Should you get pet insurance or a pet savings account?
Key takeaways
- Pet insurance covers accidents, illnesses and sometimes chronic conditions, while savings accounts can be used for any pet-related expense, including routine care.
- Pet insurance helps cover significant medical expenses, offering peace of mind in emergencies, but comes with monthly premiums and policy exclusions.
- Pet savings accounts give you flexibility and control over your funds but may leave you vulnerable if you haven’t saved enough for a major emergency.
Safeguarding your pet’s health can be tricky. While a routine check-up may not break the bank, rushing your pet to the emergency vet after an accident could set you back a few thousand dollars. So, do you play it safe with pet insurance or build a pet savings account for high, unexpected vet bills?
Pet insurance means upfront costs like premiums and deductibles, but struggling to save when faced with everyday bills can be tough too. Each choice comes with its own risks and rewards. Below is a quick look at how pet insurance and savings accounts work, the pros and cons and how to make the best decision for you.
How pet insurance works
Pet insurance functions similarly to human health insurance. It offers three main coverage options for your pet’s medical expenses, ranging from preventive care to surgeries resulting from accidents or illnesses.
You pick a plan based on your pet’s needs and your budget and pay a monthly premium. In 2023, the average monthly premium for an accident and illness plan cost pet owners $56.30 for a dog and $31.94 for a cat. Then, should your pet need veterinary care, you’re reimbursed for a portion of the costs (minus your deductible) up to your annual coverage limits.
You pay out of pocket for some expenses. However, when faced with a potential $7,500 bill for an emergency vet visit, it helps to know that you’re only on the hook for a portion of the bill. Sometimes, the pet insurance company will even pay the vet directly.
Pros and cons of pet insurance
It can be difficult to decide if pet insurance is worth it. Here are some pros and cons to consider.
Pros
- Add-on options: Preventive care and alternative therapies are not part of traditional plans. Some insurance companies allow you to purchase add-ons to help cover things like dental cleanings or acupuncture.
- Customize your coverage: Whether your pet is a daredevil or a couch potato, you can find a coverage plan that matches their lifestyle and your budget without sacrificing care. Many plans even cover long-term illnesses that require ongoing treatment.
- Financial safety net: One of the main benefits of pet insurance is its ability to cover between 70 and 90 percent of unexpected veterinary costs, such as surgeries, emergency care and treatments for severe illnesses. Without coverage, these expenses can run up to thousands of dollars.
- Peace of mind: Pet owners shouldn’t have to choose between their wallet and their pet’s life. Pet insurance lifts the burden of making tough decisions in emergencies.
- Wellness plans: Looking for some coverage without the big premiums? Opt for a wellness plan. These low-cost options can help cover routine and annual checkups to catch health issues before they become a bigger problem.
Cons
- Benefit-to-cost ratio: If your pet is a picture of health year after year, you might find the cost of premiums outweighs the benefits.
- Exclusions and limits: Pet insurers don’t cover pre-existing conditions, regardless of your plan. Likewise, you may be responsible for the entire bill if something happens to your pet during the waiting period. While all pet insurance companies have annual limits, some have a lifetime cost cap.
- Out-of-pocket costs: In addition to monthly premiums and deductibles, some pet insurance companies have copays for services ranging from $20 to over $100, depending on the age, breed and health of your pet.
- Wait for reimbursement: Even with pet insurance, you may have to pay the vet bill and submit a reimbursement claim. If your claim is accepted, receiving your money back could take up to 30 days.
How pet savings accounts work
A pet savings account is a simple, flexible way to save money specifically for your pet’s needs. It’s just like setting up a regular savings account, but the money is set aside for pet-related expenses.
You put aside a certain amount of money each month, or whenever you can, into this account. Over time, you’ll build up a fund to help cover routine costs (like vaccinations and checkups) or unexpected emergencies (like injuries or illnesses). The key is to identify a savings account with a good rate or high-yield interest so you get money back.
Wondering how to build a pet savings account on a tight budget? Check out our 14 tips to help you set aside money each month.
Pros and cons of pet savings accounts
The goal is to have funds ready to go at a moment’s notice. But, like with pet insurance, there are some pros and cons.
Pros
- Interest accrual: Depending on which type of savings account you choose, you may accrue interest on your daily deposits, helping to grow your balance over time.
- No monthly premiums: Besides potential bank fees, there are no ongoing costs with a pet savings account. Plus, you can put that money in your savings account rather than pay a pet insurance company for services you may not use.
- No risk of claim denials: Since there are no third-party insurance providers involved, you won’t have to worry about claim denials, waiting periods or policy exclusions.
- Total control over funds: The biggest advantage of a pet savings account is that you can use the money when and where you see fit. Rather than being restricted to accidents or illnesses, you can choose to pay for preventive care, surgeries or even doggy daycare.
Cons
- Building savings takes time: Even with monthly deposits and high-yield savings accounts, building your savings account is a slow process. One large bill could wipe out your yearly savings.
- No immediate coverage: With a pet savings account, there’s no immediate financial assistance for large, unexpected expenses — just what you have available in your account.
- Requires discipline: Much like building an emergency fund for yourself, setting aside money for your pet’s future requires discipline, foresight and a little bit of sacrifice — three things that can be tough to juggle when your personal finances are already stretched thin.
Comparing pet insurance vs. pet savings accounts
Insurance may offer a broader safety net for unexpected, costly vet bills but comes with its own set of costs and limitations. On the other hand, savings accounts provide flexibility and control but require discipline, and the funds could be quickly depleted.
Here are our four considerations:
- Cost: Pet insurance comes with potentially high premiums and deductibles, whereas setting up a savings account is typically no cost. You can even earn interest on funds you put in.
- Coverage: Both help cover pet bills. Pet insurance has limits, but some companies offer unlimited options. With a bank account, you’re limited to what you’ve saved.
- Flexibility: Pet insurance has restrictions based on policy terms, but you decide how to spend the money with a pet savings account.
- Risk: With pet insurance, the risk of high out-of-pocket costs is lower depending on your coverage. In contrast, a pet savings account leaves you vulnerable to major expenses if you haven’t saved enough.
Choosing the best option for you
To help you decide which option is best for you, consider the following:
- Financial stability: Can you afford regular insurance premiums, or would you prefer setting aside money as and when possible?
- Pet’s age and breed: Older pets and certain breeds are more prone to health issues. Insurance might be more beneficial in these cases.
- Risk preference: Are you comfortable taking on the risk of potentially high costs for the peace of mind that insurance provides, or would you prefer the certainty of having funds available, albeit limited to what you’ve saved?
Many pet owners take a combo approach, investing in pet insurance and a pet savings account. You can use insurance to cover unexpected veterinary expenses and a savings account to build a financial cushion for routine care and other pet-related expenses.
The bottom line
Whether you’re weighing the potential costs of accidents or simply want to ensure your furry friend stays healthy without breaking the bank, finding the right balance between peace of mind and financial responsibility is key. Make your own pros and cons list based on your pet’s needs and your financial situation, then research pet insurance companies and options for savings accounts to decide on the right option for you.
