Is Pet Insurance a Sound Investment?
As pet ownership continues to rise, so does the popularity of pet insurance. In 2023, nearly 5.7 million dogs and cats in the U.S. were insured, representing a 17.1% increase from the previous year, according to the North American Pet Health Insurance Association’s “State of the Industry 2024” report. But is pet insurance truly worth the cost?
Pet insurance serves as a financial safety net, helping to offset the potentially hefty expenses of unexpected veterinary bills. Conditions like cancer treatment or a broken bone can lead to bills in the thousands. Without insurance, these costs come directly from your pocket. The core value proposition of pet insurance lies in this financial protection.
However, policies often have annual limits, coverage exclusions, and waiting periods, so you’ll need a clear understanding of what a policy does — and doesn’t — cover to determine its value for you.
When Pet Insurance Makes Financial Sense: A Real-World Example
Consider a scenario where you’ve paid approximately $684 annually for your dog’s pet insurance over three years, totaling $2,052 in premiums. Then, your dog requires $4,000 in vet care after ingesting a small toy. With a $500 deductible and a 90% reimbursement level, your out-of-pocket expense for the incident would be $850 ($500 deductible + 10% of $3,500). By adding up your premiums for three years plus the toy incident, you’ve spent $2,902. Without the insurance, you would have spent $4,000 on vet care — a savings of roughly $1,100.
“What’s important to know is that four out of five pets will have an unexpected emergency. You don’t know if that’s going to come three months or three years after you get your pet,” says Walter Haugland, chief marketing officer at Pets Best. “It’s almost impossible to plan for the unexpected. So, that’s where pet insurance comes in.”
Advantages and Disadvantages
Like any insurance product, pet insurance has its pros and cons.
Pros:
- Coverage for Substantial Vet bills: It can cover substantial and unexpected vet bills.
- Annual Coverage: Many policies do not have an annual limit.
- Customization: You can often personalize your plan’s annual coverage amount, deductible, and reimbursement levels to fit your budget.
- Behavioral and Holistic Care: Some plans extend coverage to behavioral therapy and alternative treatments like acupuncture.
Cons:
- Cost: Some policies are pricey, so it pays to comparison shop.
- Breed-Specific Costs: Certain breeds can be more expensive to insure.
- Reimbursement-Based: Generally, you pay your vet bills upfront and submit a claim for reimbursement.
- Pre-existing Conditions: Pet insurance doesn’t cover pre-existing conditions.
What You Need to Know About Pet Insurance Costs
Pet insurance costs vary. According to Forbes Advisor’s analysis of pet insurance costs, the average is about $46/month ($552/year) for dogs and $23/month ($276/year) for cats. This is based on a policy with $5,000 in annual coverage and a $250 deductible with 80% reimbursement.
However, costs fluctuate based on the policy’s features and the pet’s characteristics. An unlimited coverage policy with a $250 deductible and 80% reimbursement costs about $66/month ($792/year) for a dog and $34/month ($408/year) for a cat.
Factors Influencing Pet Insurance Premiums
Several elements can influence the cost of your pet insurance:
- Breed: Certain breeds are more prone to specific health problems, affecting insurance costs. For example, larger dogs often cost more to insure.
- Age: Older pets are more susceptible to illnesses and accidents, leading to increased premiums.
- Gender: Female pets are often considered a lower risk, which may translate to lower premiums.
- Location: Vet costs vary by location, which may affect the price of your insurance.
Deductibles, Reimbursement, and Coverage Limits
When choosing pet insurance, you’ll select:
- Deductible: The amount you pay before the insurance coverage begins. Amounts can run from $50 to $1,000. Deductibles can be either annual or per-condition.
- Reimbursement Level: This is the percentage of vet expenses the insurer will cover after your deductible. Common levels are 70%, 80%, and 90%.
- Coverage Cap: This is often an annual limit on the amount the insurance will pay. Some companies offer unlimited annual coverage.
Pet Insurance Coverage Explained
The key difference between human and pet insurance is that pet insurance plans are reimbursement based. You pay the vet directly and then submit a claim to the insurance company. There are generally three plan options:
- Accident and Illness Plans: The most common type, covering a wide range of issues, including accidents, illnesses, diagnostic tests, surgery, and medications.
- Accident-Only Plans: These plans cover veterinary expenses related only to accidents.
- Wellness Plans: These are often optional, covering routine expenses such as vaccinations and checkups.
Insurance Exclusions
A pet insurance policy won’t cover everything. Common exclusions include:
- Experimental Treatments: Treatments considered experimental are not typically covered.
- Food and Supplements: Dietary expenses are not covered by most policies, although some may include prescription food.
- Grooming: Services like baths and nail trims typically aren’t covered.
- Non-Veterinary Expenses: Expenses such as licenses or waste disposal aren’t covered.
- Pre-Existing Conditions: Conditions present before the policy’s start date are typically not covered. However, some companies will cover pre-existing “curable” conditions if the pet has been symptom-free for a certain period.
Making the Decision: Is Pet Insurance Right for You?
Before committing to pet insurance, consider these points:
- Budget: How much are you prepared to pay out-of-pocket for veterinary bills?
- Financial Planning: How would you finance potentially large vet bills if they arise?
Financial planning is a crucial element in selecting pet insurance. As Haugland has noted, a potentially life-threatening situation might prompt you to stretch your budget further than you initially anticipated. Pet insurance provides peace of mind and gives you the freedom to make choices that can help your pet.
Alternatives to Pet Insurance
If pet insurance isn’t your path, consider these alternatives:
- Financing: You could use a personal loan to cover veterinary costs.
- Payment Plans: Discuss payment options with your vet.
- Fundraising: Explore crowdfunding platforms.
Frequently Asked Questions
- Are pet owners buying pet insurance? Yes, the popularity of pet insurance has increased. There was a 126% increase in the number of insured pets between 2019 and 2023.
- Does my dog really need insurance? Consider how you’d handle a large vet bill. If you can easily afford it, you may not need insurance, but it can still provide advantages.
- What is a disadvantage of pet insurance? You may feel like it’s wasted money if you don’t need to make a claim – but it can provide invaluable assistance if you do need to make a claim.
- What is the best age to get dog insurance? The best age to purchase pet insurance is when the dog is young to ensure coverage is in place prior to any pre-existing conditions arising.
