As a pet owner, you’re tasked with making many important decisions regarding your pet’s health and happiness. From choosing the best pet food to finding the right vet for their needs, there are many things to consider when keeping your pet as happy and healthy as possible.
That’s why having a financial plan in place to account for unexpected illnesses or injuries is essential when it comes to your pet’s well-being. Not only does this allow you to choose the best care for your pet in their time of need, but it also helps you avoid the financial burden of expensive vet bills.
In this guide, we’re covering the two most popular options – pet insurance versus a pet savings account – and how to choose the best financial strategy for you and your pet.
What is Pet Insurance?
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Pet insurance is an arrangement in which you pay a monthly or annual premium in exchange for coverage of specified future veterinary expenses. Pet insurance typically reimburses a portion of your veterinary bills, though the amount reimbursed can vary depending on the plan you choose and what’s eligible for coverage.
Just like with any insurance, there are different plans with different coverage options and prices. Some plans cover only accidents and emergencies, while others also offer wellness plans at an additional cost.
Pet insurance typically covers:
- Consultations/examinations performed by a veterinarian due to unexpected accidents and illnesses
- Diagnostic tests, such as blood tests, x-rays, ultrasounds, and MRI scans
- Surgeries, including anesthesia, surgical fees, and post-operative care
- Medications
- Hospitalization
- Emergency care for accidents or sudden illnesses
- Cancer treatments such as chemotherapy, radiation therapy, and surgery
Additional coverage: Some plans may include coverage for alternative therapies like acupuncture or physical therapy, ongoing or chronic conditions that require long-term treatment, and/or hereditary and congenital conditions, though this type of coverage depends on the plan you choose so it’s important to read the policy plan carefully.
Benefits of Pet Insurance
There’s a reason why pet insurance is the most popular financial planning tool for pet parents. Pet insurance gives you peace of mind knowing that your pet's health is taken care of and that you are better protected from financial hardship as a result of unexpected vet bills.
Here are some of the many benefits of having pet insurance*:
- Financial protection for emergencies
- Peace of mind
- Access to veterinary care options and advancements
- Customizable policy options
- Potential long-term savings
- Help with unexpected expenses
- Support for costly treatments
- Reduced financial stress
- Reimbursement for eligible vet bills
- Coverage for accidents
- Coverage for:
- Surgeries
- Diagnostic tests
- Specialist referrals
- Medications
- Hereditary conditions
- Unexpected illnesses
* Please note that it’s important to read the policy of any pet insurance you’re considering as all plans provide different levels of coverage and may provide less or more than what is included in this list.
Benefits of PHI Direct’s New-Condition Coverage
At PHI Direct, we provide coverage of 80% of eligible veterinary treatment costs due to new illnesses and accidents. Rest easy knowing that you’ll have “just in case” coverage if your pet comes down with an unexpected injury or illness.
- Premiums that stay lower year after year
- Coverage for new illnesses and accidents
- Sick visit exam fees and applicable taxes included
- Low $200 annual deductibles so we pay out faster
- Coverage while travelling
- Coverage for breed-specific care
Learn more about PHI Direct’s New-Condition Coverage
Drawbacks of Pet Insurance
Pet insurance, while offering valuable benefits, also comes with certain drawbacks. One drawback is the potential for coverage limitations and exclusions, which can vary between policies and providers. For example, pre-existing conditions, hereditary illnesses, and elective procedures may not be covered. Also, pet insurance typically involves monthly or annual premiums, which can add up over time, especially if your pet remains healthy and does not require frequent veterinary care.
Overall, while pet insurance provides financial protection and peace of mind, it's important to carefully review your options before choosing a plan for your pet to ensure you’re getting the level of coverage that’s right for you and your pet.
What is a Pet Savings Account?
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A pet savings account is a bank account where you set aside money specifically for your pet's future expenses. Similar to a regular savings account, a pet savings account allows you to deposit funds over time and then use the money saved in the account to cover future costs, such as veterinary care, grooming, food, etc.
Unlike pet insurance, which involves paying premiums for coverage through an insurance company, a pet savings account is an independent solution wherein you are responsible for how much money you put in and save.
Benefits of a Pet Savings Account
Creating a pet savings account is another popular option among pet owners, and is sometimes even used as a complement to a pet insurance plan. Here are just a few of the benefits of having a pet savings account:
- Flexibility in fund usage
- No monthly premiums
- Control over contributions
- Savings for routine expenses
- No claims process
- No coverage limitations
- No exclusions for pre-existing conditions
- Long-term financial security
- Helps budget for pet care
Drawbacks of a Pet Savings Account
While a pet savings account offers benefits, it also has its drawbacks.
The biggest drawback is that the growth of your pet’s savings account depends on your ability to consistently make contributions. Without regular deposits, your account won’t accumulate enough funds to cover major veterinary expenses.
Also, unlike pet insurance, a pet insurance account does not provide immediate financial assistance in the event of an emergency. The funds must be accumulated over time, and you need to have made enough contributions to cover the total costs. You’ll also need to resist the temptation to use the money for other purposes.
