Is pet insurance worth the cost of premiums?

Analysis by Dr. Karen Shaw Becker

pet insurance

Story at-a-glance -

  • The number of companies offering pet health insurance plans has exploded over the last few years; 11% of U.S. companies now also offer pet health insurance benefits to their employees
  • When shopping for pet insurance coverage, it’s important to fully understand the exclusions and other limitations of the plan you’re considering
  • Plans vary widely, so ignore the marketing hype and thoroughly research your options; making a list of pros and cons can be helpful in the decision-making process
  • Alternatives to a pet health insurance plan include keeping an emergency fund and applying for a medical expenses credit card or a veterinary discount card

In the last few years, the number of companies offering pet health insurance plans has grown dramatically. In addition, according to a 2018 Society for Human Resource Management survey, 11% of U.S. employers now offer pet health insurance benefits, up from 6% in 2014.1

Per Ann Carrns, writing for The New York Times, most of these employers offer pet insurance as a voluntary benefit, meaning they don’t contribute to the cost of premiums as they do with human health insurance. But insurers may offer lower premiums or better coverage to employees because their marketing costs are lower.2

A common pet insurance scenario you’ll want to avoid

If you’ve thought about getting coverage for your own pet and tried researching the various plans on the market, chances are you wound up at least a little confused about how to proceed. Like insurance of any kind, for example, for your automobile, home or your own health, pet healthcare coverage can be a huge blessing when you need it — as long as there are no expensive surprises when you submit a claim for reimbursement.

Unfortunately, when it comes to pet insurance, the following isn’t an uncommon scenario: A pet parent pays the premium for her dog’s health insurance like clockwork every month, including the inevitable annual increases. She enjoys peace of mind knowing her canine BFF’s healthcare will be paid for in the event of an emergency or expensive illness.

Years later, her dog is diagnosed with a serious disease requiring costly treatment. She agrees to the treatment plan and assumes she’ll be reimbursed for a good portion of the cost. She pays her veterinarian out of pocket and submits a claim to her pet health insurance provider, only to learn her dog’s illness isn’t covered by her policy.

Stunned, she realizes the substantial debt she’s just incurred to save her dog’s life is hers alone to bear. She does some quick math and realizes that if over the years she’d been putting her monthly pet insurance premiums into a savings account instead, she’d be in a much better financial position.

Now she’s out thousands of dollars in premiums plus the veterinary bill she just paid, plus the cost of future treatments for her beloved dog. This isn’t an uncommon outcome for pet parents who don’t fully understand the exclusions and other limitations of their pet insurance coverage.

Engage your brain and a healthy measure of skepticism when shopping for pet health insurance

Pet health insurance providers lean heavily on the “pets are family” theme to market their products. There’s nothing inherently wrong with this approach because after all, most of us who share our lives with animals believe it wholeheartedly.

However, in the context of selling insurance plans, the “pets are family” spin can border on manipulative, depending on the audience. Yes, pets are family, but they’re not humans. Pet health insurance coverage is vastly different from human health insurance coverage — there simply is no equivalency. This is another situation in which it’s important to ignore the sales pitch and do your own careful research.

As J. Robert Hunter, director of insurance with the Consumer Federation of America warns in the NYT article, pet parents should shop for pet insurance with a healthy dose of skepticism. Purchase of these plans is “often motivated by a combination of love and fear,” says Hunter. “So the buyer may be particularly vulnerable.”3

Jeff Blyskal of Consumers’ Checkbook, a nonprofit group that rates services in major urban markets, recommends that pet owners compare policies with a critical eye. As was the case in the scenario I described above, when years of payments are taken into account, buying insurance can end up being more expensive for some pet parents than going without it.

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Pros and cons of pet health insurance plans

The Penny Hoarder website offers a list of pet insurance pros and cons you might find helpful as you consider whether a plan makes sense for you and your furry family member:4

Pros

  • It’s easy to compare your options — Compared to human health insurance plans, plans for pets are relatively straightforward, and you can get no-commitment quotes online from different companies within minutes.
  • Premiums can be low — If your pet is young and healthy, or you choose a lower tier, you can get coverage for a nominal monthly fee.
  • Deductibles are reasonable — Compared to human insurance plan deductibles or the cost of an emergency animal hospital visit, most pet plan deductibles are reasonable.
  • You get to choose your vet — There’s none of the usual human health plan “out of network” provider headaches with pet insurance. As long as the veterinarian you take your pet to is licensed, eligible expenses should be covered.
  • You can do more for your pet — No one wants to have to choose between a sick pet and a mountain of debt. Too many pet owners, faced with a catastrophic medical crisis they hadn’t prepared for, are forced to make the heartbreaking decision to elect “economic euthanasia.” Pet insurance may save you from having to face such a decision.

