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Is Pet Insurance Worth It?

Michael Reynolds | September 14, 2020

[Prefer to listen? You can find a podcast version of this article here: E72: Is Pet Insurance Worth It?]

Pet insurance is a topic that comes up frequently in online discussions, forums, and among pet owners in general. The question often asked is: "Is pet insurance worth it?" or "Should I get pet insurance?"

The short answer

My answer to the question of pet insurance is no – I do not recommend it in most cases. This is not because I am anti-pet or anti-animal; I love animals and have had pets throughout my life. The reason for my stance is based on the math and risk factors involved in pet insurance, as well as the available alternatives.

Why pet insurance may not be worth it

Let’s unpack the potential reasons to pass on pet insurance.

  • Self-insurance: Some types of insurance, like life and disability insurance, are nearly impossible to self-insure. However, pet insurance is one of those insurances that can be more easily self-insured. This means that you can save up money to cover potential medical costs for your pet instead of paying premiums to an insurance company.
  • Consumer Reports study: A study by Consumer Reports showed that pet owners, on average, end up paying $500-$700 more in insurance premiums than they would have in out-of-pocket veterinarian costs. This means that, on average, pet insurance isn't a financially sound investment.
  • Low chance of major medical events: On average, there's only a 3% chance of a major medical event for pets each year. The costs of these events are typically between $3,000 and $5,000, which is significantly lower than human healthcare costs.
  • Increasing premiums: As pets age, their insurance premiums often increase, which means you may end up paying more in premiums when your pet is more likely to need medical care.

Self-insuring your pet as an alternative

Instead of purchasing pet insurance, you can self-insure by saving up money to cover potential medical costs. You can either add extra funds to your short-term savings or create a separate pet emergency fund account. If you don't end up needing the money for medical expenses, you can keep it and use it for other purposes in the future, if needed.

The point is, you get to keep the premiums you would have paid to the insurance company.

Starting a pet emergency fund

If you're considering getting a pet, start saving for their medical costs before you bring them home. This will allow you to build up a cushion for potential medical expenses. If you already have a pet and haven't built up an emergency fund, consider slimming down your budget for a few months to put more money toward your pet's medical fund or into your general short-term savings.

Final thoughts

If you haven't yet built up your own emergency fund, it may be wise to wait on getting a pet, as pets can be expensive.

Ultimately, when it comes to pet insurance, the math and risk factors often make self-insurance a more favorable option. By saving up money and having a pet emergency fund, you can ensure your furry friend receives the care they need without the added cost of insurance premiums.