Around 9 years ago I made conscious decision not to insure our four animals, a decision which I was very nervous about at the time. The following article explains why, and gives some insight from a mass of data I’ve collected over approximately 10 years from self-insuring. If you are thinking about purchasing insurance, or self-insuring, I hope this article helps inform you.
Before I go any further, let me get a few things out of the way:
- Whenever anyone asks me about whether they should purchase pet insurance or not, I tell them there is no simple answer. It’s a very personal decision, and very much based on individual’s circumstances and their ability and appetite to absorb risk.
- I’m not a qualified financial advisor. This isn’t, and shouldn’t be considered financial advice. It’s just my experience and explanation of why I chose to self insure. Take it as such.
- At the time of writing this, I’m employed by an insurer who offers Pet Insurance. My advice here is my own personal opinion, and in no way influenced by my employer.
Why don’t I Pet Insurance?
Actually, I did use it, for years. My wife and I owned cats together before we added dogs, and I didn’t question using it. It was a good price (around £12.5 per month per cat), when we needed it, the insurer paid and provided good value. Our cats rarely got sick, but there were two occasions where our older cat needed surgery and the bill turnd out to be significant. So far so good.
When we introduced our first dog, a Boxer named Kingsley, I also purchased Pet Insurance. He was a pedigree dog, so I bought a premium ‘cover for life’ policy from a leading UK insurer. It cost around £40 per month, had unlimted cover, a £90 excess and promised to cover conditions for the life of the animal. This again seemed like good value, so when we introduced our Doberman, Junior a year later, I purchased similar cover. In this case, his premium was £60 which was more than I expected but fair. However, his cover was significantly different. His maximum cover per year for a condition was £12,000. This still seemed like a decent amount of cover, but it didn’t quite give me the peace of mind I wanted from a premium insurance product.
What drove me to question pet insurance really though was Kingsley’s first annual renewal. His premium had increased by £5 per month, but more importantly, his cover had also been limited to £12,000 per year. In my opinion, this wasn’t the product I purchased, and it made me question the long-term value.
So I made a decision
But it wasn’t an easy one to make. On one hand, I knew without pet insurance, I could be faced with a choice in the future of having to let one of our animals go if I couldn’t afford their medical treatment. That isn’t something I’m comfortable with. On the other hand, I now didn’t feel like I could fully rely on Pet Insurance to take that worry away for me. Now, £12,000 is a significant amount of cover, and as I’ll show with data later on, I have never had to pay more than that for medical treatment for 1 animal. Close! But that limit still hasn’t been exceeded. But I was extremelly worried about the insurer’s ability to change the Terms and Conditions of my policy each year, including the premium and amount of cover. It was £12,000 then, but what if in a few years it was reduced to £10,000? £8,000? What if the premium keeps increasing at the same time. The whole point of me buying a covered for life policy was to give me certainty for the animals life, and now I didn’t have it.
I chose to self-insure
I figured accross four animals, I’d be paying at least £130 per month for insurance, but I don’t feel like I can rely on the product to be there for my pet when I really need it. I cancelled my policies, and set up regular transfers in my bank account to move the same amount of money into a seperate account to pay for future medical expenses. It was at this point I also started to log every medical expense to help me monitor the outcome of my decision.
What does the data tell me?
At time of writing, the summary is as follows:
Over 116 months that I’ve been recording data, it shows:
- A total of just over £26,500 spend on total medical costs accross all four animals
- Over £24,000 would have been paid out by Insurance
- That in total I would have spent over £15,000 in insurance premiums
- I would be approximately £9,000 in credit
Off the bat, it looks like a no-brainer. Of all the vet costs that would have been eligible for insurance cover, it would have cost me £9,000 less to pay for insurance.
But before I get carried away, there are a few things to consider:
- My calculations don’t cosider any premium increases. Now assuming a fairly conservative annual increase of 5% which was evidenced in the first year, the premium after 116 months would sit at £209.42, and the total cumalitive premium to date would be £19,538.47 as opposed to £15,687.00. That reduces the overspend from £9,098.08 to £5,238.61.
- My calculations also don’t consider any increasing excess. The policy I had for my dogs had a clause that increases the claims excess for dogs over age 7 to 20% per condition. Now, given our single largest claim was £11,500 which occurred when Kingsley was diagnosed with a meningioma at 8 years old. Our contribution to that condition alone would be £2,300 taking the overspend down to around £4,000. Our contributions after the age of 7 aside from that totalled £3,800. Assuming half of those are eligible for insurance it would reduce it by around a further £400 to £3,600.
