Why Pet Insurance is Usually a Dog
July 2007 - Consumer Reports
"Why Pet Insurance is Usually a Dog." Consumer Reports. 2007.
If the recent pet-food scare is tempting you to buy insurance for Fifi or Fido, hold on. Even though many policies cover tainted food, most exclude pre-existing conditions. And hereditary or congenital problems. And ailments that strike during the first month of coverage. And oh, yes, some insurers restrict coverage for older pets.
But such limits didn't stop the pet-insurance industry from selling an estimated $230 million in policies in 2006, a figure projected to grow by 24 percent this year, according to Packaged Facts, a market-research company1.
1Pet Care Services in the U.S., 2nd Edition: Packaged Facts, June 2006. PackagedFacts.com Academic.
There are at least a dozen brands of pet insurance in the U.S., selling several levels of coverage. Accident insurance, usually with a provision for tainted food, is typically part of a policy. Coverage for checkups, shots, and certain breeds costs extra.
Most insurer Web sites give you price quotes instantly, but whether the price is worth paying is harder to gauge. If you buy PetCare's QuickCare Gold policy for, say, a bearded collie puppy, you'll pay $49 a month. If the pup needs $3,000 toward treating a spinal problem the next year, you'll be glad you bought insurance: You'll owe a $100 deductible, after which the company pays 100 percent, up to $3,000. Not a bad deal, because you will have paid about $600 in premiums. But if the problem occurs after the dog turns 8, the plan pays only 80 percent, and you'll be out more than $4,000 in premiums paid during those eight years.
CR's take. Checkup costs alone don't justify insurance. Instead, factor them into your budget. Annual surgical vet visits cost, on average, $453 per dog and $363 per cat, says the American Pet Products Manufacturers Association2. If your pet is older and more likely to need extra treatment, and you can find an accident-and-illness policy that costs less than those amounts, consider it. If not, put the amount you'd pay in premiums into an interest-bearing fund.
2"Industry Statistics & Trends." American Pet Products Association (APPA). 2007. Web.
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Consumer Reports was extremely smart in pointing out that most plans exclude hereditary
and congenital problems. What they didn't go into detail about and what most pet
owners might not be aware of is how costly hereditary and congenital disorders can
be. So unless a pet insurance company covers those conditions, they may not be very
valuable to pet owners. CR also suggests putting
money into an interest-bearing fund. What CR is incorrectly doing is comparing insurance
to an investment. Investments have much more promise of a return than most kinds
of insurance (life insurance excluded), but what CR fails to take into consideration
are the unexpected accidents that can run up into the thousands. For example, if
you bought pet insurance when your puppy was 8 months old and put in $200 in premiums
by the time he was hit by a car at the age of 15 months, and the incident cost $10,000
you would be getting quite a great deal more. If you had put that same $200 into
an interest-bearing fund earning 8%, you would have only accrued $216. The point
is, a person can't plan for an unexpected expensive accident.
