Is Pet Insurance a Good Investment?

money questionsRecently, during a Q&A, an audience member asked this question. Now, I’m a bit of a skeptic about a lot of financial products – insurance being a big one – so my standard answer is probably not.

After-all, there’s a reason most of us run the other direction when we meet an insurance agent at a party! But, to be fair, I went and did some more research on insurance and pet insurance particularly, and here’s a more detailed answer.

Risk – of almost any kind – make most humans crazy.

The entire insurance industry, from asset protection (property and casualty), income (life and annuities) to cost containment (health, travel and pet) sucks over four hundred twenty one BILLION dollars (2.5% of GDP) from the US economy annually.

They’d like you to think they have your best interests at heart but many of the products they sell you have an obscenely high profit margin.

According to the Insurance Information Institute:

  • There were 6,086 insurance companies in 2013, including P/C (2,623 companies), life/annuities (904), health (835), fraternal (87), title (58), risk retention groups (256) and other companies (1,323), according to the National Association of Insurance Commissioners.
  • Insurance carriers and related activities accounted for $421.4 billion, or 2.5 percent of U.S. gross domestic product in 2013, according to the U.S. Bureau of Economic Analysis.
  • The U.S. insurance industry employed 2.5 million people in 2014, according to the U.S. Department of Labor. Of those, 1.5 million worked for insurance companies, including life, health and medical insurers (838,200 workers), P/C insurers (596,000 workers) and reinsurers (25,200 workers). The remaining 1 million people worked for insurance agencies, brokers and other insurance-related enterprises.

And, for the 2014 year the III reports:

“an underwriting profit of $12.3 billion (compared to $15.2 billion in 2013). The industry’s overall net income after taxes (profits) for the year tallied $55.5 billion (though down from $63.4 billion a year earlier)… Overall industry capacity rose to a record $674.7 billion as of December 31, 2014—up $21.3 billion, or 3.2 percent, from $653.4 billion as of year-end 2013.”  

But, today’s question is: Does pet health and accident insurance protect you from a real risk or is it another profit center for the insurance issuers?

Let’s start with some numbers –

Pet Number US House-

holds with Pets

Number of Pets in

US Households

Bird        6.9M        20.6M
Cat      45.3M         95.6M
Dog      56.7M         83.3M
Horse        2.8M           8.3M
Freshwater fish      14.3M       145.0M
Saltwater fish        1.8M         13.6M
Reptile        5.6M         11.5M
Small animal        6.9M         18.1M
*Source: Dog ill pet insurance
American Pet Products Association’s 2013-2014 National Pet Owners Survey.

If you’re (like me), one of the 56 million plus dog owning or 45 million plus cat owners in the United States, you probably know that an unexpected injury or illness of your furry friend can bust your budget.

Veterinarians now treat household animals for cancer, heart disease and other chronic illnesses plus fit them with artificial limbs and do complicated reconstructive surgeries on injuries that would have sent previous generations of pets off to the Rainbow Bridge.

Pets are big business in the USA – everything from food and clothing (yeap, my pit bull Indo needs a sweater in the winter) to special medications cost us about $55.5 BILLION in 2013*.

None-the-less, the American Veterinary Medical Association reports that in 2012 we spent an average of $227 per dog and only $90 per cat on routine vet bills and about $600 on dog surgeries, a bit under $400 for cats. So, it would seem that pet health and accident insurance is not something the average pet owner needs.

Two types of pet owners might be better off covering the risk:

  • Those who are unable to save an emergency fund to cover unexpected bills and
  • Those who are so emotionally attached to their furry family member that they’ll spend “whatever-it-takes” to prolong their lives.

Typical pet insurance runs $25 – 30 a month or $300 – 360 per year. Older or already ill pets will cost more. Over a typical 10 – 15 year lifetime that adds up to about $5,000.

Most policies don’t cover routine vet visits, just accidents and certain illnesses. If you do decide to purchase pet insurance, look carefully at the deductibles, exclusions (pre-existing conditions) and policy limits; be sure your vet accepts the insurance and compare prices. It’s likely you’ll still pay a portion of the additional expenses plus the insurance.

So, I suggest it’s better to save $5,000 as a pet fund unless you fit into one of two types above (and if you’re the non-saver, I suggest learning to save, instead!). Most pet owners will never spend that much in vet bills and in general, it’s unwise to purchase insurance to cover relatively small risks of any kind.

Final Answer: NO.

Skip the insurance and create a pet emergency savings account!

Live long and prosper, Leah the

Why You Need to Know How to “Talk Money”

Learn financial termsYeah, we keep harping on it – the need for everybody (especially women) to be financially literate.

NOT knowing the meaning of financial terms, and how the system works can, in the words of John Lanchester whose 2013 book is titled How to Speak Money, says in this 2014 New Yorker article, WILL hurt you financially.

