A slight deviation from our usual unapologetic rants about personal finance, investing and compounding investment fees for things that add no value, here’s a brief personal account of this Editor’s experience with pet insurance.
Yes – pet insurance – the surest sign that having children has become too expensive for most people.
This Editor has two cats. One is amazing and might just be the best pet ever, whilst the other is a personality black hole, but that doesn’t mean we love it any less, so my recent free time was spent doing a bit of work and some analysis on the benefits of taking out pet insurance.
A reminder as to why insurance works and what it’s for
Insurance is all about pooling risk with like-minded people, all paranoid about contracting the same affliction, or worried about golf-ball sized hail stones. If my house burned down as a result of some poor electrical work, I’d probably end up living in a camper van for the foreseeable future, as I just would not have the money to rebuild from scratch.
I do, however, have the several hundred rand per month to insure my house, knowing that if something did happen, my insurance company would make me whole.
It all comes down to pooling risk. Insurance companies earn premiums from the likes of you and me, invest these premiums and hopefully act with care to insure that the sum of all the money they have is sufficient to cover the claims that could confront them in the future.
Pet insurance is no different.
You mean that insurance that didn’t exist until recently?
There has been a huge amount of growth in the pet insurance industry these last few years. You might even have seen an ad on TV, or found a pamphlet at your local vet with a picture of a kitten on it and some happy family on the lawn.
Cheesy clichés aside, they appear to offer very good value based on current pricing.
Pet insurance is like most other insurance products, which makes them quite easy to mentally digest and importantly – to compare.
- There are generally exclusions for pre-existing conditions, which is only fair. If you and I have our pets in the same risk pool, the last thing I want is your mange-riddled troeteldier spending five nights in intensive cat care, three days after joining. So pet insurance is not a ticket to sorting out your current pet ailments.
- There is an excess. The excess is the amount you pay every time you claim. Excesses are there to keep you and I slightly more cautious with claiming, as by having an excess we will still suffer some kind of economic loss should we claim.
- Underwriting applies. Underwriting is the process whereby the insurer, understands fully all the risk around your pet, such that they can ensure that they’re not letting a pet onto their books that shouldn’t be there, based on the rules of the policy.
Let’s get down to hard biscuits
And then of course, there is price.
Price alone should not influence your decision for almost all financial products, but all else being equal, paying less for something does make complete sense. Not all insurance products are perfect substitutes and just because one is cheaper than another, doesn’t mean it’s appropriate for your needs. It’s always best to compare and interrogate the characteristics of an insurance policy, find those that meet your needs, then find the cheapest from the remaining providers.
Doing some of the hard work for you
There’s a comparison table on Take Charge website under the post Finding the best Pet Medical Aid in South Africa. This was quite useful but these things are unfortunately always changing and you’ll need to check up on the various providers if the info is still correct.
I won’t say who I used, as you should make up your own mind, but it looks like a no brainer from the table.
I pulled out my Texas Instruments BA II Plus, and ran some numbers. Taking into account the excess I would be in for, as well as a quick call to my local vet to get an idea as to the kinds of things I could end up paying for one day as well as their cost, I got comfortable quite quickly paying the relatively small monthly premium.
Pets are quickly becoming more and more important to us in a cultural sense. Many people now consider them children, and would do anything to keep them happy and healthy. That said, no one likes being confronted with a R20k bill for cat surgery, so I recommend doing some quick research and deciding if it’s worth paying a small monthly premium to offset the worry that you may have to put a beloved companion down because you don’t have the capital to pay for expensive treatment.
In my family’s case, we even covered the second cat.