Smart Money Podcast: Smart Ways to Get Out of Debt, and Pet Insurance Planning

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

Today’s first Money Question: Personal finance Nerd Tommy Tindall joins Sean Pyles and Liz Weston to discuss alternative ways to pay off debt when you can’t get a personal loan.

Today’s second Money Question: Is pet insurance worth it? Co-host Sara Rathner joins Sean and Liz to break down how pet insurance works, what to consider when selecting a plan, and when you may want to consider it for your furry (or feathery, or scaly) friends. Costs can vary by the level of coverage selected and the age of your pet. Another approach is simply setting aside money for anticipated medical expenses in your budget.

Check out this episode on your favorite podcast platform, including:

• Apple Podcasts

• Spotify

NerdWallet stories related to this episode:

How to Get Out of Credit Card Debt in 4 Steps

Pay Off Debt: Tools and Tips

Is Pet Insurance Worth the Cost?

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

If you enjoyed today’s episode, then please vote for us in the 18th Annual People's Choice Podcast Awards! Register at https://podcastawards.com and find “NerdWallet’s Smart Money Podcast” in the Business category. Voting in other categories is optional.

Episode transcript

Sean Pyles: Hey, Liz, how much would you say your cats factor into your budget?

Liz Weston: Oh, way too much sometimes. Especially if one eats something that she shouldn't have.

Sean Pyles: Oh, yeah. Well, listener, you are in luck if you're a pet owner. Today, we'll not only discuss alternative ways to pay off debt, but we'll also talk about the pros and cons of pet insurance, and how to figure out if it's worth it for your furry friends or scaly friends.

Liz Weston: Or feathery friends, or whatever it is that frogs have.

Sean Pyles: And let's not forget exoskeletons, in the case of a pet scorpion or a tarantula.

Liz Weston: Ugh, let's not go there.

Sean Pyles: Welcome to NerdWallet's Smart Money podcast. I'm Sean Pyles.

Liz Weston: And I'm Liz Weston. Today, we're revisiting a couple of our most popular money questions from the past few years. We'll start with a listener question about ways to pay off debt if you can't get a loan, before we dive into the wild world of pet insurance.

Sean Pyles: And listener, if you have any stories to share about your pet insurance experience, we would love to hear from you. Leave us a voicemail or text the Nerd hotline at 901-730-6373, that's 901-730-NERD, or email a voice memo to [email protected].

Liz Weston: All right on with the show. This episode's money question comes from a listener's voicemail. Here it is.

Virginia: Hi, Sean. My name's Virginia, and I have a lot of credit card debt. My score is 753, despite my debt. I keep up with all my bills and I've tried to apply for a personal loan and I've been denied, because of my high percentage rate, even though I pay my bills every month on time. And I was wondering, do I have to get somebody to back up my loan? Why did they deny me? I was wondering if you could help me out. Thank you.

Sean Pyles: To help us answer Virginia's question on this episode of the podcast, we are joined by NerdWallet debt writer Tommy Tindall. Welcome onto the podcast, Tommy.

Tommy Tindall: Hey, thanks for having me. Glad to be here.

Sean Pyles: Sure thing. Let's start off by talking about Virginia's situation. There is a lot that we don't know, like exactly how much debt they have, what their income is, but we can postulate a little bit about why they may have been declined for this personal loan. Liz, do you have any thoughts?

Liz Weston: Well, Virginia says it's because their percentage is too high and that likely refers to their debt-to-income ratio. Your debt-to-income ratio is simply how your debt compares to your income. So for the purposes of debt payoff, we look at how your monthly debt payments, your housing payments, student loans, credit card debt, etcetera, compare with your gross monthly income. Lenders typically like to see a debt-to-income ratio of 40% or lower. The lower, the better.

Sean Pyles: They're also wondering if they need someone to back them up to get a loan, and I'm assuming that means getting someone to cosign for a loan with them. And that could help if they could find someone who's willing and able and with a credit profile that's in good enough shape. But I also am beginning to wonder whether a personal loan is the best route for paying off this debt. One thing that we know anecdotally is that many people who apply for personal loans just do not get approved.

