Is Pet Insurance Worth the Cost?
Most people are motivated to buy pet insurance out of a combination of love and fear.
Family member
Pet parents these days often think of their animals like children and treat them like family. We want them to be healthy and happy. But do we need pet insurance to do that?
The promise
Insurance companies sell pet policies with the promise that they will be there to help cover your pet’s medical bills. You won’t be forced to consider euthanizing your pet because you cannot afford the treatment.
♦ Pet insurance a $3 billion dollar business and growing.
Most plans cover cats and dogs. One company (Nationwide) also insures birds, rabbits, snakes, turtles, and other more exotic pets.
A few cover horses, but these can become quite complicated. The coverage you can get may depend on the horse's age, breed, and other criteria. Some even require a form of horse life insurance.
♦ Very few people pay close attention to policy details. And nearly no one considers the total costs over the lifetime of their pet.
♦ If your pet is healthy, many pet policies are not worth the cost paid over many years. Seldom will you receive more in reimbursements from pet insurance than what you pay in premiums.
• Pet insurance is not bad. It does provide a peace of mind. And it is possible to come out ahead if your pet has an expensive health condition or an accident.
♦ Pet insurance is one of those ‘consumer beware’ things. Policies can be vague and claims processing can become quite painful.
Details vary by insurer and policy, but premiums for pet insurance typically use factors like the cost of veterinary care where you live and the age and breed of your pet.
Pet insurance will not protect against large vet bills. Even with pet insurance you will need to pay first and then submit a claim, hoping for some reimbursement.
The Pet Health Insurance Association lists the most common claims and typical costs.
• The most common accidents are broken legs or torn knee ligaments which run around $1,500.
• The most common mistake is swallowing something with estimates of close to $2,000 to remove it.
• The least common but very serious illness is cancer with treatments easily reaching $5,000.
In 2023, the average annual premium for “accident and illness” coverage for dogs was $640 and for cats $387.
♦ The American Pet Products Association (APPA) estimates the annual US average vet bills are less than the typical $500 deductible of many pet policies.
• In 2022, total premiums in the US alone reached $3.2 billion USD and claims paid out were $1.9 billion USD.
Spot Pet Insurance data shows that the most common claim for dogs is gastrointestinal issues with an average claim payout of $70. Vomiting paid out $78.
The most common claim for cats is also gastrointestinal issue with an average claim payout of $89. Vomiting payed out $82.
♦ Limited value is hardly unique to pet insurance. After all, most people pay a lifetime of premiums on their homeowners and car policies, yet rarely ever make a claim.
• Pet insurance is more likely to pay off when your furry friend has a major accident or serious illness.
Few pets have insurance
Sixty-six percent of U.S. households, or about 86 million families, own at least one pet. There are roughly 65 million dogs and 47 million cats as family members.
About 11 million households own freshwater fish.1
• Only about 4.8 million pets in the US are covered by pet insurance. The number has been growing at about 20% per year.
♦ 80% of insured pets are dogs and roughly 20% are cats.2
The growth is driven in part by vet costs. But a large driver of this trend actually is employers. A third of Fortune 500 companies now offer pet insurance as an employee benefit.
Talk with your vet
If you are considering pet insurance, ask your vet about your pet and what he thinks your pet’s breed will usually incur in medical costs during its lifetime. Ask if he has had any experience with pet insurers.
This industry is not like insurance for people, where the doctor submits claims and the patient waits for it to be processed.
♦ The pet’s parents must submit the paperwork to get a claim processed. A large claim will get the vet involved because he will be asked to provide proof of medical history. Ask your vet if any particular pet insurer was easy or difficult to satisfy.
→ There is a slow movement toward electronic claims. Trupanion has some vets onboard but for the most part pet parents must do the filing.
Ask a friend or neighbor
People love to talk about their pets.
Forget the networking sites like Facebook and Nextdoor. They have now fallen into the trap of pretty much all online review sites.
• Every pet insurance will have some glowing reviews. They tend to be in abundance on sites that have links directing you to buy from them.
• Complaining reviews fall into three types: true, disgruntled and fake.
Pet insurance is one of those industries that can still stretch things a bit so it natural to find a few bad apples.
♦ The industry likes to refer to itself as health insurance for pets. It sells.
But unlike health insurance for people, pet insurance is actually a form of property and casualty insurance. Because pets are considered property.
Most are regulated by a state’s Department of Insurance but some are not.
Most are not upfront about future rate increases, which leads to a lot of negative talk.
♦ All will fight a tough fight to pay for an expensive claim. A pre-existing condition is the number one form of denial. Expect the claims examiner to look at your pet's health history with a fine tooth comb.
This behavior supports many of the negative reviews people leave and is a common Better Business Bureau complaint. It tends to be strongly applied toward older pets, who have a longer history.
• Disgruntled folks are people who failed to follow some minor rule when submitting a claim so it was denied. These people are expected to give up.
♦ Never forget, insurance companies make more profit when they don’t pay out. Just expect you may have to work at getting a claim paid.
- American Pet Products Association (2023-2024)
- North American Pet Health Insurance Association (NAPHIA)
