Tuesday, January 19, 2016

YOUR DOG WILL THANK YOU:Continuing Connection Part IV: Picking Pet Health Insurance #2

Continuing Connection Part IV: Picking Pet Health Insurance #2
Your Dog Will Thank You

            Stipulating to Schwartz’s Insurance Law (what good is a Cadillac with no gas in the repair shop, or what good is a Yugo, with gas, in the repair shot all the time): while pet health insurance coverage has become better since the 1990’s that’s a relative statement like – being the winner in a beauty contest of uglies.
            Without there are carrier(s) that:

·         Have good coverage, a deductible per year (not per incident) but an insurer that has 3.84 per 100 complaints (which is only closed complaints not open nor ‘the hell with it’ complaints figured in which could mean 3, 4, 5 times the amount – not getting paid, getting paid less on claim etc.
·         Have very good coverage, but a non rated insurer (Yugo) behind it
·         Have a very good carrier, but go by condition for each deductible and tried to take symptoms like diarrhea (which 30%+ of puppies have) to be pre-existing illnesses to deny coverage
·         Giveth on one hand – and taketh on the other when examining policy language
·         Have unlimited catastrophic coverage in total – but limited per incident

You get the idea – gotchas, gotchas, gotchas …handing you an umbrella when it isn’t going to rain
So here is the checklist if you choose a pet health insurer

1.      A+ Bests and or AA S&P rating (remember no guarantee as Mutual Benefit Life went down with a AAA and A+ rating & remember all those mortgages in the meltdown of 2008 that were A+ rated by those bastion of integrity rating agencies
2.      No exclusions for hereditary conditions
3.      Yearly deductible preferable, secondarily per condition, lastly per incident

(What this means is once you meet the deductible for the year then reimbursement begins whereas, on per incident there is a deductible for each occurrence covered. So if you have 4 incidents during the year – a new deductible for each during the year. As for per condition, a new deductible for each condition though not each incident of the condition during the year.)

4.      Minimum $15,000 lifetime coverage – preferable at least $10,000 per year coverage restored each year – and not limited by a per incident

(For example a policy that states for example $50,000 lifetime coverage but has a $2500 per incident coverage  effectively eviscerates the coverage given a $5000 injury is only covered to the extent of $2500 despite the $50,000 supposed coverage. This is handing you an umbrella when it isn’t going to rain.)

5.      Preferable: alternative care is standard (acupuncture, homeopathy, chiropractic, etc under the supervision of a veterinarian)
6.      Pre-existing illnesses – restored coverage after being 1 year or less condition free
7.      Waiting period before coverage begins – 30 days or less
8.      Coinsurance after the deductible is split minimum 80% paid by the carrier, 20% by the guardian
9.      As long as premiums are paid and current – the policy can’t be cancelled.
10.  An NAIC (National Association of Insurance Commissioners) ratio that is less than average for the property and casualty category (which pet health insurance carrier fit within


If the average in the property and casualty area (remember companion animals by law are property and even though the policy sold is ‘Pet Health Insurance’ the carrier for pet insurance purposes is classified as under property and casualty. So if the average complaints in the area is is 1 per 100 less than 1 is preferable – 3.84 as is the case of the insurer of one Pet Health Insurer is a red light.

THE ALTERNATIVES: (one that exists and one that should exist but doesn’t):

  1. Self insurance (which has it’s drawbacks)
  2. Bundled Pet Health Insurance as a rider/option or ‘contingent policy’ to one’s homowners or renters policy (remember again by law companion animals are personal property like a toaster) given floaters (options) are normal and customary for jewelry, firearms, furs (all personal property) on homeowners policies & 70%+ of jewelry, firearms, and furs – DON’T sleep in their owners bed as dogs do (Sealy Study)

DISCLAIMER & DISCLOSURE #1 ALERT  I have a patent for – to put the pet health insurance on your homeowner’s policy – which hasn’t happened though I have been working at this since 1998 which I’ll discuss after later.
DISCLAIMER & DISCLOSURE #2 ALERT I have a pet insurance policy on Simcha and Goodie. I have had long waits on payments – in one instance the insurer – no kidding - held up payment because they couldn’t get info from a Vet Clinic – which I hadn’t used in 10 years (let alone for these dogs) – and that they didn’t have the insurance on (Talk About Dog ID Theft – Lifelock™ may have another potential market). Seriously. But both Simcha & Goodie have now what might be considered preexisting conditions – so I’ll stay and fight as I am used to the shennigans of pet insurers now. Besides, the now documented actions of the insurer will make good copy for my blog & potentially another book as well my continued motivation (now 16+ years) for the disruptive distribution of pet insurance on homeowner’s policies concept.

