Is Pet Insurance a Good Idea?

Our beautiful Labrador Retriever mix, Sophie, is getting on in years. At 15, she is at the outer edges of life for a dog of her size, but she is still hanging in there. We’ve been fairly lucky with her. She’s been mostly healthy since we got her at roughly the age of two. But a recent visit to the Veterinarian for an ear infection got me thinking about pet insurance.

While Sophie has been mostly healthy, there have been a few spendy episodes. She came to us from the humane society with pneumonia, and that cost about $500 to treat. She had poor teeth, and before we started brushing them every day, she wracked up around $800 a year in teeth cleanings and extractions. She also had a bout of skin cancer that ran about $1,000 for surgery.

If your savings are low, these expenses can push you into debt. So is pet insurance a good idea? Like other insurance products, if a potential loss would be financially devastating, it might be, but you have to be careful with what you buy.

The pet insurance market is hard to navigate. Every policy is unique, and it’s easy to buy a policy that doesn’t do what you would expect. Some cover just accidents, some cover accidents and illnesses and only a few cover routine vet visits.

The fine print can lead to less coverage than you’d expect. For example some policies have bilateral exclusions, meaning that a policy will only cover a condition once, even if the same condition occurs on both sides of the body. Some policies have per incident deductibles, while others have annual deductibles.  Some policies will only cover average costs in your area, and not the specific cost charged by your vet. has done a comparison of several pet insurance plans. Plans range in price depending on your pet and the area where you live. To see if pet insurance would have been a good idea for Sophie when we got her, I got a quote from their recommended carrier, Healthy Paws, for the two year old dog she was at the time.

Healthy Paws’ quoted premium was $38.41 per month, covering 80 percent of the cost of care after a $250 annual deductible. There were several exclusions in the policy. For example, the pneumonia wouldn’t have been covered, since she had it when we got her. And the dental procedures would not have been covered either.

What would have been covered was her cancer treatment. After the deductible, Healthy Paws would have covered a little over half the cost. Her recent ear infection and treatment would have been covered, but was within the deductible, so no benefit there.

Over Sophie’s life with us to date, we would have paid over $7,000 in premiums and received back $550 in benefits. Of course, we might not have been so lucky with Sophie.

She was an athletic dog in her day, and she could have easily torn an ACL, or her cancer might not have been so easily treated. An ACL surgery would have cost around $3,000, and the pet insurance would have paid around $2,150 of it. Chemotherapy could have run up to $10,000 and pet insurance would have covered three quarters of it.

In fact it would have taken the chemotherapy to get our premiums back. But that is the thing with insurance. Insurers use the premiums paid on healthy dogs to cover the dogs with more problems. You buy insurance against an unlikely, but financially devastating, event and hope you don’t have to use it.

If you have the savings to cover the costs associated with a serious injury or illness in your pet, then pet insurance isn’t necessary. Overall pet costs will be less, because you’ll save the premium. But if you don’t have the savings, it’s worth looking into pet insurance. It can keep you from derailing your budget and going into debt to save your beloved family member. However, pay attention to the details, so you understand what coverage you are buying, and shop around for the best policy.

The Parent Child Talk: How Will You Pay for College

Spring is in the air and so are those college acceptance letters. Now it’s time to choose. There is so much to consider; student life, available programs of study, where are friends going. While you may not want this decision to be about the money, at least part of it has to be. For many kids, the school they select will have financial consequences that will last a very long time.

Now, before your kid gets invested in a particular school choice, is a good time to have a talk with him or her about how you’ll pay for college, if you haven’t already. Since so many kids will take out student loans to pay for school, it’s important that they are clear about what they are in for before they commit.

According to an annual survey conducted by Sallie Mae, the student loan provider, only a bit more than half of Americans have saved any money at all for their kid’s education. Among those who had saved for college, in 2016, the average amount set aside by families with teenagers was almost $23,000. This will certainly be a help, but it won’t go very far. The following chart compares savings with the average annual cost of college tuition, fees, room and board based on data from the College Board. The average savings will cover just one year at a public four year school.College savings and costs 2016

Given this data, it’s no wonder the average college graduate in 2016, who had taken out student loans, left school with over $37,000 in debt. With loans like this, the standard monthly payment would be around $370 using current federal student loan interest rates. This is important information when thinking about where to go to school and how to pay for it.