Liz Weston: Exactly. So Virginia might want to think about a different approach to paying off their credit card debt. Tommy, let's discuss alternative ways to pay off debt beyond a personal loan.

Tommy Tindall: I think people's first tendency when they're in debt is that, “I can do this myself and I want to try the DIY method,” and that's a good thought. But they're generally best if your debt to income ratio is around 40% or less.

And there are a couple DIY options if you do fall into that category. We've got debt snowball and debt avalanche. And Sean, I know that you are a proponent of debt snowball, so you want to explain that one?

Sean Pyles: Sure. So with the debt snowball, you pay off your smallest balances first. And the idea behind this is that when you resolve your smaller balances, you are getting a psychological hit, a win, a serotonin boost that is encouraging you to continue to pay off your other debts. And Tommy, you're more a debt avalanche. You want to give us the rundown of that?

Tommy Tindall: Yeah, I am, and I totally get the merits of debt snowball, and I just have a hard time sitting tight on the money that costs more to borrow. So debt avalanche is basically the opposite. You focus squarely on paying the higher interest loans first, and then you work your way down. Those dopamine hits will take a little longer. Those wins will take a little longer, but they can be more valuable.

And just a little personal experience for me, when my wife and I first got married, she had a lot of debt in the form of student loans. She's pretty smart, so there were some pretty big bills, multiple loans to contend with. The biggest of those also, of course, had the highest interest rate. We decided we would target the biggest loans with the highest interest rates first and pay extra on the principle when we could. And eventually, we knocked them out ahead of schedule, we saved some money, and minimized the sting of those high interest rates. So team avalanche here, when it's possible.

Sean Pyles: Yeah, there's also I guess technically a third option, which is trudging through your credit card debt with the terms as-is. And this is often costly and not very time-efficient. So that leads me to another option, which are balance transfer cards. You roll over the balance of your current credit card debt to a new one that has a zero APR promotional period. The thing is, you really want to make sure that you can pay off your credit card balance before that zero APR period ends, because after that, your interest rate could go back up pretty high, maybe around where it was before.

Liz Weston: And you need a really good credit score to get those 0% offers, right?

Sean Pyles: Yes, in general. And you might also need to have a low DTI, which could be an issue for Virginia, based on what we've been talking about so far. So let's go into another option for resolving debt, and this is credit counseling.

Tommy Tindall: I think credit counseling is a good place to turn when some of the options we just discussed aren't available or aren't an option to you. And I think a lot of people might be surprised to learn that they can get free money advice from a nonprofit credit counseling agency. And these are generally trustworthy, accredited organizations, not-for-profit, that are really there to help people work through challenges and financial crises.

I've spent a lot of time poring over these organizations' websites, because of my job, but if I didn't write about debt, I don't think I'd know these options existed either. So I imagine there are others in the same boat. So it's worth a look and it's easy to get in touch with a credit counselor and get help over the phone. In many cases, these organizations have local offices in various states, so you get in-person help as well. And much of the support and the resources they offer are free or low cost.

Sean Pyles: I think people hear that and they wonder, "Why haven't I heard about this? If it's so good, what's the deal? Why is it free? What's going on here?" And I think the fact is that they just don't have the marketing budgets that a lot of other debt resolution options, especially debt settlement companies, have. So they can't really get the word out, which is part of what we try to do with our jobs.

But it's true, you can call up these agencies, they can give you free budgeting advice, they can walk you through everything from what you're paying for rent to toothpaste and help you get a better grip on your finances. And if it's a good idea, they can set you up with something that's called a debt management plan that can help you pay off your credit card debt much faster and cheaper than the standard way of doing it.

Tommy Tindall: I think this might be an option worth exploring for our listener Virginia.

Liz Weston: Can you tell us a little bit more about how a debt management plan works?

Tommy Tindall: In its essence, it's a way to consolidate credit card debt from multiple cards into a single monthly payment and often at a reduced interest rate with waived fees. And that's kind of the kicker there. When you go through a credit counseling agency, the rates can be cut significantly, talking by half or more, picture 22% down to 10%. In exchange for that lower rate, you'll agree to a monthly payment that fits your budget. And the cool thing is the credit counseling agency will facilitate the process. You pay the agency, they distribute it to your credit card company.

