What is Pet Insurance?

July 13, 2008

A previous secretary of mine told me of a story involving her dog. When its previous owner started noticing signs of illness in the dog, she did what most pet owners do and took her to the veterinarian. The diagnosis: a blocked intestine which required immediate surgery. The bill: $1,100.

Not too bad, considering the soaring cost of veterinary care. While the cost of many veterinarian visits are manageable, the availability of advanced medical treatments has ratcheted up the cost and need for pet health care. Pets that are regularly undergoing chemotherapy and radiation for cancer treatment or MRI's for screening are billed a price of $1,000 to more than $5,000.

According to the American Pet Products Manufacturers Association, Americans were expected spend an estimated $9.4 billion on their pet's health care last year, up from $8.7 billion a year prior. To ease these escalating veterinarian costs, owners have increasingly been purchasing pet health insurance.

Several companies outshine the competition regarding plans and premiums, such as Veterinary Pet Insurance (VPI), PetCare Pet Insurance, and PetsHealth Care Plan. To trim the cost of premiums, employers are even starting to offer the insurance as a benefit. While pet insurance is not a standard employee benefit, such a thing is growing in popularity. Based on a 2004 Society for Human Resource Management report, the coverage is currently offered by five percent of companies--up from just two percent in 2003.

Increasingly popular pet insurance plans are similar to human health care insurance. There are deductibles, annual premiums, limits on preexisting conditions, and exclusions for hereditary defects. There are also co-pays for tests, office visits, prescriptions, X-rays, lab fees, and hospitalization, as well as surgical procedures. You pick your own vet and then file claims directly to the insurance company. Premiums are based on where you live and your pet's age and breed. Monthly premiums for a particular breed and age of dog typically run $15 to $25 with many plans offering discounts for insuring multiple pets.

Now to the brass tacks: Is pet insurance worth it?

For most people, pet insurance will probably cost more than it will save. As with any insurance product, from auto to homeowners, you're betting that your total vet expenses will be higher than the amount you've paid in premiums and other costs. Considering you own dog’s health issues in the past and your pet's curious nature, are not vet visits almost expected? The blocked intestine surgery that cost the owner $1,100 would have only cost $100 according to the average premium rates of many pet insurance policies. The possibility of emergency surgery alone would prompt an owner to sign on the dotted line, however most plans also have an annual cap payout ranging from $500 to $14,000. That said, all it takes is one catastrophic accident or illness and the coverage more than pays for itself. And therein lies the dilemma.

Much like human life insurance, policies are best when purchased before or around a certain age. For the life expectancy and hereditary health concerns, it is recommended to start looking into pet insurance at the age of 5 - 6 years old. If your beloved member of the family reaches that age and you can protect and provide for him or her at a reasonable price, a pet insurance policy may be well worth considering.