Help your pet without risking your finances

Dear Liz: Due to lack of work over the last few years, I finally began my Social Security benefits this year. I can afford only catastrophic health insurance, so I hardly ever see a doctor anymore.

So here’s the problem: A pet! I have had my cat Jackie for nearly 14 years. Jackie has a growth on her neck that has been growing since last fall. Last week, I took her into a pet clinic that offered free first visits. Their suggestion was to remove it and have it tested for cancer. The cost was $450 just to remove it, with another $150 to have it tested. Ouch! If it is cancer, I can’t afford the treatment.

The vet says Jackie seems remarkably healthy and could live another five or six years. Do I spend that extra money for a possible negative assessment of something I can’t afford to cure, or do I just let her live out her life with the growth continuing? I feel like I am not being a good parent.

Answer: A pet may feel like a family member, but your cat is not your child. Although most parents would willingly bankrupt themselves to save a child’s life, you don’t face a similar obligation to extend a pet’s life.

You do have an obligation to make sure a pet doesn’t suffer, and you may have more options for treatment than you think. Discuss your situation with the vet who assessed Jackie to see if more affordable diagnostic and treatment options are available. If you’re willing and able, your vet may consider allowing you to work off a bill by cleaning kennels or answering phones, according to Humane Society of the United States.

If not, contact your local animal shelter to see if it can recommend a veterinarian willing to discount his or her services. There are also a number of national and local organizations that provide financial assistance to pet owners in need. You can find a list at the Humane Society’s website.

If you get another pet down the road, consider buying a health insurance policy for the animal. The American Society for the Prevention of Cruelty to Animals estimates a typical policy for a cat would cost about $175 a year, although premiums vary based on deductibles and what the policy covers. Veterinary costs have spiraled to the point where these policies can provide real protection against catastrophic bills.

“Too many credit cards” boosts insurance premiums

Dear Liz: My husband and I are in our late 60s and debt free. We recently were informed of a $200 annual increase in our auto insurance. Our insurer explained we have too many credit cards (all paid in full each month) and too many department store credit cards (including some we haven’t used in years, and all with a zero balance). What does car insurance have to do with credit cards? Can the insurer do this? Should we close some cards?

Answer: Only three states — California, Hawaii and Massachusetts — prohibit insurers from using credit information when calculating premiums. In other states, the practice is common, since insurers have discovered a strong correlation between people’s credit histories and their likelihood of costing an insurer money. (The worse the credit, the more likely they are to file claims, essentially.)

The states typically don’t regulate how insurers use credit information, so behavior that might not affect premiums at one company could jack them up at another. Closing credit cards might not help, because that could inflict its own damage by changing the credit-utilization portion of your insurance score with that company.

This is yet another reason it’s important to shop around occasionally for insurance: You can often find a better deal if you look.

“Eating healthy” won’t protect against medical bills

Dear Liz: I really enjoy the columns you’ve written about living frugally and especially appreciate when you discuss healthcare expenses. I find it extraordinarily frustrating when people who promote a frugal lifestyle answer that they keep healthcare expenses down by “eating healthy.” I recently experienced a serious medical situation even though I maintain a healthy weight and otherwise take care of myself. It is in this area, I believe, the frugal community lacks understanding. Some believe that you get sick only because you don’t take care of yourself, or assume that their emergency fund will get them through a rough patch of health issues. Those that believe this are setting themselves up for disappointment should they have the unfortunate experience of a healthcare problem. Thank you for drawing attention to the importance of healthcare and making sure your family is covered.

Answer: Eating healthful food, exercising, maintaining an appropriate body weight and investing in preventive healthcare can lower healthcare costs on average. But no individual, no matter how vigilant, is immune from an accident or illness that can result in catastrophic medical bills.

So you’re right that people who voluntarily go without health insurance are deluding themselves. They’re pretending they have the sole power to determine their future health, when that’s clearly not the case.

Is disability insurance worth the cost?

Dear Liz: My husband and I have individual life and disability policies. We have two teenage children and have had some health issues in the past. I think the life insurance is important, but I’m not sure about the disability insurance.

My husband and I have coverage at work, although it would not make us whole if we got disabled. Together we make more than $350,000 a year. We have two homes and pay private tuition, so there are a lot of bills to pay. But is the insurance worth the money we spend every month?

Answer: You may have read some scary statistics about the likelihood you’ll face a disabling injury or illness. One often-quoted statistic has you facing an 80% chance of serious disability, one that would prevent you from working for 90 days or more, before age 65.

But it’s not clear how accurate those statistics are. Last year, columnist Ron Lieber of the New York Times tried to find the facts behind insurance industry proclamations about disability and found little agreement. One source pinned the risk of serious disability at closer to 30%. If you have a white-collar job, you may well face less risk than someone who does physically dangerous work.

The reason you buy insurance isn’t to cover likely events, in any case. It’s to cover events that could have a catastrophic financial impact if you didn’t have the policy. That certainly describes most people’s risk when it comes to disability. The Social Security system provides limited payments to only the most disabled workers, and workplace policies are often limited and may not cover disabilities that aren’t work-related. An individual disability policy can be a good idea because it provides more coverage.

You can’t expect any disability policy to make you “whole,” however. Many insurers won’t replace more than about 60% of current income because they don’t want to give you an incentive to fake a disability.

Consider asking an independent source, such as a fee-only financial planner, to review your workplace disability coverage to see whether you need to hang on to your individual policies. If the cost of the coverage is an issue, this planner can help you research your options, such as choosing a longer waiting period before coverage kicks in or limiting your benefit period to three or five years instead of through age 65. An experienced independent insurance agent can help you compare policies, as well.

Why you shouldn’t buy cell phone insurance

Dear Liz: I read an article in which you recommended getting rid of cellphone insurance. Why? I thought that the insurance would be beneficial if something should happen to my phone.

Answer: You shouldn’t use insurance to cover costs that you easily could pay out of pocket. And if you couldn’t afford to replace your phone out of pocket, you’re spending too much on your phone.

Insurance is best used to protect against catastrophic expenses, not minor costs. When you use insurance to cover incidental expenses, you typically pay too much for the coverage — and that’s particularly true for cellphone insurance, which is ridiculously expensive for the protection you get. Plus, cellphone coverage is notorious for loopholes and exclusions that make it tough to make a claim should your phone be lost, stolen or destroyed.