The Pet Insurance Conundrum
Here's the scenario... you feel sick and you hold off going to the doctor, shrugging it off and saying, "I'm fine. It will pass." But when your dog or cat becomes sluggish and doesn't eat or run around, you immediately get concerned and call the vet.
If it IS something you need the vet's help treating, you are suddenly facing a bill that can start at several hundred dollars and skyrocket up to thousands of dollars.
The conundrum of pet care vs human care is that we seek insurance we can afford for our own care, but ignore pet insurance for our furry family.
There are over 111 million pet owning households in the US, but according to the North American Pet Health Insurance Association (NAPHIA), only 5.36 million of our dogs and cats are covered by pet insurance. Even though the number of covered pets is growing by nearly 22% per year, the market penetration is still quite small. The cost of treating a sick or injured pet can climb into the thousands of dollars, yet 87% of pet parents are paying out of pocket for expensive trips to the vet.
According to a USA TODAY survey released in October, 91% of pet owners have experienced financial stress due to the rising cost of pet care. The ironic thing is that pet owners experiencing financial strain often delay getting pet insurance due to rising costs, yet pet insurance actually decreases monthly costs for pet owners. With a good pet insurance plan in place, usually 2-3 visits will cover the annual cost of the premium. And now many pet insurance plans include wellness programs, so pet owners can have more than just accidents and illnesses covered.
So... should you get pet insurance for your furry pals? Let's explore more deeply.
Pet Insurance 101
Understand why to buy pet insurance
Many consumers buy insurance to give themselves peace of mind in case something happens to someone in the family. But insurance is designed to keep the insured healthy, which is the real peace of mind gained from having that coverage. Pet insurance is for the pet, not for the consumer. It exists to ensure pets can get the vital care they need if something bad happens. When considering whether to buy pet insurance, look at your pet and remember, you are buying this coverage for them, not for you.
Know what pet insurance covers
Pet health insurance provides coverage and care for your pet. Pet Insurance generally covers illness, hospitalizations, medications, accidents and sometimes preventative care. Traditionally these policies cover dogs, cats, and horses, but is available for exotic pets like birds and gerbils as well.
Simply Insurance wrote an exceptional resource for pet owners considering insurance for their four legged friends- the Pet Health Insurance guide. Their guide delves deeply into all of the "how to's" for pet parents looking to learn about and buy pet insurance for their dogs and cats.
Pet insurance plans generally fall into two categories. They cover either only accidents, or they cover both accidents AND illnesses. These two types of plans can be augmented by wellness plans, which pay for preventative services to keep pets healthy instead of treat them after they are sick or injured. Nerd Wallet wrote a detailed article about what pet insurance covers and how to choose which type of plan best fits your lifestyle.
What you should consider before buying
The California Department of Insurance says you should consider multiple factors before buying pet insurance. These include:
- Is coverage included or excluded for pre-existing conditions?
- Does the policy have a waiting period?
- Are hereditary disorders or congenital anomalies covered or excluded?
- What is the annual or lifetime policy limit?
- What impact does a claim have on future premiums?
- What is the basis or formula for reimbursement of claims?
Pet insurance terminology
Monthly Premium - This is going to be how much you pay on a month to month basis. You can pay monthly or annually depending on the company you choose. The older your pet, the more your monthly insurance premium will cost. This is the same as with human insurance.
Deductible - Your deductible is the amount of money you must pay before the insurance company starts sharing in the costs of your pets’ coverage. Be sure to understand your out of pocket costs, which include deductibles, before signing up with a particular pet insurance company.
Reimbursements - Unlike health insurance for pet parents that have what is called “Co-Insurance,” pet insurance has “Reimbursements.” This is because some Vets may require you to pay everything up front instead of going through the insurance company to get the difference.
You would then be reimbursed back from the insurance company. The process has become much faster, and now most pet insurance companies offer reimbursement through direct deposit.
Annual Maximums - Your annual maximum is the maximum amount of care that the pet insurance company will pay out per year. The amounts range from $5,000, $10,000 or Unlimited. Unlimited options are better for pets with ongoing issues, while capping the coverage range makes the monthly premium more affordable.
Claims - Once your pet has been treated, you will want to keep copies of the receipt so that you can file a claim to be reimbursed for the amount you spent based on how your plan works.
The faster you submit a claim, the quicker you can be reimbursed. Some companies now offer the ability to file a claim by just taking a picture with your phone and submitting the request from an app.
Understand the costs of pet insurance
The main reason to secure pet insurance is to increase a pets health and simultaneously lower vet visit costs. This cost reduction is most obvious for large out of pocket expenses for accidents or serious illnesses. The general rule of thumb is that a good pet insurance will pay for itself within 2-3 vet visits. If the unthinkable happens and a pet gets very ill or injured, the cost of vet care can skyrocket. In this instance, having pet insurance can save the pet owner thousands of dollars in tests, surgeries, procedures, and vet visits.
The annual cost of pet care is between $1,350 and $4,150, which factors in average preventative health and vet care costs ranging from $900 to $2,600. The chart below shows that in 2022, pet insurance premiums ranged from $614 to $1,134 per year. Buying pet insurance could save pet owners between 32% and 56% of their annual spend for their pets.
Healthy Paws Pet Insurance did a case study showing that the two most common reasons pets go to the vet are Stomach Issues and Skin Conditions. On average the vet cost for stomach issues can climb up to $6,500, and vet costs for skin conditions can cost up to $4,000. With pet insurance, you could decrease that cost by half or more, depending on your policy.
Become a pet insurance expert
The most important thing for you to do is become an expert on this topic by doing your homework:
- Read reviews on health insurance companies for pets
- Get quotes for multiple pet insurance companies and compare them side by side
- Read the FAQs on insurer's websites to get more detailed coverage information
- Do a cost/benefit analysis of your vet visit costs for the last 12-18 months
- Consider your own monthly budgeting to determine how much you can afford
- Factor in the age and current health of your pet(s) and how it changes premium costs
- Read unbiased articles written by sources outside of the insurance industry
Here are some excellent articles about pet insurance to round out your knowledge.
- Consumer Reports: Is Pet Insurance Worth It?
Consumer Rating: Best Pet Insurance Providers of 2023
- AVMA: Do You Need Pet Insurance?
- USA TODAY: Survey: 91% of dog owners have experienced financial stress over the cost of pet ownership
- How Stuff Works: 8 Things to Know Before Buying Pet Insurance