Say that your daughter is a stellar student, and she is offered a scholarship to attend a small private school. The cost to attend will only be $25,000, instead of the $45,000 list price. Given that the in state school will cost $20,000, that seems like a good deal. However, if you can’t fully pay for her education, the extra $20,000 for four years at the private school will add $200 to her monthly student loan payment. If she knows this ahead of time, she might make a different choice.

Here are five things to discuss with your student before she chooses a school.

  • Tell your student how much you will be able to pay. This includes what you have saved and what you are willing to commit to out of your income. The converse of this is how much should she expect to pay. Only 70 percent of parents of teenagers have discussed their expectations with their child.
  • Outline options for raising the extra money. In addition to student loans and scholarships, your student may be able to raise some money through part-time or full-time work. Taking a gap year to work and save up for school is a reasonable approach.
  • Help your student understand the implications of their choices. Student loans may be hard to avoid, but they can certainly be minimized if you understand your trade-offs. You can calculate the monthly payments given different loan amounts on the Federal Student Aid web site.
  • Provide context for the information. Estimate the kind of monthly salary your student might earn given her career interests. Payscale’s College Salary Report is a good place to start. It wouldn’t hurt to also talk about average living expenses. Career Trends has a cost of living calculator. Don’t forget to show the impact of taxes. How much of her take home pay will be left after student loan payments?
  • Consider starting school at a community college. The average cost per year at public two year colleges is only $3,520 assuming your student can stay at home while she attends.

Parent’s everywhere fret about the cost of college and how they will afford it. If college is around the corner for your family and you haven’t saved enough, speak frankly with your son or daughter about their role in paying for their own education. Young people need to make choices about their education with all of the information available.


Thank You for Reading!

Happy new year to all the wonderful people who have followed this blog. In 2015, the site was viewed 2,100 times by viewers in 34 countries. Thank you to everyone who has followed the posts. There will be more to come in 2016. If you have a specific subject that you would like to learn about, please leave a comment or email me at May the new year bring you happiness and success in whatever you do.



What is SeSo?

SeSo stands for Save Early, Save Often. Here, I will be providing tips on saving and investing for financial independence and the occasional rant on things that get in the way of becoming financially independent.  Financial independence means you get to decide how to spend your days, and not have it decided by your mortgage and credit card payments. You do not need to make a lot of money to become financially independent, but you do have to be willing to save a good chunk of what you do make.

In its 2013 survey of American Households, the Federal Reserve found that the median total savings in retirement accounts of people aged 55 to 64 was $111,100 and for those aged 45 to 54, $100,000.  If you were to retire on $111,100 this would give you a monthly income of about $550 per month if you invested in an income annuity at today’s rates.  Even with Social Security, that doesn’t go very far.  The Motley Fool calculated that the average mortgage payment for these same age groups was $766 and $891 respectively. If all you have in retirement savings is $111,100, Average Americans, you cannot even make your mortgage payment with your retirement savings.

The lack of retirement savings will be a big issue not only for the individuals who will see their lifestyles seriously scaled down, but also for our nation’s economy.  Our economy is driven by consumers, and if a large portion of our consumers can barely make ends meet, we can only expect slower economic growth and fewer opportunities for the younger generations.

I recently retired from my corporate career in the investment and financial services industry. I’m 51 and I’m financially independent. How could this be?  No, I did not inherit a pot of money from a distant (or close) relative.  No, I didn’t sell my start-up to Google.  I never had a start-up.  I have been well paid in my career, and cashing in some stock options provided by my company did shortened my target time to independence by a couple of years.  However, the reason that I was able to retire at such an early age is that I and my husband Jeff are savers and planners.

Throughout my career, the focus of all of our clients was on finding the best investments and on investment returns. However, I found an astounding lack of focus on saving. Saving and accumulating wealth has been my lifelong focus, because it doesn’t matter how great your investments are, if you haven’t saved enough.

I would love to see your stories about the financial decisions you have made, big or small. If you have a story (good or bad – we all make mistakes) please leave a comment. Check back here for saving and investing tips, interpretations of the financial news and economic statistics, fun and interesting facts, and stories about how we all make financial decisions.