“…when the finance industry says ‘credit’, what it really means is ‘debt’. If you don’t know that, you are likely to get into trouble.”

He goes on to give us really good, readable and interesting explanation of why in the rest of article.

The world is full of priesthoods. On the one hand, there are the calculations that the pros make in private; on the other, elaborate ritual and language, designed to bamboozle and mystify and intimidate.

Lewis book Big ShortThe latest episode (the 2008/09 crash) had even many so-called-experts fooled. If you haven’t read the Michael Lewis book The Big Short about the mortgage mess, the movie (staring Brad Pitt) is coming soon and I recommend it.

Reading this Money Talks article will give you a good basis for understanding Lewis’ book. As Lanchester explains:

During the recent credit crunch, many suspected that the terms for the products involved were deliberately obscure: it was hard to take in the fact that C.D.S.s were on the verge of bringing down the entire global financial system when you’d never even heard of them until about two minutes before.

BTW, reading Lewis’ latest book Flash Boys… Lewis book Flash Boyswill clue you into the current financial center scam!

While I certainly don’t recommend anyone spend time watching daily financial media like CNBC or Bloomberg TV, understanding how the financial sector functions is a critical part of building wealth in the 21st century.


Live long and prosper, Leah the

What’s MY Financial Type?

financial personality Had a chance to take a quick quiz offered by an exhibitor at the FinCon15 financial blogger conference.

I think mine came out pretty accurate!


They say:

As The Adventurer, you’re happiest when you’re learning and discovering something new. You’re always studying, innovating, and creating new things. You strive to solve old problems with new answers and are always open to new ideas. You approach life with a very “I’ll try anything once” mentality. Starting new projects is great, but you can have trouble following them through to completion. Some people may not follow your life approach, but you always take criticism lightly because you never stop believing in yourself.

Being The Adventurer means you typically keep a loose hold on your finances. You don’t really enjoy the details of financial planning, but that doesn’t mean you have terrible financial habits. You keep track of your income and spending, pay your bills on time, and hardly ever spend impulsively. After all, how would you fund all your ideas and adventures without money in the bank?

How about you?

Take the free Financial Personality Quiz (click here) and see if it can help you design a better financial life!

Live long and prosper, Leah the

The Difference Between Investing and Sex

Sex on bed covered with dollars large1Money and sex are two very powerful human drivers – especially for modern people whose basic needs are easily met.

It’s not surprising that investing money and procreating (or just practicing) have a lot in common:


  • Some folks get a thrill from just watching…

  • Some avoid talking about it at all costs…

  • We like to know what other folks are doing… but it’s impolite to ask.

  • It requires practice and commitment to improving…

But when investing your savings with the goal of creating non-earned  income and financial freedom, passive is almost always better than active (unlike sex which is almost always better if you’re an active participant).

The squawking heads on MSNBC, the emails from investment newsletter promoters, and the headlines on the covers of magazines scream about the prospect of returns for your accounts that “beat the markets” if you’ll only follow their system.

Why? Because it sells; not because it’s good for your net worth.

Two major reasons active investors (or the average trader) rarely if ever “beats the market” in the long run:


The financial services industry runs on fees. They take them out of your savings at every opportunity. But, the more transactions you make, the more those fees take out.

How fees reduce $100,000 investment over 30 years

  1. Consistently great active investors or traders are a rarity.

We love to hear the stories of that big score – George Soros has lived for 25+ years on his winning beat against the British pound back in 1992 – but it’s unusual, that’s why we keep telling it. Sure he’s won some (and lost some) since then but having a billion dollars to work with helps you get deals us individual investors will never be offered.

Though there are a few publicly available fund managers who are better than average investors and even the overall markets, most of their returns fluctuate and average out at or even below the general market growth especially after you deduct the FEES (see #1). Tactics that beat the market  one year quit working when more investors use them so it gets harder and harder to consistently outperform the general market.

Lucky for us, the modern equity markets offer two ways individuals can avoid most of the downside of active investing:

  • Exchange Traded Funds (ETFs) and
  • Index Mutual Funds

Both, when used for consistent capital accumulation, offer relatively low fees and returns in line with the overall growth of businesses in the United States and internationally. And you don’t need to become an expert in picking stocks or even know a whole lot about business or economics to make and follow a profitable investment plan.

By minimizing your costs and capturing the growth in broad equity markets, your savings can turn into the capital that leads to financial freedom. Consistently adding to your capital via savings from your earned income, plus the returns from your investments, is a far more likely way to become wealthy than attempting to beat the markets with aggressive, high risk trading.

Don’t let your emotions, or a slick financial product salesman, trick you out of the wealth you deserve. Pay attention to the fees you pay for investments and get your emotional needs (and some thrills) met in the bedroom instead of risking your future financial freedom.

Live long and prosper, Leah the


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