Pet Life Value – Don’t Forget Your Pets – Episode 477

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[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, welcome to the podcast. This one is about pets and Kim, you’re going to especially love this because you are one of the biggest dog fans that I know. So let’s talk about insurance for your pets, pets with your legacy and all of the other pieces in between. All things pets. I love it. And of course, you know, we have some people that are cat people, and I’m sure we have some people that are alpaca people, right? I always wish I could spend more time with our alpacas so that they could be pets because people that have a lot of time on their hands that own alpacas, their alpacas are kind of like dogs, but yeah, I don’t have that kind of time.

[00:51] So it’s just Emma dog and me. And if you happen to be a new listener, Emma dog is a Great Dane and she weighs 140 pounds and we adore her and, you know, she goes in the car with us and we debate about where we’re going to go to dinner to see whether Emma dog can come and yeah, completely, totally spoiled. But isn’t that how it should be? Right? Come on. I think so because of the joy that she provides in our lives. And I mean, I had dogs when I was a kid, but I, you know, they were fairly utilitarian. They were sheep dogs. They were for our farm, whatever. I mean, they were total family dogs. So I, I just really had forgotten maybe how meaningful and how much laughter the presence of a dog is in a family.

[01:45] And even when guests come over, it just really changes the dynamics literally of the entire house. Well, they teach us unconditional love. They really do. And happiness. Absolutely. They do. But you mentioned something in there, like they add to our life. And the article that you had found around this, like weaves in perfectly because it’s, you know, in the insurance world, we’ve got our, you know, our human life value, but now we’ve got this value on something and we’ll say someone that means so much to us, but it’s not human, but it’s part of the family. Well, and it’s interesting because when you use the word insurance, a lot of people’s thought, I would assume initially goes to what we would call health insurance.

[02:34] So for dogs, you can buy quote health insurance. You can have the type of insurance that if they got something pretty serious would pay your vet bills. And so I want to talk about that super quick first, because Todd and I actually looked at that. Emma dog is a registered great Dane. You know, she was not cheap. Great Danes are not cheap. Anyway, we actually looked at rescue dogs and that kind of thing. And we just really wanted a puppy. So we paid a certain amount of money for her. And when we looked at the health insurance aspect, chose not to spend the money because we felt like we would rather spend money on a little higher quality of food and get her some good supplements and do more preventative care and just deal with anything that

[03:19] should come up from a health standpoint. And I think that was a good decision for us. You know, every family has to look at it themselves. And one of the things to always remember when you’re looking at that type of insurance is the issue of opportunity cost. So I don’t even remember what her health insurance was, but it was, it was not a small amount. You know, let’s just say it was a hundred dollars a month. Well, a hundred dollars a month, times 12 months, times a dog like that lives usually eight to maybe 14 or 15 years, it has all of those premiums added up, but then there is also the interest rate that you have to apply to those premiums that is what you use to measure opportunity cost.

[04:07] And opportunity cost is an economic concept and it basically says if you spend the money on the health insurance, you have to look at it in the light of what else you could do with it. And basically what else you could do with it is to save it. And so that’s what we chose to do. And so we apply about a 4% rate of return to those dollars, because that’s what our cash value of life insurance earns. And we just said to ourselves, we’ll just keep paying our life insurance premiums and we’ll know that if we ever have something on the larger size that we decide that we want to pay the vent for, then we will borrow against our life insurance cash value in order to pay for Emma’s care. And that seemed for our family, a better way to go.

[04:53] So that’s premiums, opportunity cost, which you figure out by applying an interest rate to and a decision. So that’s the insurance space on the short side of things. The article that you helped me remember that we found two or three weeks ago, it had a little different perspective on it. And like you brought up the human life value for humans, this is more of a long term and death oriented issue. So share with me your thoughts so far. So I think there’s a few things that are really interesting in here because you added in a, we’ll call it a formula, a math formula of the premiums, the opportunity costs and the decisions. And typically a person will make a mistake in one of those three. Usually the premiums are pretty clear, but they might not be

[05:49] applying the true opportunity cost. And then you have this thing called emotion that creeps in and then it causes people to not make the decisions or not make good decisions. And so you, one, you look at Emma as a member of the family. So you didn’t do this because you were saying what’s the greatest return on our investments. And you didn’t do this because you’re saying, oh, this will be the most simple thing to do. You did it because you actually looked at it as a formula and you said, here’s how we want to do it. But on top of that, you continue to be responsible and safe for it. And if something goes awry, you have a solution. You can use that policy to then take care of large emergency care.

