I often get asked my opinion on whether it is worth buying pet insurance. This is a hard question to answer because, unless you have a crystal ball and can foresee the future, there is no way to know what the “best” answer will be. Even if a pet owner decides to insure their pet, they still need to decide on an insurance provider as well as specific policy terms, which can have an impact on the overall financial benefit (and cost) of the insurance coverage.
Evaluating pet insurance requires an understanding of the major policy terms and an assessment of your pet’s specific lifestyle and health. This is cannot be covered in a single post. With that said, today I will begin an ongoing series on pet insurance that will help you to:
Today we will provide a simple way to think about pet insurance which can help you frame the decision.
Many years ago, I worked in the financial industry and specialized in derivative products including options. Options are usually described as either “Calls” or “Puts”. Calls provide gain when the market goes up while puts provide gain when the market goes down. They are often used to hedge a portfolio and provide protection in case something “goes wrong”. In the case of the stock market, a put option can provide protection in a market meltdown, but in most normal scenarios, the option will expire worthless and the investor would have paid the premium for nothing more than peace of mind*.
In my opinion, this is analogous to pet insurance! You are paying a premium each month and hoping that you never really have to use the insurance. Said another way, pet insurance can be viewed as a safety net for major, unexpected medical expenses that would otherwise put a burden on you and your family. If you are thinking about pet insurance, think about it from the following perspective: if your pet became suddenly ill or injured, how well would you be able to cope with a large veterinarian bill? How would you feel if you were unable to afford medical care that could have potentially helped (perhaps even saved the life of) your pet?
In future installments of this series, we will discuss the major policy terms and conditions as well as provide a framework for comparing pet insurance coverage to alternatives like self-insuring.
* There are many different factors that will determine the payout of an option, the details of which are out of scope for a pet related blog post.