Do You Need Pet Insurance?

The decision to insure your furry friend isn't just about the money.

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We adopted an eight-year-old beagle, Tobey, two years ago and it was one of the best decisions we ever made. He's brought so much excitement and love into our lives. He also became one of the biggest responsibilities of our lives—since we don't yet have any children.

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Most of the major decisions were pretty easy to make—what kind of dog bed to get, the type of dog food to feed him, and who would be responsible for what and when. There was, however, one tougher question we hadn't considered—whether or not we should buy pet health insurance.

Pet health insurance is a lot like people health insurance. You pay a monthly premium and, in return, you get medical coverage for a litany of medical procedures. You have to pay a deductible out of pocket. Our particular insurance has a $50 deductible per visit and we pay 20 percent of any procedures. Much like people health insurance, pre-existing conditions are not covered.

While the specifics might change from breed to breed and company to company, the basic gist is the same. The healthier dogs, the ones that aren't as adventurous eaters and climbers and escape artists, help pay for the ones that get into more trouble.

When we did the math, it didn't really make much sense. The monthly premiums, combined with the deductible and 20 percent co-payment, made it such that we'd have to have almost a $700 dollars in treatment each year for the program to make sense.

We bought it anyway. We bought it because this health insurance bought us peace of mind. I don't want to be put to the decision of whether I want to put down our beagle Tobey or pay for an expensive medical procedure. It wasn't a money issue, it was a peace of mind issue.

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With insurance, a $3,000 operation is still $650 out of pocket. $650 is less than $3,000 but it's still a significant amount of money. Since I felt like we are financial stable enough to pay the monthly premiums, which makes a $3,000 decision into a $650 decision, we decided that it was better for us to buy peace of mind and not subject ourselves to that choice. (See From Pet to Marriage Insurance: Good Deals?)

Some would say that we should save the money and put it in a high-yield savings account, accruing interest and "self-insuring." The problem with that strategy is that I would still be faced with a $3,000 decision (instead of a $650 one). My purpose for buying this insurance isn't financial, it's for mental health.

Fast forward two years and the decision has, so far, paid off. Our little guy has had a few medical issues that amounted for 20 percent more than what we paid for the insurance. Thankfully, we haven't experienced anything catastrophic and so the policy hasn't been hugely "profitable," but it's broken even. In a perfect world, we hope never to have to use insurance but breaking even means we at least made a good choice... so far.

What do you think about pet insurance? Is it worth it? A rip off?

Jim Wang writes about personal finance at Bargaineering.com. When he's not tackling money issues, he's usually looking forward to his next vacation and writing about it at Wanderlust Journey.