[06:36] And nowadays that can be as much as human care. It’s insane. Oh my gosh, thousands. Yes. Yeah. It’s absolutely insane, especially with a large dog like that. Yeah. Then you have to factor in recovery and all these other pieces and then how it affects your life. So for us, our world’s dynamic is changing, meaning some people are choosing not to have children. They’re just having pets that they’re taking care of. So how do we factor that in or how about this? Like, you know, you mentioned Emma, she has all of her papers. Um, we know people that, um, you know, you have, you’re in the alpaca world that that’s an industry where those animals are very valuable, you have the animals that have papers, they’re very valuable.

[07:21] So you can’t just say it’s what dogs were like when we were kids, you know, a farm dog, there’s something significant to it. Very well said. And I’m glad you brought up the alpacas because this is something I think we’ve talked about on previous podcasts, but it falls right into essentially dog life value and alpaca life value. Like we talk about human life value and alpacas actually can have life insurance, similar to race horses. These are the only two animals I’m aware of. I’m sure there are others, but there are actual animals that you get life insurance for because of their value. Now I’m not aware of life insurance for a dog, but it doesn’t mean there’s not a calculation to figure out the dog’s value.

[08:16] And that is what was so interesting in the article, which I’m sure we’ll include the link to in the show notes below the podcast and it talked, and you’ve read it more recently than I have, I think it talked about the average dog value at $11,000. Wasn’t that right? $10,000. So you’re close. Yes. Okay. So that’s pretty interesting number when you think about, and it, it didn’t get specific and it wasn’t even talking about dogs with papers, right? That’s just general across the board. Yeah. Which is amazing. And you know, there are times when somebody’s dog could accidentally get run over by a car or somebody’s dog could accidentally get killed by another dog or, or damaged so much that the dog had to be put down

[09:05] or what have you, and so here’s this line item that we need to address, which is now coming to the forefront, calculated by somebody. You know, they, they didn’t pull the number out of thin air. They came up with it through a series of experiments and analysis and a perception of the value of a dog to a family, and it was $10,000. And that’s pretty interesting. When you think about, you can go get a dog for a couple of hundred bucks at a pound. Yeah. But to replace, wow. Yeah. Yes. Priceless. So well said. And you used an interesting word with replace because insurance is designed to replace and unfortunately, especially in the life insurance area, the last, I believe this kind of came forth around the same time that financial planning did.

[10:05] So, you know, the sixties or the seventies. So the last call at 50 years, people use the life insurance space to do something that’s called a needs analysis, which is a very incorrect mathematical formula to figure out life insurance need, because it does not deal with replacing. Insurance is supposed to replace. If your house burns down, you have another house built. If your car gets totaled, that car gets replaced or at least one of similar value. And so whether it’s dog’s life value that we’re talking about, alpacas life value that we’re talking about, or human life value that we’re talking about, you want to have full replacement coverage, and if you apply this to a home, you have the same decision, there is full replacement

[11:00] coverage available that sometimes you have to pay a little bit more for. And it’s a much higher number than what anybody would quote need, because frankly, you know, we could all live in a X thousand dollar apartment building or, you know, a tiny home for 20 grand or whatever the number is, but that isn’t the point. The point is what is the value of that item that is being dealt with. And so our new number for dogs, apparently, according to this article is 10,000, human life value is a function of your income. It’s between 15 and 30 times your income. So each adult, a working adult has a human life value. If you are not earning income outside the home, it’s usually about half of your spouses.

[11:50] Children are about a quarter of the main income earners, human life value. Now that’s the calculation done on an income basis. There is another way to look at human life value though. And that is based on your gross worth, not your net worth, your gross worth, and it’s actually one times your gross worth. So we’ve got dog life value, 10 grand, human life value, 15 to 20 times your income or one times your gross worth and alpaca life value is between 10 and $20,000. It depends on the papers, the lineage, the breeding, et cetera, of the particular alpaca. So all kinds of fun numbers we talked about today. Yes. And who would have thunk that on this podcast, we could have brought in alpaca life value, that is a first.

[12:41] That’s pretty good. I’m so grateful that we get to chat about it and trust that our listeners found some joy in the conversation because it started with dogs and we know that the dogs bring joy. And you know, if you need a little alpaca fix, I’m sure you can jump on Instagram and see a few cute pictures and videos. That’s pretty good. I enjoy that. We’ll put, as Kim mentioned, a link to this article inside of the show notes of this episode. And if you do have questions of, you know, where to fit your animals in your family legacy plan, because I mean, depending on your family, that’s, that’s a family member right there, then you can always reach out to Kim and we have a special email address

[13:25] dedicated for podcast listeners. That’s hello at prosperity thinkers.com and share some of your dog stories or some of your dog questions. And we’ll figure out where that fits in the mix of your family legacy. Thank you for listening to the prosperity podcast to take control of your money and have it work for you visit prosperity thinkers.com.