Cons

Premiums can be high — If your pet is older, has a pre-existing condition or you choose a high tier, you could be looking at premiums of $50 or more per month. In addition, premiums tend to increase yearly, so your monthly pet care budget will need to grow accordingly.

You still have to pay for procedures up front — Unlike in human medicine, veterinarians don’t involve themselves with pet insurance. This means you must pay your veterinarian the full amount, and then submit the proper forms to your insurance provider for reimbursement.

It doesn’t cover everything — On average, pet owners with insurance still pay around 20% of their pets’ medical expenses. Routine wellness checkups usually aren’t covered, often along with certain hereditary/genetic conditions.

I can’t stress enough the importance of knowing exactly what the plan you’re considering does cover. For example, a client of mine has a golden retriever with a “sensitive stomach,” including food intolerances and slow gastric emptying. His issues have been well-controlled for years through diet and appropriate supplementation.

When he was around 7, my client purchased an insurance plan for him only to quickly learn that because he’d been seen by a veterinarian a total of one time in his life for tummy issues, virtually no disorder or disease involving his digestive tract from his mouth to his anus would be covered. Ever.

My client immediately cancelled the insurance because she couldn’t see the logic in paying for a canine health care plan that didn’t cover the GI tract. Her pet’s predisposition to tummy troubles aside, all dogs, as scavenging carnivores, are prone to gut problems.

The flip side of this scenario is another client of mine who did a tremendous amount of research on what plan to buy for issues later in life: she purchased an extended long-term care plan when her Labrador retriever was a puppy. As it turned out, the dog had congenital elbow problems that required surgery, rehab and extensive outpatient care, and 90% of it was covered by her plan (to the tune of $4500).

The Lab then went on to acquire hemangiosarcoma, requiring extensive diagnostics, a splenectomy and follow up oncology care, another $9000, 90% of which was covered by the plan. The key is in understanding what you’re buying.

The coverage has limitations — Many plans limit the amount you can claim, either annually or over your pet’s lifetime. If your pet suffers a major medical problem, you could max out your plan’s limit pretty quickly and find yourself paying the difference. If this is a concern for you, look for plans without payment caps.

If your pet only needs routine vet care, you won’t save much — Here’s how the numbers break out for an average year for an insured versus uninsured dog:

Annual Costs Insured Dog Uninsured Dog

Out-of-pocket

$324

$251

Average premium

$264

$0

Total

$588

$251

The reason the average yearly out-of-pocket cost for insured dogs is higher is because people with insurance tend to take their pets to the vet more often than those who aren’t insured. However, even if we lower the out-of-pocket on the insured dog to $251 to match the uninsured dog, we still see a total outlay of $515 versus $251.

Another thing to consider is will you benefit from the “perks” the plan offers: if the plan covers annual vaccines but you know it’s best to titer pets before automatically vaccinating them, make sure the plan covers titer testing.

Generally speaking, I think most people purchase pet health insurance primarily as a hedge against the horrifying prospect of an “economic euthanasia” situation.

As long as you know exactly what your plan does and does not cover, you can afford the monthly premium now and as it increases throughout your dog’s life (according to the NYT article, the average pet policy is maintained for three years or less), and you also have a way to pay your veterinarian upfront while you wait for reimbursement from your provider, a pet insurance plan may be the right choice for you. If you’re in the market for a plan, you might want to check out Pet Insurance Review or The Best Pet Insurance at Reviews.com. 

Additional thoughts on paying for your pet’s health care

Especially if you decide that pet health insurance doesn’t make sense in your situation, it’s crucially important to plan for emergency expenses. According to insurance provider Petplan, the average bill for unexpected care ranges from around $800 to $1,500, but the reality is that every six seconds a pet parent is handed a bill for over $3,000.5 When you’re creating your household budget, it’s a really good idea to include pet care expenses such as:

  • Regular wellness checkups, including dental care
  • Costs for treatment of unexpected illness or injury
  • Costs for proper nutrition and daily care
  • Costs for breed-specific conditions that may arise, such as allergies, skin diseases, heart problems or orthopedic conditions

Financial planners advise setting aside a pet emergency fund that you regularly contribute to. One of the big benefits of this approach is any money in your fund that isn’t needed for your pet belongs to you, unlike the monthly premiums paid to a pet health insurer.

If you find yourself with an unexpected veterinary bill that you're having trouble paying, there are a few options that may help. Some veterinarians offer payment plans, deferred payments or financing options through their practice. You can also apply for CareCredit, a credit card for medical expenses and/or PetAssure, a veterinary discount plan.

There are also low-cost veterinary clinics for low-income households, although these may not offer emergency treatment or treatment for complex conditions. You can also try contacting your state veterinary medical organization or a veterinary medical college, which may be able to provide you with a list of programs that help with financial assistance or low-cost veterinary care for families in need.