The insurance industry has been around since Babylonian traders hedged their bets against shipments making it across rough terrain through pirate infested territories. Insurance is just legal gambling. Let's say a company collects $1.00 from each of a million customers in exchange for an offer to pay the costs that any customer may incur from being struck by lightening. The National Weather service estimates that about 1 person in 750,000 will be struck by lightening in a year and 90% of these victims survive but may need some medical treatment. So each year the insurance company with $1,000,000.00 in premiums can expect to pay one or two customers for expenses related to lightening injury. The rest of the money they can use to pay a sales staff, record keepers, spend on office space and pay dividends to stock holders. The company is betting that the average lightening strikes will hold steady over time and that they will make a profit. The customer is betting he can afford $1 per year much more easily than he can afford a $1500.00 emergency room visit if he is unlucky enough to be struck by lightening. Even if the customer pays for 75 years, he still is making a good investment.
How does it apply to pets? Let's say your pet's regular check up costs you about $300.00 for vaccinations, lab work and preventive medicine. Over the life of your pet you'll spend about $5,000.00 in routine care. However, if your pet has one serious accident or illness, you may easily double that lifetime cost. Is it worth it financially for you to invest in pet insurance?
Most pets do not have emergencies every year so the insurance company can afford a certain percentage of clients to make a claim each year. The company will calculate based on the age and breed of your pet how likely you are to have a claim. They base your premiums on this risk anaylysis and charge rates that make their profits likely.
You can compare plans for premiums, deductibles, per incident limits and lifetime limits that suit your savings plan. Some plans cover inherited disorders, some plans require certain preventive treatments to be provided at the owners expense to keep the pet enrolled (heartworm preventive medication). Remember, the insurance company is willing to pay your unexpected bills because most clients don't have any. If owners of accident prone pets were the only ones to sign up for insurance, then pet insurance companies would not survive. If you are living paycheck to paycheck, an insurance plan may help protect your pet in an emergency but if you are a saver, you may be able to plan for a pet emergency and still have that money for other needs if the emergency doesn't happen. It's certainly something to think about.
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