Your pets are members of your family, and they provide you with companionship, joy, and, in some cases, services that you simply cannot find elsewhere. Is it possible to ensure that they are covered by your insurance?
The short answer is yes, but it will take some forethought on your part.
Even if you’re on a tight budget, you can ensure that your life insurance will cover the care of your pets. While the process isn’t without complications, there are ways to ensure they’ll be cared for even though pets are legally considered “property.”
“The reasons a pet cannot be the sole beneficiary of a life insurance policy are basically because it would be very difficult to verify the pet’s identity. Not to mention, a pet can’t sign off on any legal documents,” says Holly Anderson, spokesperson for State Farm Insurance.
While there are no agencies that provide pet life insurance, there are many that provide pet health insurance, including the American Society for the Prevention of Cruelty to Animals.
You can use your own life insurance policy to ensure that your pet is well-cared for for the rest of its life. One simple way to make it happen is to create a “living trust” to accommodate your pet’s future needs. You can use such a trust to direct that the trust’s proceeds be used to cover expenses ranging from regular veterinary checkups to the finest chew toys to funeral services and expenses.
“Lots of people have different options as to where they put their funds,” says Tricia Clements, legal assistant at Lane & Karlo, LLP, a law firm specializing in estate planning. Clements’ firm has recently begun to offer “pet trusts.”
While she believes such trusts are feasible, she does point out some drawbacks.
A trustee is appointed as a caregiver for the animal, as most trusts function by having a trustee appointed to manage and allocate funds to their designated recipients. This arrangement establishes a system of checks and balances to ensure that your pet is properly cared for.
“There are numerous options to fund a pet trust. For example, somebody may have a life insurance policy and name the [pet] trust a partial or sole beneficiary,” Clements says.
She went on to say that another way to use your life insurance to care for your pets is to make the caregiver or trustee the sole beneficiary of your policy. It is also possible to make the policy a “conditional gift” or to direct how the proceeds of your policy and funds will be used in your will.
“A [pet] trust has a trustee who manages the money and pays the caretaker. It is best to have the trustee and caretaker separate so there’s a system of checks and balances. The problem with making a life insurance policy conditional gift is that it cannot be enforced, so you need to be very comfortable with the person you leave this money to—you are basically giving them the money with no guarantee,” Clements said.