Emotionally, pet health insurance provides pet lovers peace of mind knowing their pets will receive optimal medical care in a time of need. Pet health insurance is still insurance, however, so there is also a pragmatic reason to insure your pet.   

Risk Management

The purpose of insurance, in general, is to manage risk. For example, if our home is destroyed by fire or disaster, few of us could afford to rebuild it from our savings. We are willing to pay a regular, affordable premium to an insurance company in exchange for the peace of mind in knowing that the insurance company will pay to rebuild our home should catastrophe strike. This same theory is true for life, health and auto insurance. 

Insurance companies pool the premiums of all their policyholders. These premiums are used to pay claims for those policyholders experiencing a loss, pay administrative expenses, and pay any dividends to the owners of the insurance company in years of profitability. Insurance companies are regulated to ensure the premiums they charge are sufficient to prevent financial insolvency and also to monitor business practices.    

Premium Pool

A basic concept of insurance is that a “risk” (i.e., life, house, car, etc.) must be insurable. In other words, insurance companies must have underwriting practices in place to screen out risks that will deplete the premium pool used to pay claims to policyholders. In general, each risk that enters the premium pool needs to have an equal chance of experiencing a loss. 

For example, an insurer would not offer auto insurance to an individual after an auto accident as the likelihood of filing a claim is 100% at this point. Of course, higher risk policyholders can be charged a higher premium to enter the pool, such as is done when adding a 16 year old male driver to the family auto policy. I’m personally familiar with this situation.

“The true value of pet insurance is the promise to pay for covered veterinary expenses, if you incur them.”

Increasing Sophistication of Veterinary Care 

The primary purpose of pet health insurance is similar. For many of us pets are part of the family. We want to keep them healthy and alive as long as possible. Fortunately, the veterinary profession is doing its job to help us by increasing the sophistication of companion animal veterinary medicine. Veterinarians are now treating our pets for cancer and other catastrophic diseases. Although we are fortunate that veterinary medicine is able to keep our pets healthy longer, there is a cost. It is not uncommon now for veterinary bills to run into the thousands of dollars. With life-saving treatments available it is hard to say no—despite the fact that we may not have an extra $10,000 to spend on Dakota’s radiation and chemo therapy. 

Financial Return Fallacy

I have heard from many pet lovers that they don’t see a financial return from buying pet health insurance. What these people don’t understand is they have just been lucky. This is no different than saying “I don’t see a return on my house insurance premiums”. This is a good thing!  After all, who wants their house destroyed? 

There When You Need It

Pet insurance is the same. The insurance is there if you need to use it. But not every policyholder will have claims to submit. The true value of pet insurance is the promise to pay for covered veterinary expenses, if you incur them. I believe a year that goes by where you don’t have to use any insurance policy is a good year. It means you didn’t incur any losses. And one of the last things I would want is for one or both of my dogs to become seriously ill or hurt. However, if they did it is well worth the $300 per year in premiums per dog to know a substantial part of the financial burden to bringing them back to health has been transferred to a strong financial institution such as VPI.

Return to the VPI Pet HealthZone >>