Liz Weston: And these plans are basically subsidized by the credit card companies, right?

Tommy Tindall: Yeah. The rate cuts are standardized across the counseling agencies by the creditors through agreements that they have together.

Sean Pyles: OK. How long does a debt management plan usually take?

Tommy Tindall: It depends on the amount of debt you have, but it usually takes between three and five years to complete. So there's definitely a commitment there, but the reduced interest can save you thousands or knock years off what you would pay if you were going at it yourself.

Sean Pyles: Sounds like a pretty good deal. I'm wondering what these plans cost and any downsides.

Tommy Tindall: Well, as the saying goes, "There's no such thing as a free lunch," but it's close. There's typically a small cost to start the plan. From the reviews we've done, we've seen an average of around $30. Then a monthly charge, which averages around $25.

Liz Weston: Virginia will have to live without credit cards for a while if she's on this plan, right? And how does it affect her credit scores?

Tommy Tindall: Yeah, that's right. She'll have to live without credit cards. And as for credit score, I think this is a good way to not impact your credit score so drastically, since you are paying the debt that you owe.

Sean Pyles: Sometimes agencies may ask you to close your accounts and if that happens, you might take a hit to your credit score, but that doesn't happen every time.

Liz Weston: OK, that's good to know.

Sean Pyles: Tommy, can you let us know when it might make sense to use a DMP?

Tommy Tindall: You want to take a look at it when your debt-to-income is approaching about 50%. And again, these plans are really designed for dealing with credit card debt, which is a form of unsecured debt. There are other types of unsecured debt, like medical bills and personal loans, but these plans are generally for credit card debt. And again, worth considering when you're at that 50% debt-to-income area.

And just to keep in mind, you're agreeing to a monthly payment for an extended period of time. So it's important to have room in your budget to make that payment, because missing one can derail the plan and end access to the lower rates that the agencies have through the agreements with creditors.

Liz Weston: Yeah, I think credit counseling agencies are awesome, and I think debt management plans can really work. But all too often by the time people realize they're in trouble, it's way too late, and they really should be looking at bankruptcy instead. So I always say, "If you're going to look at credit counseling and talk to a credit counseling agency, also make an appointment with an experienced bankruptcy attorney, so that you can get the whole picture of your options."

Sean Pyles: Bankruptcy may be best if your monthly debt payments consume more than half of your monthly gross income, could also be a good option if you're being sued for debt, and/or see no way to resolve what you owe within three to five years.

And Liz, a lot of folks are still pretty freaked out by the idea of bankruptcy. They can see it as a moral failing. Let us know, tell us your thoughts on why it gets better than just trudging through this debt for the rest of your life.

Liz Weston: Well, the reality is a lot of times you're facing unpayable debt. You could keep trudging for years and years, still not pay off this debt and wind up in bankruptcy court anyway.

And I've talked to people who, heartbreakingly, have spent all their home equity, they've spent all their retirement funds, and those two things would be protected in bankruptcy court. So they just kept trying when there was really no hope.

And sometimes you need that outside person, that attorney to take a look at your situation and go, "You know what? You really need to look at this."

I know that most of us have the desire to pay off what we owe and we don't want to file for bankruptcy. But if you are really far gone, it can help you get that fresh start that you're guaranteed under law, and help you start rebuilding your credit. Because as long as you continue struggling, your credit's going to suffer.

Sean Pyles: Right. Well, with Chapter 7 bankruptcy, you can resolve your debt in a matter of months, sometimes around three to four months. And that's instead of the years it would take you to typically pay off a lot of credit card debt.

Liz Weston: Most people do file for Chapter 7, that's the one that essentially erases most of your debt. Chapter 13 is much harder to get through, and it typically is if you're trying to protect some kind of asset like equity in a home, for example.

Tommy Tindall: Liz, I agree with you. Before writing about this topic and learning more about it, it just sort of sounds like a negative thing. And it's not ideal, but it's an option that exists and it can be something worth considering to get out of debt.

