I Spent $9,000 On My Dog. Would Pet Insurance Have Helped?

Katie: All right, before you ask, yes, I know spending $9,000 on a dog is absurd, and it's extreme. But when you don't have any human children, you get to waste all your money on your four-legged ones. Welcome back to this week's episode of The Money with Katie Show, Rich Family. I am your host, Katie Gatti Tassin. And today we are talking about the pet insurance decision. 

Now, I maintain that one of the hardest things about being an adult is discerning which types of insurance are a total ripoff and which are actually worthwhile. There are a surprising amount of perspectives online. You've got, on one end of the spectrum, literal insurance salesmen who will recommend a whole life policy to a 23-year-old teacher making $40,000 per year with no dependents. Yeah. And then on the other end of the spectrum, you have Pete Adeney of Mr. Money Mustache, who famously does not even carry health insurance because he says he self-insures instead. One such “I am unsure if this is legitimate or a scam product” is pet insurance. 

So growing up, my family and I always had at least like four stray cats living in our house at any given time, and my parents never carried any pet insurance. So I was surprised when it was offered as a benefit at my first job. And depending on who I asked, I heard wildly different experiences. Some people swore it absolutely saved them and they would never go without it. Other people insisted, hey, this is a huge waste of money. It didn't end up covering anything worthwhile. And so in other words, it sounds representative of the polar opposite experiences people have with insurance, whether or not they end up needing it. According to a MarketWatch survey, about 45% of pet owners carry insurance, and making matters more complicated, each and every policy is different, and it's worth acknowledging at the outset, these insurance companies, they don't lose, right? At the aggregate level, they make money because they are collecting more in premiums than they are paying out in claims, and they employ a bunch of people to find ways to deny coverage so that they don't have to pay. And that is the quiet part that we're gonna say out loud today. 

But when my dog Georgia, aka Georgia Beans, aka henceforth referred to as Beans, got sick in 2022, I found myself routinely thinking, gosh, I really wish we had pet insurance. So today we are gonna do the math. We're gonna simulate an alternate reality wherein we carried pet insurance for Beans to determine, is it cheaper to carry pet insurance or to self-insure when things go wrong? We're gonna try to figure out where the tipping point is. And in order to do so, I am subjecting my Gmail to an absolute onslaught of marketing materials by pretending to take out the same policy on her that we would have taken out when she was just a wee puppy lass in 2018. Through this example, I think it'll become obvious why the right decision is not always clear. 

So our methodology? Pretty simple. Knowing what we know now, we’ll calculate how much we would have spent on premiums over the years leading up to her medical needs, and then figure out what portion of her medical expenses using real costs would've been covered by the insurance policy, and then compare it to what actually happened, aka, no insurance, just vibes. I'm requesting quotes from a company called Embrace Pet Insurance, mostly because my next door neighbor told me that's who she has and she likes them. Henah vouched. So ironclad research happening over here. And we'll be right back after a message from the sponsors of today's episode. 

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Katie: Okay, let's get started. So for context, in 2022, Beans had a slew of health problems that seemed to kind of come out of nowhere, because except for needing a Prozac prescription a few years ago, she had been a really, really low-maintenance dog. But in 2022 it seemed like something new was going wrong every couple of months. So at first we noticed she was losing weight. We took her to the vet; they couldn't figure out why, which is never what you wanna hear, because typically it means you are about to subject your dog and your wallet to a number of tests. We then got some rogue blood work results back that suggested something might be wrong with her liver?

And long story short, we pinballed from specialty vet to specialty vet, putting her through test after test to try to figure out what was going on. Spoiler alert: It had nothing to do with her liver, but we almost ended up doing a $6,000, yes, $6,000 liver biopsy. Thank god more blood work ended up revealing that the biopsy was not necessary. So a few x-rays, other tests later, the vet figured out she actually had a condition called EPI. It has a long fancy name that I won't bore you with, evidently very common in German Shepherds, but the illness means her pancreas does not make the enzymes needed to digest her food anymore, which explained why she was constantly needing to go to the bathroom in the middle of the night, why she was rapidly losing weight.

Now the punchline is that the medication for EPI is extremely expensive. I am convinced that the Sackler family and Purdue Pharma are somehow responsible for this, because when I first got a bottle in October 2022, it was $190. And by January 2023, three months later, it was $290. Now the point is, she now requires roughly $300 per month in medication and specialty food for the rest of her life. 

Now, that would've been upsetting enough, except for the fact that at one of her follow-up meetings for her pancreas issues, the vet noticed a lump on her skull. They were like, hey, what is this giant bump on her head? So we did a series of biopsies on that and found out it was a low-grade bone tumor which needed to be removed. So I sat down; I totaled up all of our charges for all of the vet visits and procedures over the last six months, food and medication aside. And I realized we've spent $9,000 on vet bills since September 2022. The good news is that as of right now, Beans is tentatively doing well. She gained most of her weight back since the diagnosis. Her tumor has not begun to regrow aggressively, as far as we can tell, but to state the painfully obvious, that is a lot of money.

