVERAGE pet owner is spending well over $500 per year on veterinary care.
But again, pet health insurance is not about these ordinary, average expenses. It's about protecting yourself and your pet from the financial (and emotional ... and life-threatening) disasters that may not happen, but all too often do.
What kind of disaster are we talking about? Well, remember Edie's vet bill in her post was an unexpected $743. We've done a series of "From the Claims Files" podcasts on the PurinaCare blog (scroll down a couple of posts) describing everything from major surgeries for accidents and swallowing strange objects, to high-tech diagnostics, to treatments for chronic or herediary conditions, where the bills ran $2,000-$4,000. Deb Mallon over at Pet-Care-Unleashed provides a meticulous comparison of four years of her dog's life with or without pet insurance, including a serious injury that cost $5,600. Even the MSN Money post linked above acknowledged advances in veterinary medicine with "costs ranging from $1,000 to more than $5,000."
The "mother of all claims" that I've seen so far is described by another of our speakers, Dr. Larry McDaniel, in his recent Now That's a Vet Bill! post: seemingly routine spay surgery and then complex treatment for post-surgical complications, totaling over $18,000. PurinaCare reimbursed over $14,000.
Okay, to paraphrase Dr. Larry at the end of his post, "That's what pet health insurance is REALLY all about!" Imagine how it must have felt to those pet parents to take their beloved dog in for a routine procedure, have all that go wrong, and then be able to make it all right again — without worrying about going bankrupt.
And getting back to my original point, even if you accepted the "investment" premise, there are at least two huge holes in the savings-are-better argument.
The first is that hardly anyone has the financial self-discipline to put the amount of a pet health insurance premium into a savings account each month. Heck, Americans can't bring themselves to save for retirement, or their kids' college, or other kinds of "rainy days." What makes these financial advice gurus think anyone is going to set up a separate account for their pets' health care needs?
The second flaw in their logic is far worse. Even if you had the discipline to put away that relatively small amount as an "investment" it would take years to accumulate enough to cover even the amount of Edie's vet bill. Your "investment" would never grow enough to make a dent in the bill Dr. Larry wrote about, within the life span of most dogs and cats.
I got a free quote for a PurinaCare With Preventive Care policy on the mixed breed puppy we will be getting as soon as our cat is fully settled in here in Colorado. I chose a $500 deductable, becasue the "average" above tells me we'll spend that much every year anyway, so if we have a claim for something unusual, it'll likely be covered. The premium will be $26.36 per month.
According to the Simple Savings Calculator over at BankRate.com, here's what I could accumulate if intead I put that amount into a savings account, added the same amount every month for the next 15 years, and earned 5% interest (yeah, right!):
How much protection would our dog have in the first few months? The first couple of years?
As you can see, it would be more than two years before I'd have enough to cover a bill like the one Edie posted on her blog. I'd have to hope nothing went wrong for 8 years, to be ready for a bill like the many we've talked about in the PurinaCare podcasts. And if a real disaster like the one Dr. Larry described came along, a savings account would never provide much comfort.
On top of that, what if you actually needed to spend the money in the account on vet bills along the way? You'd have to start the savings process all over. And you'd go back to having no protection for your pet's health at all for the first few years!
So in my opinion, when you think about pet health insurance, be thinking about your pet's health and not about investment returns.
You're buying protection against a disaster you hope will never happen and the peace of mind you'll have in knowing that, if it does, your pets' health — or even survival — will not depend on how big your savings account has gotten.