Sean Pyles: And what we're laying out are a number of different tools that are available to be deployed, given your personal situation. Sometimes bankruptcy is the best tool to resolve what you owe. But on the other hand, there are some tools that you should try to avoid because they might do more harm than good. One of them I want to talk about is debt settlement.

And these companies have huge advertising budgets, so you've probably heard about them on the radio. But with them, you divert your monthly payments to a third party company that then basically sets up a game of chicken with your creditors, hoping that they will make a deal to cut how much you owe. This can leave you vulnerable to debt collection efforts and lawsuits. And all the while, while you're waiting months and months for your creditor to potentially cave, which they might not even do, your credit score is getting trashed as you rack up missed payments.

Liz Weston: I could see some very limited use cases for debt settlement, but again, I think most people should talk to a bankruptcy attorney before they sign up for something like that.

Sean Pyles: One of my friends actually went through a debt settlement company to resolve her credit card debt, and I had to really bite my tongue before saying, "Why did you do this?" But I ended up kind of coming to peace with it, because it was what worked for her in a way. It wasn't the best solution, but at the end of the day it was a solution. It helped her get past her credit card debt. It took her a lot longer than other options. It cost her a lot more. It did a lot more damage to her credit score than other options would've done. But she took care of it. So I guess that's what matters sometimes? I don't know.

Liz Weston: Well, and 401(k) loans are kind of the same. People turn to them a lot to pay off credit card debt. And we at NerdWallet don't think that's a great idea.

Sean Pyles: Yeah, well, you're borrowing against your retirement savings. And it's true, the rates are generally lower than what a credit card will have you paying, but you're derailing your retirement savings and then if you get fired or quit the job that you borrowed the 401(k) loan from, you'll have to pony up that loan amount pretty quickly.

Liz Weston: And you've had experience with this, didn't you? Somebody recommended one of these to you.

Sean Pyles: Oh, my goodness. I had a financial advisor recommend a 401(k) loan to me just to ease my cash flow after I had some major expenses. And it was actually a red flag for me, which helped me know that I did not want this person to be my financial advisor. Because I didn't want to derail my retirement just so I could have a little bit more cash in the short term, it didn't make sense.

Liz Weston: Tommy, how about you?

Tommy Tindall: I have a little experience with this one, too. The consequences weren't huge, but I did take a small loan out of my 401(k) to help with the down payment on our house about five years ago, and I'm still paying it back, and it was small.

Upside on that one was the interest is low and I'm paying it back to my own account. But the downside is that I missed out on that compound interest. And I will note though, that I was fully vested in that company, so I was able to leave that company and keep my 401(k), but I have not been able to roll it into my 401(k) here at NerdWallet because I have to get that loan paid back.

Liz Weston: Oh, interesting.

Tommy Tindall: If I want to pay it back, I got to pay it back in a lump sum to do that, or I can continue making the payments. And as I mentioned, I like to keep borrowing the cheaper money.

Liz Weston: Yeah, understandably. Well, most people do manage to pay off their 401(k) loans, but if you lose your job, that's when it really gets difficult. Because not every company is as accommodating as your former company and letting you pay off that loan.

Tommy Tindall: Yeah.

Sean Pyles: Well, Tommy, thank you so much for chatting with us. It was great to have you on the podcast.

Tommy Tindall: Yeah, thanks so much. I really enjoyed it.

Liz Weston: Before we get into the next listener question, we want to remind you how you can learn more about things like debt snowballs and debt avalanches. Just visit nerdwallet.com. We have lots of in-depth articles about financial concepts like those. And we'll include a link to read more about the debt snowball and debt avalanche methods in this episode's show notes. And for right now, let's get to our next question.

Sean Pyles: This episode's money question comes from a listener's text message. Here it is: “Hi NerdWallet friends, would love to hear your take on whether pet insurance is worth it. Thanks.”

Liz Weston: Oh, OK. To help us answer this listener's question on this episode of the podcast, we're talking with our co-host Sara Rathner. Welcome back, Sara.

Sara Rathner: Thank you for having me for this extremely important topic, because I love animals, so I love it.

Sean Pyles: Yes, when we got this question, I figured that you could probably answer this with a single word, which I'm going to assume is "yes."