So would pet insurance have helped? And if so, how much? You might think, wow, this is gonna be night and day. There was so much that went wrong in such a short period of time. Pet insurance is a no-brainer. So let's enter the pet insurance alternate reality and find out. First I'm requesting a quote from Embrace on a German Shepherd puppy, as though Beans were six to 12 months old with no known preexisting conditions, to help us get the best rate. And if I were to accept their most popular plan, it'd be $50 per month, but almost immediately I am skeptical, right? Because they're trying to steer me to a plan that's popular. The translation in the UX world is usually, “This is the most profitable plan for us.” Now, the $50 a month plan would get me a $5,000 annual reimbursement limit, a $750 annual deductible, and a 70% reimbursement percentage. So in layman's terms, this plan means you would pay $50 per month for the coverage. You would be responsible for the first $750 in expenses each year, and then they would reimburse up to 70% of each accepted, accepted, underline that, claim up to $5,000 per year total.

But we can adjust the limits; we can play around with them. So we can increase our coverage to a higher annual limit. We can lower our deductible, we can make a higher reimbursement percentage, and that will increase the monthly premium cost, which highlights how insurance is really always about running a constant cost/benefit analysis. So before we try to figure out what the optimal level of coverage is, I'm gonna create a plan based on what I actually probably would've done had we gotten insurance at the time, which is an unlimited annual reimbursement. So we'll raise the annual limit, a $1,000 deductible, so a higher deductible typically helps lower our monthly premiums, and then a 90% reimbursement rate instead of 70%. So they'd cover 90% of our accepted claims after we spend our first thousand dollars. Now that plan for Baby Beans would've been $88 a month. It is worth noting, this does not cover regular vet checkups. Now today, Beans is almost six years old, but our health problems began in September 2022. So that means if we had insured her in January 2018, a month after my husband Thomas got her, we would've paid 57 months of premiums before ever needing the insurance for anything. Prior to this past year, all of her expenses were standard and low. They would not have surpassed a thousand dollars per year deductible.

So that means by the time she got sick, we would have paid $5,016 in premiums. It appears we would've hit our deductible in October, because we racked up a thousand dollars of costs by September 30, and at that point the insurance would've begun kicking in at that 90% coverage level. So if you're keeping track, that is now $6,016 out of pocket so far in the insured alternate universe. The rest of the charges for the year 2022 totaled $3,940. So then the deductible resets, right, because now it's January. So of those 2022 costs, the insurance would've covered 90% per the plan. So $3,546. My husband and I would've been on the hook for $394, which brings our total out of pocket costs in the insurance world up to $6,674, when you also include the monthly premiums. 

Over that time in January and February of 2023, the costs were driven up by the major surgery to remove the bone tumor. So a total of $4,116, of which we would've paid that thousand bucks toward the 2023 deductible, and then $311 of the remaining $3,116 bill, plus $176 more dollars in premiums. That is $8,161 out of pocket total in the insurance world, as opposed to our actual costs of $9,006. We would've been $845 ahead had we carried that insurance plan on Beans. 

Up until this point, though, it is worth stating that we don't know what the future holds. So if all my hopes and prayers pay off, she will not have any more medical issues. And after nine more months of paying $88 per month in premiums, we would then again be neck and neck with our uninsured reality, which goes to show, a crystal ball can make insurance planning a lot easier. So if you can get your hands on one of those, do it. It's also worth calling out that since $5,000 of our $8,161 would've been spread out over 57 months of her life, it would've been easier to pay for as opposed to lump sums of $2,000 and $3,000 just weeks apart.

So now that we've looked at this hyper-specific example, let's talk averages and examine what might be the optimal risk/reward strategy and how to think about it. So according to MarketWatch, the average cost of pet insurance for cats is between $14 and $24 per month. And for dogs it's between $23 and $45 per month, depending on your insurer. Moreover, the breed of your pet changes premiums. For example, a 10-year-old Yorkshire Terrier costs, on average, $65 per month to ensure, but a French Bulldog costs $168 per month on average. The cheapest dog breeds to ensure are Dachshunds, mutts, and Australian Shepherds. That last one surprised me. They seem pretty high-maintenance. The most expensive are bulldogs, French bulldogs, German Shepherds (ayy), golden retrievers, labs, and Rottweilers. So we will link the full breed breakdown from MarketWatch in the show notes. If you're curious, there was less variation for cats by breed, and I actually couldn't find Sam cat's breed, Tiny Perfect Tabby Prints, in the list. So who knows? 

And when it comes to claims, the average claim amount paid for accident and illness plans was $278. So I guess we really are just very unlucky. And when it comes to providers, Lemonade and Fetch appear to be the only pet insurers that do not charge monthly transaction fees and one-time enrollment fees. So something else to keep in mind. We'll be right back after a message from the sponsors of today's episode. 