Overall, while a pet savings account can be a valuable savings mechanism, it requires careful planning and discipline to ensure it accumulates enough funds to cover a range of expenses.
Compare Pet Insurance Versus Pet Savings Accounts
|
Features |
Pet Insurance |
Pet Savings Account |
|
Purpose |
Financial protection against unexpected vet bills |
Saving money for future pet expenses |
|
Cost |
Varies; requires monthly or annual premiums |
Initial deposit and ongoing contributions |
|
Coverage |
Veterinary expenses, illnesses, accidents, etc. covered up to your policy limit (for instance, up to $10,000 each year with PHI Direct) |
Veterinary expenses, routine care, emergencies, etc. covered up to the amount you have saved |
|
Risks |
Potential denial of claims, premium increases over time, coverage limitations |
Insufficient funds to cover veterinary care; euthanasia due to the inability to afford life-saving treatment or choosing a less optimal form of treatment due to financial constraints |
|
Lifetime Coverage |
Generally for the life of the pet depending on the coverage plan, subject to policy terms and conditions |
Generally no expiration, as long as the account is maintained and contributions to the savings account continues and there are enough funds |
|
Accessibility |
Subject to policy limits and conditions |
Immediate access to available funds up to the saved amount |
|
Additional Benefits |
May include wellness plans, 24/7 helplines, behavioural training, prescription dog food, pet owner assistance packages, etc. |
Potential interest accrual, investment options, ease of withdrawal, depending on bank or account types |
The true cost of a pet savings account vs pet insurance
The hidden cost of relying on a pet savings account is that insufficient funds could leave you having to decide between financial hardship and life-saving care. With a pet savings account, you are betting on your ability to save (and to save enough), versus with pet insurance, you can rest easy knowing that in many cases, even the largest unexpected expenses are eligible for coverage.
Let’s say a person sets aside $30 per month in a pet savings account and in the pet’s first year, it breaks its leg while playing fetch or taking a tumble. An accident like this could cost $2,000 but the pet owner will only have $360 saved up at that point and will need to find an extra $1,640 to pay the vet bills.
Someone could have a pet that never has any accidents or illnesses greater than $1,000 and could be fine simply setting aside money into a savings account. However, pet insurance is important so that pet owners never have to face the difficult question of if they have enough money to treat their pet or not should one of these bigger events occur.
Choosing the Right Option for You and Your Pet
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When it comes to choosing the right financial planning options for your pet’s needs, there are a few factors to consider.
What’s your financial situation?
Consider your current financial situation and ability to afford monthly premiums versus making regular contributions to a savings account. Pet insurance is a predictable monthly expense in exchange for coverage of most scenarios, big and small. You are mitigating the financial risk by investing in a reliable pet insurance plan. With a pet savings account, deposits may be more “affordable”, but ultimately inconsistent and may not be sufficient to cover life-saving care.
What kind of coverage does your pet need?
Evaluate your pet's specific healthcare needs and the level of coverage required. Pet insurance typically covers unexpected accidents and illnesses, and, depending on the plan, can cover significantly higher costs. The “coverage” provided by a savings account, however, depends on your ability to save a significant amount of money.
What are the long-term costs?
Pet insurance provides ongoing coverage for new eligible illnesses and accidents as long as the policy is maintained, while a pet savings account allows you to accumulate funds that can be used indefinitely (but, again, depends on your ability to save). Assess which option offers the most cost-effective solution for your pet's lifetime healthcare needs and consider the amount of financial risk you are willing to assume.
Are there any exclusions?
Review the terms and conditions of pet insurance policies carefully, including coverage limits, exclusions, waiting periods, deductibles, and reimbursement rates. Understand what is covered and any limitations or restrictions that may apply.
How’s your risk tolerance?
Consider your risk tolerance. Pet insurance provides peace of mind knowing that your pet's health care expenses will be covered in the event of an emergency or illness, but it does come with a recurring premium. A pet savings may involve greater financial risk in the event that unexpected expenses arise before sufficient funds have been accumulated.
Is it Better to Have Pet Insurance or a Savings Account?*
It's generally better to have pet insurance versus relying solely on a savings account for your pet's healthcare needs. This is because pet insurance provides immediate coverage up to your annual policy limit (after applicable waiting periods) whereas a savings account depends on your ability to save enough money to cover the expense.
Access to quality pet insurance is especially crucial in emergency situations where time is of the essence and medical expenses can escalate rapidly. Without insurance, you may face significant out-of-pocket costs, which can force you to compromise on your pet’s care and health or otherwise risk financial hardship.
Pet insurance helps ensure that your pet receives the necessary care and treatment, regardless of your bank account balance. Overall, pet insurance offers immediate coverage, comprehensive protection, and peace of mind, making it the preferred choice for pet owners seeking to safeguard their pet's health and well-being.
Looking for a pet health insurance plan for your pet? Check out PHI Direct and receive coverage for up to 80% for all the new illnesses and accidents. Contact our Care Team with any questions or get a free quote today.
*This is not intended to provide financial advice. For that service, please speak with a professional.
Featured image by BRUNO CERVERA on Unsplash