Sara Rathner: You are correct.

Sean Pyles: Before we get into whether it's worth it, and why, let's talk about how pet insurance works. Can you give us a rundown, Sara?

Sara Rathner: So basically you pay a monthly fee. Sometimes you can pay an entire year upfront and even get a small discount for that, or you can get a small discount if you have multiple pets using the same insurance company. So multipet discount they call it.

And then what you do is you'll take your pet to the vet as needed. You will front the cost of the vet's bill, and then you'll submit a claim to the insurance company, and they'll reimburse whatever amount is appropriate to your plan. That can depend on what sort of features you've picked in the plan, what sort of deductible you're susceptible to. So you'll have to meet the deductible first before they'll begin to cover any costs. And then you can also select what percentage of costs the insurer will cover, usually 70% to 90% after you've met that deductible.

Sean Pyles: OK. And I'm assuming the more you pay monthly, the more they'll reimburse you for percentage-wise?

Sara Rathner: Exactly. So if you are anticipating higher costs for the year, it might be worth paying that slightly higher premium. But if you have a relatively healthy pet, you're not really expecting too many expenses, then you might want to save some money on the premiums and have a lower level of coverage.

Liz Weston: One important thing we should talk about is preexisting conditions, because typically pet insurance does not cover preexisting conditions. And there are even conditions that are sort of endemic to certain breeds. For example, if you have a German shepherd, I think hip dysplasia is often not covered. So that's something else you need to go through and make sure that you understand what the policy does and doesn't cover.

Sara Rathner: Right. And if there's anything on the vet records, if you've recently adopted an animal, for example, you'll receive their medical records from the shelter, and anything on there might be considered a preexisting condition that wouldn't be covered. So that's just something to keep in mind.

Sean Pyles: Does pet insurance typically cover things like dental cleanings?

Sara Rathner: It kind of depends on the plan you pick. Some plans cover, for example, preventative care like your annual exam and vaccines, some don't. And it really just depends on the level of coverage you want to pay for.

Sean Pyles: All right, asking selfishly, because my dog and my cat both have awful teeth, so this is something I'm looking into for myself and we can get into that later on. But let's talk about how to know if pet insurance is worth it for you.

Sara Rathner: So there are a number of different routes you can take when it comes to covering the costs of pet care. And one thing you should just know from the get-go: there are going to be costs. It's so tempting to get that cute kitten or that cute puppy. You don't really think about the ongoing expenses beyond food.

But animals can get really sick. They can eat things they shouldn't eat. They can get injured. They can get attacked by other animals. And that will cost a lot, because just like with people, doctors need to do diagnostic testing to determine what's going on with your animal, because your animal can't say, "It hurts here." So they have to do the surgery and the ultrasounds and the blood work and all of that. You can rack up a bill of thousands of dollars just trying to figure out why your dog is on a hunger strike.

And it might be nothing serious or it might be something very serious. So point being, you need to have a plan for how you're going to pay for these things. You can go the route of self-insuring, meaning you will pay for all medical expenses out of pocket with no insurance. This could be a good route if you have a relatively healthy pet, you don't want to spend money on insurance. You would rather take the money you would pay for premiums and just put it into a savings account, just have it at the ready.

But the important thing is you need to have these savings set aside. Think of it like an emergency fund for your pets. You probably want about $5,000 set aside, because that's what you'll spend on surgery if your pet has to have it. And I got this idea from a financial planner I used to work with who had a dog savings account, which is not an actual financial product, it was just a savings account she earmarked for dog expenses. And I thought that that was a really great idea. So if you want to self-insure, have that emergency fund at the ready.

The other route is having insurance. What I like about it is I don't hesitate to bring my pets to the vet if I think they're acting a little strange, because I know that an illness visit is going to be covered 90% by my plan. I'm not going to be out a ton of money in the end, if out of an abundance of caution, I take my pets to the vet.

Because oftentimes if your pet starts acting a little different than they normally do, maybe they're not as enthusiastic about their food, they're a little bit lethargic, even waiting an extra 24 to 48 hours to take them to the vet — "Let's stick it out, let's wait and see" — that can exacerbate a situation. And if you had gotten them to the vet more quickly, because you weren't really worried about the cost, it can make a very big difference in treatment and in the outcome.