SELF INSURANCE (self insuring the potential risks rather than transferring the risks)

But first understand the insurance is risk transference. You can either self insure a risk or part of the risk – or transfer part or all of the risk – to an ‘insurer’ The discussion of self insurance next is excerpted from my book Trust Me: I’m Not A Veterinarian 2008 and updated to 2016

Steps To Consider

Let’s face it, there is no such thing as a free dog or cat. Whether it’s original cost, destruction, vet bills, etc. – companion animals are costly (but, from a cost benefit ratio, I contend, very inexpensive ((compared to raising a child -$250,000+ , sending him or her to college another $100,000 to $200,000++ for them to come home without a job and resent you – sarcasm intended)). Therefore, instead of wasting money on pet insurance premiums until real, affordable, no games-gotchas, convenient major medical pet health insurance comes to fruition, I suggest the might suggest the following with noted cavaets:

·         Self-Insure: for each companion animal put aside initially $500 -$1000 and then $50-$75 a month in a separate account. (For example, I have set up my own self insurance for each of my dogs – investing in Vanguard Health mutual fund.)

The positive of this approach is 100 cents on a dollar (other than gains or losses on your chosen investment) are available to pay healthcare costs versus maybe 60 cents from a dollar of insurance premium. (After commissions, administration, marketing costs – typically 60 cents are available for claims.)
The negative – God forbid a major illness(s) or accident(s) occurs of a magnitude of $5000 in the first couple years – the amount accumulated may not or would not be sufficient to offset the total cost of the $5000 illness injury, but neither would any existing pet health insurance with a $2500 per-incident limit or, worse, inner limits (lowered maximums per illness or injury) when you’ve accumulated only $2300 to $3700 (giving no value to investment gains or loses).

Making the case - $5000 injury or illness at the end of three-years
            Self Insurance vs Today’s Pet Health Insurance:

            Accumulation (Initial Deposit)  $500 $1000 
            Earnings at 6% after tax             95        191     
            Per month deposit
                     $35                                 $1260  $1260
                        6% earn. After tax          116      116
                     Total available                $1971 $2567
        $50                                  $1800  $1800 
            6% earn After tax           167      167
        Total Available                $2562  $3158
         $75                                 $2700  $2700
            6% earn After tax           250       250
         Total Available               $3545  $4141
            For $5000 claim

Of course, you could have paid $30 - $50+ per month (much more in 2016- jds) depending on age etc, with the $2500 per incident limitation. You would have paid out the following:
                                                $35/mo            $45/mo            $50/mo
Premiums                                $1260              $1620              $1800
Loss of earnings @ 6%             116                    150                  166
$2500 of the $5000 claim       $2500              $2500              $2500
Out of pocket on $5000          $3876              $4270              $4466
Net insurance coverage           $1124              $780                $534
Of course, if you have no claims, you are ahead by self insuring $3545-$4141 versus having paid premium of $1260 to $1800 (not including lost earnings during the period.)

However, if the investments made go sour – then there will be one can make the argument insuring would be preferable. However, what do you think insurers invest in? So their investment portfolios will suffer as well. How does this effect you given your coverage in the contract? Underwriting of claims gets ‘tougher’ – trying to chisel and weasel out of claims or reducing claim costs as less is available to pay claims. Of course, that never happens at insurers – who live and die (figuratively) to reduce their claim loss ratio 1/10th of 1% which would be a cause for celebration at insurer’s home office – lampshades on heads and all. (Note: I espouse this opinion as a conservative Republican not some bleeding heart liberal/progressive.)

Self-insurance is still a viable alternative to today’s insurance (considering gotchas, or non rated underlying insurers) the longer the time till a big claim (and remember, not even calculated in this contrast is the fact that today’s pet insurance premiums typically rise annually – and at the 7th + year in come policies the coverage actually decreases.)
The time when today’s questionable pet health insurance wins versus this self-insurance is in the first year or two – assuming there are no inner limits, no ‘continuing coverage claims’, etc. – is the large claim incurred.
So until real, affordable, no games “gotchas” major medical pet insurance  is available as described previously, given the history with pet insurer claims, etc., my choice is to self-insure which, in effect, is the recommendation of Consumer Reports which prefers paying ‘out of pocket’ to today’s Pet Health Insurance coverage should be considered as an alternative.


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