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Is Pet Health Insurance Worth It?
How much do we love our pets? Somewhere near the tune of
$40.8 billion — the total amount Americans will spend on their
pets this year, according to the American Pet Products
Manufacturers Association.
Somewhere in that figure is $230 million — the amount that
was spent on pet health insurance in 2006, according to research
firm Packaged Facts, which projects that amount will rise 24
percent in 2007.
The veterinary industry is mirroring the advances in human
health care — new drugs, new treatments and new opportunities
for dogs, cats, birds, horses and even fish. But is pet health
insurance really worth the money, which can be as high as $500
or more a year for an older pet with a top-of-the-line policy
that includes cancer coverage?
There are now more than 12 major suppliers of pet insurance
in the United States. High-end policies can include coverage for
items like accidents and illnesses, CAT scans and MRIs,
surgeries, cancer treatments, prescriptions, hospitalizations,
vaccinations, annual exams, heartworm protection, flea control
and spaying and neutering.
However, coverage is tempting because it's not unusual for
annual expenses for a pet's cancer treatment to exceed $3,000.
Be aware that most policies pay to a maximum "per
incident", so for a chronic problem once you have received
the maximum for that diagnosis, you are on your own for payment
no matter how many years or treatments you schedule. In major
metro areas, vet bills can average $100-$250 just for the
basics, which include annual vaccinations and checkups.
But is it wise to actually buy insurance? If you feel that a
major illness or accident for your pet would wipe you out
financially, it might be worth considering. However, if that's
the case, you should only consider paying for a catastrophic or
accident policy if an insurer offers it — that is, a policy that
covers major illnesses or an accident only.
That would keep premiums relatively low and you would pay out
of pocket for annual checkups, vaccinations and routine care.
You could also save money by buying your pet's prescriptions
through reputable online and mail-order pet pharmaceutical
suppliers.
Reputable pet insurers underwrite their coverage as
traditional insurers do, but at this point, the market leaders
in the industry are not rated for financial strength by A.M.
Best or other major insurance rating agencies that cover human
concerns due to insufficient data.
What are some things you can do to control your veterinary
care costs? It might start with your pet selection. You should
research particular breeds of animals before you buy or adopt to
see if there are any particular conditions associated with the
breed.
Also, when you adopt, see if the adoption agency has a
provision for health care reimbursement whether your particular
breed of pet falls ill with certain specified conditions within
a specific period of time.
Of course, there are other options. One might be creating
your own pet emergency fund in an interest-bearing account with
deposits of at least $400-$500 a year. By the time a pet is 10
years old, you'll have a healthy cushion of at least $4,000 to
$5,000 to cover any serious treatments necessary. Putting sudden
pet expenses on a credit card could risk your credit rating if
you can't pay them off right away.
If your current pet doesn't liquidate your reserve account by
the time he goes to his reward, keep the fund intact for your
next pet. Then you'll never have to think twice about paying for
sensible treatments.
Also think about:
- Asking your
veterinarian if he or she negotiates payment plans and what
interest costs might be;
- Contact your local
shelter to see if there are subsidized veterinary clinics in
your community;
- If you have a specific
breed in mind, contact the national club for that breed and
see if they might have knowledge of specific health
conditions faced by that breed as well as a veterinary
assistance fund;
- Ask your vet to submit
an assistance request to the American Animal Hospital
Association's AAHA Helping Pets Fund (www.aahanet.org).
One of the best things any pet owner can do is be vigilant
about annual checkups and proper vaccinations — that way, you
can catch problems early. But of course, there is a
non-financial aspect to any decision making necessary to a pet's
care: if treatments only extend a pet's suffering, then it's
time to rethink.
September 2007 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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