Sean Pyles: I'll be honest, I don't have pet insurance for my dog and my cat. I have something similar. It's a subscription plan with a veterinary office that's a national chain, and I like it for that same reason.

I've had instances where I've been traveling with my dog and something has happened. There was one time where she was shaking her head a lot and she was batting at her ears. She has these big old bat ears we call them, and we thought something was wrong, maybe something got in there. And we were able to take her to a vet in the town that we were visiting and get it checked out. And turns out a wood chip fell into her ear, because that happened with dogs. And she was fine. But we also wanted to make sure that it wasn't something more serious. So I was happy to have that coverage in a sense, even though it wasn't quite actual insurance.

Liz Weston: Well, and some historical context to throw in, 20 years ago, there were a lot of things that vets couldn't do that they can do now. And you may very well face a situation where you can save your dog's life, you can save your cat's life, but it will cost you, as Sara said, $5,000.

And when my husband and I started owning pets together, we were both farm kids. We thought at a certain point you just let them go. We turned out to be not nearly as tough as we thought we were going to be.

And we had one cat that was constipated. So we had have it cleaned out professionally several times. And you're not going to let a cat die from constipation. We just weren't going to let that happen. So anyway, it's a long way of saying, if you have a pet, you very well could face a situation. So you want to make sure that you either have the insurance or the savings account that Sara talked about.

Sara Rathner: I mean even if the situation's not dire, you might just have a pet that needs to be on some prescription medication for a short while, like an antibiotic or even chronically. My dog is on Prozac and he is better living through chemistry, let me tell you. Oh, man, this dude is living his best life.

Sean Pyles: Oh.

Sara Rathner: We joke in my family, "When you die, you want to come back as a Rathner pet." It's true.

Sean Pyles: Because you're coddled and drugged.

Sara Rathner: Oh, he's drugged, and he's like sitting on the front porch with my husband right now, just watching the dogs walk by, I mean, best life.

Sean Pyles: Nonreactively.

Sara Rathner: Nonreactively, well, he's still plenty reactive, but much less so than before. But that's something he's going to be on forever, because he is a much happier dude on that medication. It costs us 20 cents a day, well worth it.

But especially as the animals get older, they might have to take medication, basically for the rest of their lives, that will help them live a longer and happier life as they get older and slow down, as we all do.

Sean Pyles: One thing I've been thinking about is that it actually could be worth it for folks to get pet insurance earlier than they may expect, because they won't have the preexisting conditions in their pets that could potentially develop later that would then not be covered by insurance.

Sara Rathner: I mean, I'll give you an example of the preexisting condition. We pay out of pocket for the Prozac. So thankfully it is as cheap as it is, because my dog has serious vet anxiety because of some medical treatments he went through when he was at the rescue. He had heartworm, which is a very traumatic thing to treat. Don't let your pets get heartworm. It's the first of the month, he got his preventative today. Give your pet a preventative, seriously.

And I think the experience was so difficult for him, he hates going to the vet. So the vet sort of branded him as anxious in his records, and now because he's an anxious dog, anxiety is not covered under our insurance policy, wah-wah. So point being, you might not have as much control as you might think if the vet picks up on something and it is in their medical records, it might not be something that's covered later on. So yeah.

Sean Pyles: Interesting. And I know that pet insurance can be really beneficial for end-of-life care, right?

Sara Rathner: Yeah. This is the hard part to talk about. So if this is not something you want to hear, please pause this podcast for the next few minutes. I have had two pets pass away, and I have three currently. So this is something I lived somewhat recently, because the last pet of mine to pass away was right before the pandemic started. She must have seen it coming and she was like, "Oh hell no." And she …

Sean Pyles: Oh.

Sara Rathner: I also think she missed her other friend who passed away before her and she was like, "I'm going to join him in the ground, guys. Peace out." Which was very sad for us. But what can I do.

