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Is Pet Insurance Worth It?

Pet insurance can help dog and cat owners pay for unexpected vet bills. But are these policies worth their cost in premiums? Here's how to decide.

Photo by Tima Miroshnichenko on Pexels

For well over a year, most of us have been spending a lot more time in our homes to prevent the spread of COVID-19. So what do you do to add a little "spice" to the monotony that naturally sets in after an extended period of sheltering in place?

In our family's case, we got puppy fever...bad. And I couldn't be more happy to say that we were able to welcome our sweet and furry new family member a few months ago. But statistics show that our family was far from the only one that decided to acquire a new pet during the pandemic.

In June 2021, the American Pet Products Association (APPA) released its biennial National Pet Owners Survey. The survey found that pet ownership increased from 67% to 70% since its last release. And over 25% of new pet owners said that their decision to add a new pet was directly influenced by the pandemic.

The study also found that pet insurance purchases increased during the pandemic and nearly doubled for cat owners. Of course, this trend towards buying pet insurance adds to the overall cost of owning a dog or cat. Is it worth it? Let's examine how pet insurance plans work to see if they could make financial sense for you.

How Much Your Pet's Vet Visit May Cost

Veterinary costs are typically split into two categories: routine and emergency care. Routine care is generally less expensive. The APPA says that average annual routine vet visits costs are:

  • Dogs: $212
  • Cats: $160

However, routine veterinary care is typically higher in a pet's first year of life. According to CareCredit, this is how much dog and cat owners pay on average in first-year vet costs:

  • Large dog: $2,008
  • Medium dog: $1,779
  • Small dog: $1,471
  • Cat: $1,174

If your pet needs complex or emergency veterinary care, the costs can quickly skyrocket. Here are the average costs for a few of the most expensive complex conditions based on Pets Best claims data from January 2017- May 2020:

ConditionDogsCats
Cancer$4,137$3,282
Stomach Foreign Object$3,262$2,955
Diabetes$2,892$1,634
Broken Bone$2,371$2,257
Heart Murmur$1,140$1,440

And how often do these high-cost veterinary visits happen? PetPlan says its claims data indicates that every six seconds a pet owner receives a vet bill of over $1,000.

While that statistic might sound frightening (and it's designed to), it's important to understand that there are an estimated 184 million dogs and cats in the U.S according to the latest data. So that means your chance of dealing with a $1,000+ expense in a given year is actually less than 3%.

Average Cost of Pet Insurance

Before we evaluate the average costs of pet insurance, it's important to note that virtually all companies in this space only offer coverage for dogs and cats. If you do own a cat or dog, you'll typically have the option to purchase two types of coverage: Accident-Only (AO) or Accident and Illness (A&I).

Depending on the insurer, you may also have the option to purchase an Accident, Illness, And Wellness policy. Or you might be able to add a wellness coverage rider to your AO or A&I plan.
Each year, the North American Pet Health Insurance Association (NAPHIA) releases average premium data for AO and A&I coverage types. Here's what owners paid for pet insurance in 2020:

PetAccident Only (AO)Accident and Illness (A&I)
CatMonthly: $18.17, Annual: $218.13Monthly: $28.48, Annual: $341.81
DogMonthly: $11.13, Annual: $133.61Monthly: $49.51, Annual: $594.15

Whether you pay less or more than these averages will often depend on your pet's age and breed. Insurers generally charge higher premiums for older dogs and breeds that are prone to ailments that are costly to treat.

The deductible you choose should impact your premiums too, but likely to a lesser extent. Most insurers offer deductibles as low as $100. Maximum deductibles can vary a great deal by insurance company from as low as $500 to over $2,000.

Common Pet Insurance Terms and Limits

As you're comparing pet insurance policies, monthly premiums are obviously important. But there are a few more details that you'll want to pay attention to as well. These include:

  • Reimbursement rates: Even after you reach your deductible, your pet insurance company will generally only reimburse your covered costs up to a certain percentage. These typically range from 70% to 90%. While lower reimbursement rates are likely to reduce your premiums, you'll also have higher out-of-pocket costs when you do make a claim.
  • Payout limits: Many pet insurers have annual and lifetime payout caps. However, some have neither, so you'll want to ask about this during the shopping process.
  • Deductible options: The more deductible options that you're offered by a pet insurer, the more flexibility you'll have to find the right premium for your budget. Also, note that some pet insurance companies offer diminishing deductibles that decrease each year you don't make a claim.
  • Covered conditions: This might be the most important factor, but it's also the one that most likely to vary with each insurer. Carefully read through each company's list of conditions that are covered and not covered. It's highly unlikely that you'll find a plan that covers pre-existing conditions. However, coverage for congenital and hereditary conditions will vary by carrier.
  • Waiting periods: Most insurers have waiting periods of 14 to 30 days after policy enrollment before the majority of accidents and illnesses can be claimed. But the wait time could be much longer (often 6 to 12 months) for certain high-cost conditions such as cruciate ligaments, disc disease, and hip dysplasia.

Finally, you'll want to evaluate the insurer's claims and payout process. Most pet insurance companies will require you to pay for your vet visit yourself and then make a claim for reimbursement. However, direct vet payment is possible with a few insurers.

Best Pet Insurance Alternatives

If you're not sure that pet insurance is right for you, it's still a good idea to start putting away money each month in a pet emergency fund. For example, let's say you saved $25 per month ($300/year). In this case, you'd be saving enough to cover the average costs of routine care (after year one).

Plus, you'd be saving a little extra each year that would build up over time. Even having just $500 tucked away will reduce the shock to your bank account if your pet needs vet care for an accident or illness down the road. Or if you later decide to purchase pet insurance, having a pet emergency fund in place could give you the flexibility to choose a higher deductible.

If you decide to forgo pet insurance and later face a vet expense that you can't afford to pay out-of-pocket, you still have options. The Humane Society maintains a list of pet financial aid resources.

You could also ask your veterinary clinic if payment plans are available. If not, you could apply for one with a third-party financing company such as CareCredit or Scratchpay. Just know that your eligibility and the interest rate you receive will be dependent on your credit history. Check your credit reports and FICOŽ Score at myFICO.

Is Pet Insurance Worth It?

Like all insurance companies, pet insurers aren't trying to lose money. They wouldn't be offering these plans if they didn't think that, overall, they'll receive more in premiums than they pay out in veterinary care reimbursements.

But that doesn't mean that pet insurance isn't worth it. It's clear that some conditions can cost thousands of dollars to treat. And accidents that require extended vet stays (such as if your pet was struck by a vehicle) could cost even more. If you want the peace of mind that you'll always be able to give your pet the medical care that it needs, buying a pet insurance policy could be a great decision.

If you decide to buy pet insurance, it's probably a good idea to start your policy when your pet is young and the premiums are most affordable. Plus, it could help you keep your pet insured over the long-term. Even when insurers have age restrictions, they often promise to never drop coverage for pets that were enrolled in a policy before they hit the age cap.

Finally, make sure to shop around. Carefully examine the premiums, reimbursement rates, and coverage limits with multiple insurers before you make a decision. Or you can use a pet insurance marketplace like Pawlicy Advisor or PetInsuranceQuotes.com to compare plans from multiple insurers at once.

Clint Proctor

Clint Proctor is a freelance writer and founder of WalletWiseGuy.com, where he writes about how students and millennials can win with money. His work has been featured in several major publications including Business Insider, U.S News and World Report, Yahoo Finance, and Forbes.