Is Pet Insurance Necessary?

Learn about pet insurance, including the types of policies and whether it makes sense for you.

Pet health insurance is becoming more and more popular. About five percent of U.S. pet owners carry pet insurance, up from less than one percent in 1995. But pet insurance can be expensive. Before you buy, consider the various policies available, the cost, and what kind of care your pet is likely to need.

Vet Bills Higher Than Ever

The average dog owner spends $800 per year on veterinary care; cat owners pay an average of about $500 per year, according to the American Pet Products Manufacturers Association.

Why so much? Health care costs have increased dramatically in recent years, in part because vets use more sophisticated diagnostic tools (MRIs and CAT scans, for example). These tools, which are pricey in themselves, detect problems that require further treatment. And those treatments, which now include such previously unavailable procedures as radiation and kidney transplants, are expensive.

Types of Policies

Several companies offer pet insurance these days, with a large variety of policy types and premium levels.

"Safety" plans. The cheapest policies cover only treatment for injuries, such as broken bones and bee stings.

"Wellness" plans. Wellness plans include routine care, such as physicals and vaccinations. Some experts say that the premiums, deductibles, and copays for these plans usually cost a bit more than paying out-of-pocket. Of course, if your pet gets injured, such a plan may save you money.

Comprehensive plans. On the pricier side, some policies cover a broad range of treatments, from cancer medications to acupuncture.

HMOs. HMOs for pets work like HMOs for humans. The pet owner pays a monthly fee. If the pet is treated by a vet participating in the HMO, the vet submits the insurance paperwork and gets reimbursed directly (if the services are covered by the plan). The downside to an HMO: it may limit your choice of vet, as many don't participate in HMO plans.

Policy Exclusions and Limits

In addition to premiums, consider the coverage exclusions, limits, and other costs that are common to pet insurance plans:

• Deductibles for example, you may have to pay $100 or more out-of-pocket each year before the insurance coverage kicks in.
• Copayments for example, the plan may cover only 50% of treatment costs.
• Annual and lifetime caps once you go over the cap, you pay out-of-pocket.
• Exclusions for pre-existing problems, medicines, dental care, and other things.
• Exclusions for hereditary conditions often, coverage does not include health problems that commonly occur in certain breeds, such as bone cancer in Saint Bernards or hip dysplasia in German Shepherds.
• Benefit schedules the insurance company often sets limits on how much it will pay for a certain procedure. If the vet charges $300 to set a broken leg and your insurance policy caps the charge at $250, you'll have to cover the remaining $50.

Does Pet Insurance Make Sense for You?

To decide whether or not pet insurance is a good deal for you, calculate how much you'll pay for vet care if you obtain insurance (include premiums, deductibles, copays, expenses after caps, and expenses for excluded services) and compare that to how much you would pay out-of-pocket if you don't have pet insurance.

How much you'll pay depends on several factors, including:

Age of pet. The older your pet, the higher the premiums will be. Some policies don't cover dogs older than 9 or 10. If your pet is young now, remember that premiums will go up.

Breed. Purebred dogs and cats tend to have more health problems than mixed breeds. If the insurance policy covers the ailment that is most likely to affect your pet, insurance may be a god-send. But check the fine print: many policies don't cover particular conditions common in certain breeds.

Health. If your dog or cat is in good health, not overweight, and gets lots of exercise, healthcare costs will be lower. Also, indoor cats get injured much less than those that run free.

How much would you pay to keep your pet alive? Take a hard look at how much you'd be willing to pay or simply could afford to pay if your pet required costly medical care. Having insurance reduces the chance that you'll have to put a dollar value on the life of your pet.

How to Choose a Policy

If you decide to buy pet insurance, take these steps to get the best policy for you.

Shop around. Today, there are more options than ever for pet insurance. Ask for recommendations from friends and your vet. Look online or contact several of the better-known companies and compare policies and prices.

Check with the Department of Insurance. Pet insurance companies must be registered with your state's Department of Insurance. Make sure the company you use is registered.

Consider plans through your employer. More and more companies are making pet insurance plans available in benefit packages. Almost always, the employee pays the premiums, but at a five to ten percent discount over what they'd pay on their own.

Read the fine print. Be sure you understand all the costs of the policy such as premiums, copays, and deductibles. Find out whether the premiums will rise as your pet ages or as you file claims. And pay close attention to exclusions for example, dental care, vaccinations, and conditions common in certain breeds.

To learn more about the legal issues that affect dogs, their owners, and their neighbors, get Every Dog's Legal Guide: A Must-Have Book for Your Owner, by Mary Randolph (Nolo).