So I've had one pet die before we went down the insurance path, and one pet die with pet insurance. And I got to tell you, end-of-life care is expensive, and you are vulnerable and sad. So you'll sign anything, you'll pay any price, you will say yes to any test because you're wondering what the hell happened to your pet that used to be healthy and is now not eating and peeing around the house or whatever.

I will say that after my second cat passed away, getting a $2,100 check, because our insurance covered most of the cost of the diagnostic testing she had, and then the cost of putting her down and cremation, it softened the blow a little bit. I mean, I still missed her like crazy, but it helps lessen the financial impact of what was already truly just one of the worst times.

So I would say to anybody that's thinking about this, unfortunately, end of life care is going to run in a couple thousand dollars. It's very rare that your cat just sort of lives until they're 20 and then dies in their sleep. So I mean, I wish that were true for every pet. I wish they were immortal, honestly, but they're not. So it's just something to think about it. It hurts to think about it. You don't want to think about it.

Sean Pyles: You'll be glad to have that insurance when the worst happens.

Sara Rathner: You're not going to be thinking clearly. I will tell you that. That's just the nicest way I can put that. I can paint a deeper picture of you just lying in the fetal position, because your pet is dying and you know it.

Sean Pyles: Well, yeah, I look at my little dog sleeping and I'm like, "I would do anything for you." And she's in perfect health right now, knock on wood. And I can't imagine the kind of irrational things I would do and the amount of money I would throw at her health if something happened.

Sara Rathner: I think it's an ultimate act of love to care for these creatures throughout their lives, when they're young and healthy and when they're older and slow down, and ultimately when things end. Because they give you — I'm going to cry at this part — they give you unconditional love for their whole lives, and when ... it's like you're returning the favor.

Sean Pyles: I think that my cat's love is conditional on occasion. I will say that,

Sara Rathner: My cats might be a little nicer than yours, because I think they love me. I don't know. And I mean, I know they're very food motivated, and they'll like, yeah.

Sean Pyles: No, Argus, my cat, is very sweet, but if we give him the wrong food, he will make us pay for it with nips.

Liz Weston: And, Sara, we've been talking about the cost of all these care, but we haven't talked about the cost of insurance yet. So can you say a little bit about what people should expect to pay?

Sara Rathner: Again, it depends on the level of coverage. It also can depend on your pet's age, because it gets more expensive as they get older, because the assumption is they will need more medical care as they get old and gray and adorable. Oh, my God. Is there anything cuter than a dog with one of those white faces?

Sean Pyles: I've heard it called sugar face, which I find so adorable.

Liz Weston: Oh, I like that.

Sara Rathner: Oh, well, that's the cutest.

Sara Rathner: There's this old golden retriever in my neighborhood who sits in his owner's, like, storm door, and he has got the white face and I refer to him as the olden retriever.

Liz Weston: Oh, that's what we have.

Sara Rathner: Sweet. Anyway, so I pay, I estimated this, about $500 a year for my dog and then $300 a year for each of my cats. And this covers nonwellness costs, so illness and injury, and I think our deductible's like $250, and then it covers 90% of expenses after that.

And also we happen to go to a vet, and this is the only vet I've seen do this, but he actually lists pricing for all the different procedures on his website. So when we're scheduling an appointment and we know that our pet might need an antibiotic shot or a teeth cleaning, we know what the bill is going to be. Which is awesome, because most of the time you go and you have no idea what you're going to walk out paying. So I like ...

Sean Pyles: That's really handy.

Sara Rathner: ... the ability of that.

Liz Weston: We started paying about the same for our dog and our cat, now that they're 12, the dog's insurance I think is up to $1,600 and the cat’s I know is probably close to $800. That's with a $500 deductible, and it's hard to send that payment in, but I think it's worth it.

Sean Pyles: For my dog and my cat, I pay about a $100 a month total, so around $1,200 a year. And this, again, is not for insurance, but it's for this vet subscription service. And I have a somewhat higher tier among what they offer because I need teeth cleanings regularly for my pets. Pepper used to chew on rocks as a puppy, so her enamel is all messed up. And Argus only eats on one side of his mouth, and so the teeth on that side are all messed up. It's just weird.

