Financial Planning for Pet Heathcare Costs: Start a Savings Account Now!

JD recently talked about the costs of pets, a subject I've covered quite a bit (to the dismay of many of you.) ;-)

Anyway, he brought up the idea of pet insurance and whether or not it was a good investment. I thought the following comment from one of the readers was especially useful:

I’m a veterinarian and get the question about pet insurance frequently. There are a lot of plans out there and I encourage people to do their homework. My understanding is that generally the premium starts low and remains low if you began insuring your pet when they are young and keep the policy active throughout their lives. Also, most plans work as indemnity plans (again, as I understand it). So, you’ll still need to pay the veterinarian’s fees up front and then be reimbursed by your insurer.

Nonetheless, I’ve had many clients tell me that they wouldn’t have been able to do life-saving procedures if it wasn’t for the insurance policy that they have on their pet.

Still, my advice is to begin an interest-bearing savings account for your pet while they’re young and put a small amount ($25/month over 10 years will get you a long way, even with specialty care) in each month for emergency and specialty care, not for routine care. (In this way, you don’t lose control of your money like you do when you pay a premium on an insurance policy.) Regardless of what kind of pet you own, you’ll need that money someday.

I think that the "$25 a month savings account" suggestion is a GREAT idea!!! As many of you know, one of the main costs of pets is later-in-life healthcare. So if you start early on and save over the life of your pet, you should have a really good nest egg saved up if/when your pet needs expensive treatment. Consider it a self-insurance plan. And, as he notes, you'll have access to the money in the meantime in case you really need it.

Or, you could do as I have suggested and simply increase the size of your emergency fund. I guess this idea is very similar to that, though it is a useful spin to keep the money separately as you'll be able to see how much you have accumulated for the express purpose of paying pet health expenses.

Anyone out there do this?

Comments

[the weakonomist]

We wish we had gotten pet insurance on our boxer back in 2007. He broke his leg at a young age and after the dust settled we were down about $2,000. He was worth it and we could afford it, but that doesn't make it any less painful.

The boxer is all good now and runs like a champ! Because of the preexisting condition he will be too expensive to insure. All other pets from now on will have pet insurance!

[My Life ROI]

Weak -- Can't agree on that.

http://www.consumerreports.org/pets/0307vet2.html

Consumer Reports outlines a dog with common problems and shows that pet insurance never saves you money over the dog's lifetime. The only time it makes sense is if the dog has a problem like a hip replacement (much more uncommon).

Pet insurance is just forced savings for "just in case." You wind up paying co-pays for any visits, deductibles, and everything is out of pocket as FMF said. Once the insurer goes over all the fine print they often exclude a lot of the "treatment" the pet received. Then you also pay the $30-40/month premiums. Average that at $35 and for a pet that lives 10 years that is an additional $4,200.

Take it as you will, but for most people pet insurance is a losing proposition!

MLR

[Outdoorgrrl]

We do exactly this - put away a set amount of $$ each month to cover our cats' veterinary bills. I have to say though that $25 a month is too low. Considering the average cost of an annual vet visit, including vaccines, can be about $100. That means that you're only saving $200 a year for other vet expenses. We've found that $75 to $100 a month is much more reasonable. We may up that amount as our cats get older.

It saved our bacon recently when one of our cats suffered two major problems requiring vet care at the same time - constipation (needed an enima) and a 6" blade of grass that she'd managed to get lodged in her nasal cavity (required a rhinoscopy to remove it). $2000 later, the vet care budget is empty, but we have a healthy, happy, young cat still.

[Otis]

I think you should set up a lifetime limit for how much you're willing to spend on your pet. The problem is that as they get older there comes a point of diminishing returns. If I drop $2k on a hip surgery when my lab is 11 and they then live to 13 is that really worth it? Especially when you consider that the final years often require almost a $100/mo ($2400/year) in pills, easily becomes over $4500 for 2 of the most miserable years of their life.

Set your limits when they're younger, and try to keep in mind that they aren't people. Pets have much shorter lives and even in the best of circumstances you're probably not adding much time to their lives and even less of that time left is real 'quality' life.

[RB @ recessionsblow]

I never thought about creating a saving account for my dog. Hearing these stories makes me want to reconsider. It's definitely one of those areas that you dont usually think about until it's too late.

[Miss M @ M is for Money]

I have a pet savings account, though my rather young dogs have already run up huge medical bills and I've never been able to get ahead. I save ~$150 per month. Right now there is just $50 in the savings account, as opposed to the $2400 debt on my care credit account. Two dogs requiring surgery within 2 months will do it to you. I wish I took out insurance from the start because at least a few of the surgeries and injuries would have been covered. But, now it's too late.

Another thing to keep in mind about pet insurance is that anything deemed hereditary or a known problem with the breed will be excluded. One of our dog's required surgery to help him breathe, even if we had insurance they would not have covered it because it is hereditary.

[Kelly]

How timely! I was just going to write a blog post on the costs of our new puppy so far.
We looked into pet insurance, but for the breed (golden) it was rather expensive.
Since we have 2 cats as well we decided to take the premiums plus a bit and put it into our emergency fund. We consider them members of our family, so having our EF increase is what we chose to do.

[Sarah]

Being a young dog owner, with a minimal income and lots of expenses, I am very unlikely to set aside money from my paycheck unless it has to go toward specific bills which is why I have insurance for my dog. I have only had Trupanion pet insurance for a short time so I haven't needed it for any extremities yet but my sister's dog has diabetes and the insurance is covering it for life.

[Dr. Doug Kenney]

This conversation comes up a lot - insurance vs. a savings account. Actually both are a good idea for many pet owners. It doesn't have to be either/or. Even if you have insurance, you'll still have to pay a deductible and co-pay. By having some money in savings, you may be able to get a higher deductible and save some on premiums.
The examples used here are that if you put x amount of money in a savings account for 10 years, you'll have a pretty tidy sum saved up. My question is this, "what if your pet has a $5,000 expense when he's 1 year old?" Believe me, it happens. The comments above from people who have had this happen to them have stated, "I wish we had gotten insurance."
Carefully researching pet insurance and making a wise purchase can be beneficial. For example, you can usually find good coverage for a reasonable price if you look. This includes coverage for hereditary and chronic conditions.