So I’d say the true saving on Pet Insurance in my case would be around £3,600.
The interesting thing to note here, was up until 2016, the calculations stacked way in favour of self-insurance. One catastrophic condition with one animal tipped the balance in favour of Pet Insurance. But that highlights the main value proposition of insurance for most people, to pay for those really big unexpected bills.
How likely are those big bills?
Well it has happed with one animal out of four in ten years in our case. Now, that amount of data isn’t really statistically significant, but it’s worth looking into in a bit more detail.
The graph below shows the total cost per medical condition recorded for all animals over the period.
As you can see, the most expensive condition outside of the meningioma, is the regular allergy treatment we give to Junior. This has cost us about £3,500 which has been spread fairly evenly accross the 9 years we have had him. The next most expensive (general health) cost bar wouldn’t be covered by insurance, and includes anything from vaccinations to general check ups.
Generally, from what I see with the data I have recorded, it is fairly unlucky to be hit with a single condition that requires an immediate spend of more than around £500. Items like ‘Interdigital Cysts’ and ‘Ulcerated Cornea’ look significant, but are conditions that have occured a few times for those animals over a number of years, and usually require fairly lengthy treatment.
One other thing to note here, is the data includes a cat named Wriggly who came to us as a stray. We decided to do what we thought was the right thing and pay to have him neutered before rehoming him with a shelter, and the poor cat almost died during the procedure. 24 hours of constant supervision, and a fair amount of cash later and he was fine, even if my wallet was sore.
As another example, the graph below shows the total medical spend per animal per year.
Again, until the diagnosis of the meningioma, our costs only occasionally exceeded the £2,000 mark. Generall fitting under what we would have been paying in premium by the time you count items not covered and excess payments. However, that severe condition is worth noting, as had we not been provisioned properly, we would have been faced with letting Kingsley go at point of diagnosis. The treatment meant we managed to give him an additional 14 months of quality life.
So why do I still choose to not purchase Pet Insurance?
Given what in my case seems to be a financial benefit of at least £3,500, why do I still not purchase Pet Insurance for our new dog Ash?
Well there are a number of reasons:
- Control – I like knowing that my ability to look after my animals is 100% in my hands. The money I put aside is mine, and I have no dependency on a third party who may or may not change the conditions of cover after a number of years. I’m willing to pay a premium for this.
- Risk – Over the last few years, some big name insurers (opens external link) have pulled out of Pet Insurance and left their policy holders with no cover, or transfered to another insurer with no guarantee of premiums. The risk of this happening after I have invested a number of years of premium is too great for me to be comfortable with.
- Principals – I funamentally don’t like the cycle of insured healthcare. I believe it risks leading to inflated medical costs which in turn inflates premiums. I don’t like vets asking if I’m insured before recommending treatment, and I don’t like insurers blaming premium increases rising medical costs. I also don’t want the situation where insurers start having to mitigate heavily and question whether treatment is needed. See point 1 for why I like my independence.
- Personal Circumstances – My wife and I are fortunate enough to have the flexibility to absorb a shock expense. I’m fairly fianancial conservative, and benefit from being able to provision appropriately.
My intention here isn’t to say whether Pet Insurance is worth it or not. Clearly from the data I have collected, it has proven it’s worth. For me, I just don’t think the value it can provide outweighs the inherent risk of the product.
The decision of whether you purchase insurance or not should be based on your own circumstances alone. One thing I would always recommend though, is that if you think you want pet insurance, do it as soon as you get your pet, and do it with a very reputable insurer. Do not be driven by the lowest premium, but rather think about who has the clearest terms and conditions, and who you think you can trust to be around in 10 years to pay out on a claim. Remember that transferring between insurers will often mean your new insurer will exclude any existing condtions your pet has, so you really want to choose early and choose well. It is also worth considering that Pet Insurance usually covers other Perils aside from pet health. For example, public liability for your dog should it cause injury or damage.
Long term, I would love to see reform of the product. I would love to see ‘Cover for life’ policies, truly being for life. By that I mean, insurance written for the life of the animal, without annual renewal. Baking in annual premium increases and giving guarantees on claimable amounts per year. I would greatefully buy Pet Insurance again, if I could predict how much premium I would be paying over the life of animal, and exactly how much cover that would buy me. At that point, it would be a true financial instrument. At he moment, it just feels like something you’re afraid to not have.
Hopefully you found that useful. If you have any questions, please feel free to comment or get in touch.