So they have dental problems, and I really appreciate being able to get a free dental cleaning every 12 to 18 months. Quote, unquote, "free," because I paid for it in advance. But that said, it doesn't cover things like if there is a big medical issue that pops up, I'm not going to get reimbursed. I may get some discount. So I think for now it works out, but I'm beginning to reevaluate my needs longer term. And I think eventually, probably in the next year or so, I'm going to make the jump over to actual pet insurance.

Liz Weston: Yeah, I wouldn't wait too long, because as Sara said, there could be something that pops up that makes it impossible for you to get coverage. So …

Sean Pyles: Right. Argus is 7 and he only has one eye. So those may be two things against him. But price is only one thing to think about when shopping around for pet insurance. What other things should folks consider when they're looking at one company or another?

Sara Rathner: There are lots of companies out there, so really pricing and coverage is what I look for. But I also look for user experience, because a lot of insurance companies now are app-based or you will interact with their website. I want an insurance company that makes it really easy to file claims, whether I can just snap a photo of the receipt and then upload it to the app, super easy. Because you have to do a lot of the administrative stuff yourself, if it's really complicated, I am less likely to get around to submitting those claims and that's just money out of my pocket essentially. So …

Sean Pyles: Defeats the point, basically.

Sara Rathner: Yeah, it's kind of like a bank that has lots of functions on its app so you can deposit checks and pay your credit card bill on the go. I want the same kind of frictionless experience with my pet insurance company.

Sean Pyles: Yeah, that's fair.

Liz Weston: Sara, are there options if you don't have insurance?

Sara Rathner: There are essentially financing options. So one that a lot of vets tend to use is called CareCredit, and that can also be used for financing human medical expenses, by the way. But it's kind of like a store credit card, where you get deferred interest for a set period of time while you pay back your loan.

The thing with deferred interest you just want to keep in mind is when the no-interest promotion ends, if you haven't paid off the balance entirely, you're going to owe interest not just on the remaining balance, but on the entire amount you originally borrowed. So that can really …

Sean Pyles: Retroactive interest.

Sara Rathner: Yes. So if you go this route, just kind of look at your budget first and make sure you can time your payments so that you get down to zero before that promotion ends.

If it's an anticipated expense, like you know you're going to bring your pet in for some sort of medical treatment and around how much it's going to cost, you might consider maybe a credit card that has a 0% interest deal for new purchases. The thing is, it could just be hard to time, when those — how often do you really plan out a massive vet bill, right? Normally, those massive vet bills come unexpectedly.

So if you happen to be sitting on a new card that has 0% interest for a while, that could be helpful. You might want to put the cost on that card and then pay it off over time. And then, obviously, buy now, pay later is big. There are ways coming out where you can use these buy now, pay later services at any vendor, including at vets. So that could be helpful for budgeting purposes. If it's easier for you and the way that your paychecks come in to pay a large bill off in several installments, then that could be a good way to get around it.

Sean Pyles: Yeah, I think I'm about to open up yet another savings account among my half a dozen that's dedicated just to pet expenses.

Liz Weston: There you go. I support that.

Sean Pyles: Well, Sara, thank you so much for sharing your insights with us today.

Sara Rathner: Anytime. May you all have wonderful pet experiences, and may they live long and healthy and cheap lives.

Liz Weston: Yes.

Sean, if our listeners remember one thing from today's episode, what should it be?

Sean Pyles: My top tip as the owner of a small menagerie is that pet owners should always expect and prepare for pet expenses. Maybe your dog will swallow a marble or your cat will get into a fight with another feline in the neighborhood. Stuff is going to happen and you want to be prepared for it, either through a dedicated savings account, that's what I use, or pet insurance.

Liz Weston: And that's all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373, that's 901-730-NERD. You can also email us at [email protected].

Sean Pyles: Remember to follow Smart Money on your favorite podcast app to automatically get new episodes. If you're listening on Apple Podcasts or Spotify, then tap the five-star button to rate the show. We really appreciate it.

Liz Weston: This episode was produced by Cody Gough and myself with help from Sean. Kaely Monahan mixed this episode, with additional audio editing by Cody. And a big thank you to the folks on the NerdWallet copy desk for all their help.