First time owner and pet insurance

[conflicted1]

Hi all

I am very excited as I will be welcoming my first puppy home next week. As a person growing up with parents afraid of dogs. I have waited this moment my entire life until I have a house and settled down in work. I have also volunteered in shelters to make sure I understand how to take care one. So I thought I was prepared until I work down my checklist the topic today: pet insurance.

I thought it was a simple thing and just get what everyone gets. But the more I look into it. the more it doesn't make sense. So I'm posting here in hope that everyone might enlighten me on what I'm missing. Also, please forgive me about all the hard math if it sounds too cold to you. I love my puppy very much and intend to care for him to the extend of my ability. I just like to do the calculations first before applying the intangibles. I did the same when I purchased my own life insurance.

Now here are my thoughts based on what I found out:

A) The whole logic of insurance is transfer an unbearable risk to a third party at a cost.

This means two things:

1. The expected monetary benefit from an insurance will always be less then its premium. If this is not so, that means the actuary department screwed up big time and the insurance company will soon go under. Leaving nothing to be paid anyway.
2. Therefore, only logical thing to insure would be something one can not bear to lose.

In the context of pet insurance, this means:

1. sum of (accident/illness payout * chance of that accident/illness) < premium paid out in the insurance duration.
2. Insure for the critical injury/illness that will finically ruin one.

B) But almost all pet insurance on the market seems to be going against that logic:

1. There is usually an upper limit of 5k to 10k.
2. There is a 10% to 30% copay that have no upper limit
3. The max deductible allowed is between $750 to $1000.

With the reasoning above in A), an insurance that makes sense would be:

1. Unlimited coverage
2. 0% copay
3. Deductible set to the maximum one can bear financially.

C) The best I can find so far was somewhere around the ballpark of:

1. Unlimited coverage
2. 10% copay
3. $1000 deductible

The premium of such policy would be around $1300 a year. Now because of the evil pre existing condition not covered. I will pay this premium from day one of puppy arrive to the end of life. Which I expect to be averaged around 15 years. That nets to $19500 and probably more due to time money value.

D) And there's also the possibility of insurance company kick the dog out?

Since the expensive and chronical condition usually spams multiple years. What is stopping the insurance company from taking one's premium for 10 years making lots of money, then the year after the dog develop cancer, send out a letter saying "we regret to inform you we have decided not renew the contract"? If that is to happen, then all the premium would be wasted.

Based on the above, it seems to me that if I can set aside say $10,000 a year for potential treatment for my dog. It is mathematically logical to self insure (not getting insurance). One might say my math would look silly the moment my dog ate something and have a ER visit of $5,000. But I would say that it is not silly even in that case since ($5,000 * chance of that happen) < premium I would have paid. The insurance to me seems to at best would net me a little lose every year and cover something major to 90% down the line and at worst becomes a nightmare of constant fighting with adjuster and got dropped the moment a big bill shows up.

But not getting an insurance seems so radical that I'm really afraid I'm getting something wrong. So please do point out if I'm missing something and I would greatly appreciate it.

 

[eront]

@conflicted1

Deductible set to the maximum one can bear financially.

Do know most insurances require you to pay all of it and they refund you. They don't pay the vet.

The deductible being the most you can afford would not help you.