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Katie: So when analyzing, I like to call this the “figuring out the best bang for your buck strategy” and then hedging your bets appropriately. As you can see, Beans had a ridiculous amount of things go wrong in very quick succession, and it's still amounted to less than $10,000 total. While I ran the initial math with the unlimited reimbursement, the monthly premium drops by nearly 30% when you choose the next highest annual limit of $15,000. Knowing what I know now, I am comfortable with declaring that $15,000 of annual coverage per pet is probably a safe gamble for a pet owner to make. If you took this same policy and you selected $15k instead of unlimited, but still with that 90% reimbursement and a thousand dollars deductible, it would cost $63 per month, which is only $3,500 over the five years before we would've needed to tap ours, as opposed to $5,000, which would've put Insurance World around $2,300 ahead of reality.

And again, it is easy to make these decisions in retrospect, but this seems to be the sweet spot where you get the most coverage bang for your buck. And since every policy is different, here's how I like to think about this and determine which level is the best. So I can see that I would pay $50 per month for the first $5,000 of annual coverage, but only $13 incrementally for the next $10,000 of coverage. And at that point, the reward you stand to gain—$10,000 of additional annual coverage—effectively costs you $156 per year. That is an asymmetric reward for the cost.

Similarly, I can see that when I select 70% reimbursement, I'd pay $50, but bumping up to 90% is an incremental 12 bucks per month. Since one of Beans’s surgeries was $3,500, that's a difference of $700 in coverage on just one surgery. Again, asymmetric reward. To get an additional 20% of coverage on every single charge amounts to $144 per year. Lastly, I usually go for the larger deductibles because low deductibles tend to be expensive. For example, if I were to make my deductible $250 instead of a thousand, the price of the coverage would more than double, from around $782 per year to $1,650 per year. I'd be paying $868 more in premiums to save $750 on my deductible. So you can see, this is specific to this one insurer and playing around with this plan, but you can use these same frameworks to think about your trade-offs. 

Now the problem for us now is that any problems related to her bone cancer or her pancreas, they're no longer covered because now they're considered preexisting conditions, which highlights the way the timing matters so much. So it got me wondering, is there an ideal age to ensure your pet? We mentioned earlier that ensuring a puppy when they're young and they have no preexisting conditions can help you lock in a low rate. But is that assumption true enough to justify the likelihood that you are probably going to pay for years of premiums on a perfectly healthy dog?

Getting pet insurance earlier in a pet's life can help offset and spread out the costs of life-changing or end-of-life care. But when I was looking at the differences in cost by age per MarketWatch’s research, there's not typically a large jump in price from age one to five. For example, for the mixed medium breed, the average price to ensure a three-month-old puppy is $29. And the price to ensure that same dog at five years old is only $38. It's nine bucks more per month. The largest jump in price happens between ages five and 10, which indicates to me that from a pricing sweet spot and risk/reward perspective, at least, insuring around age five might be the best bet.

And anecdotally, at least, that is when Beans begin to have her health problems. Though obviously you can't extrapolate that to everybody. If we had a crystal ball, though, the best time for us to have gotten insurance coverage for her would've been early 2022, right before she turned five. She would've had no preexisting conditions and only a few months of paying premiums before we would've needed to tap insurance. And most policies do have waiting periods. They don't want people to notice an issue with their pets, get coverage, and then immediately try to use it. So you wanna pay attention to any waiting periods that your potential policy notes. 

And if you're thinking you may be able to get away with a little light insurance fraud with your furry best friend, know that most insurance carriers require you to submit documentation from the vet. So records, notes, you name it, that prove that there were no issues that you knew about. 

So how does pet insurance work when you actually go to use it? Number one, you're gonna visit the vet. Number two, you're gonna pay the vet. So unlike health insurance for humans that can bill your insurance first, you are responsible for paying all the vet bills at the time of service, then you're gonna get an itemized invoice. This is what you need to file your claim. Then you're gonna submit the claim with the invoice and any other required paperwork to your insurance. Then you're gonna wait probably for months. And then if you get approved, you'll receive reimbursement. And remember, months. So having pet insurance is not a substitute for having an emergency fund.

And jury's still out on us, whether or not we're gonna take out policies now, because this exercise has been enlightening for me, as it's shown how we can get coverage for a relatively low monthly premium. But I have to admit, I am not totally sold. And I think part of my cynicism is informed by my experience with the US healthcare system, where claims and billing get rejected or mishandled so frequently. Half the time my insurance doesn't even work for the things that it says it will. I recently took out an insurance policy for something else and I was reading the fine print of the policy documents after I got it and realized that the scenarios it actually covers are so slim and specific that it's unlikely it'll ever actually be of any use to me.

So suffice it to say I believe in the concept of insurance, but I am skeptical of how it works in practice. And for us, with Georgia's existing health problems and Sam's lack thereof, I'm still on the fence over whether we're gonna take out new policies for them. The bottom line is that I love Sam and Beans so much that I’d probably bankrupt myself trying to save them before I would throw in the towel, which means I'm actually probably a pretty good candidate for pet insurance. But regardless of what I choose, I hope this helps you feel prepared to make a more informed, savvier decision about the coverage that you choose or don't choose to get for your very own Sam and Beans. All, right y'all, that is all for this week. I'll see you next week, same time, same place, on The Money with Katie Show. Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our chief content officer, and additional fact checking comes from Kate Brandt.