I recently saw a question in a popular personal finance group asking “is pet insurance worth it?” The comments ranged from “100% yes, buy it!” to “just put money in savings and self-insure.”
It’s a great question. We have health insurance, car insurance, homeowner’s, and life insurance – so why or why not insure our pets?
According to the North America Pet Health Insurance Association, nearly 2.43 million pets were insured in 2018, which is up by 17% from the previous year. The NAPHIA also expects millennial pet owners to insure their pets at a higher rate than older generations.
And while 68% of American families own a pet, only 1% of those pets are insured.
Political debates aside, insurance can save people thousands of dollars when it comes to costly emergency situations. As a pet owner, you know those situations can come up with your own sweet fur baby.
The question of is pet insurance worth it is a little different than other forms of insurance – it’s virtually unregulated and there aren’t legal and/or financial ramifications to not having it. It’s a decision that’s entirely up to you as the consumer and pet owner.
So, if you’re considering insuring your pet, this guide will help you decide if pet insurance is the right choice for you and pet.
Is pet insurance worth it? A 2020 guide
How does pet insurance work?
Just like health insurance for yourself, pet insurance plans have different levels of coverage, all with the goal of alleviating some of the costs of keeping your pet healthy. Pet insurance has the same components of health insurance, including:
- Monthly or annual premium
- Coverage percentage
- Some have annual or lifetime caps
One of the biggest differences between human health insurance and pet insurance is that pet insurance is mostly a system of reimbursements. When you take your pet to the vet, you will pay the vet bills upfront, submit them to insurance, then be reimbursed a portion of those costs. Trupanion is currently the only pet insurance company to pay vet bills directly, but this only works at one of its partner hospitals. You can still use Trupanion at other vets and hospitals, but you will have to wait for a reimbursement.
As far as how much pet insurance companies reimburse their customers, it’s typically around 20-90%. Figo is just one of a couple of companies that offer a 100% coverage option, but they don’t do wellness coverage or cover pre-existing conditions.
Read about alternatives to traditional health insurance at Is a Health Care Sharing Ministry Right For You?
What does pet insurance cover?
Here’s another major difference between your health insurance and pet insurance – the majority of pet insurance policies are for accidents or accidents and illnesses only. Pet insurance has traditionally meant for emergencies and helps with major medical bills.
However, more and more companies are offering wellness plans for preventative care. This is for vaccinations and boosters, flea and tick treatments, annual exams, and even grooming. This type of coverage is supplemental, and some pet owners pay for both accident and illness coverage plus wellness coverage.
Some pet insurance companies that only offer accident and illness coverage have begun to offer reimbursement packages for routine wellness care. Embrace is one company that does this – there are different allowance levels, from $250 to $650/year.
While pet insurance companies aren’t known for covering breed-specific or pre-existing conditions, more and more are now making it an option. But, it can be considerably more expensive.
How much pet insurance costs
Like health insurance, the cost of pet insurance varies widely. Monthly premiums can range from $10/month to upwards of $100/month, although that’s more uncommon. What you pay will depend on:
- Age of your pet
- Where you live (an area with a higher cost of living will almost always result in a higher premium)
- Type of coverage
The website PetInsuranceReview has a really helpful chart that looks at policies from over 15 different pet insurance companies. It compares the cost per month, deductibles, coverage, age limits, and lets you access ratings. You’ll even see some discount pet insurance companies on that list, but with pet insurance, you get what you pay for.
According to the North American Pet Health Insurance Association, accident and illness plan premiums cost an average of $529/year. One thing to know about that $529/year average is that dogs are generally more expensive to insure than cats because they’re larger animals and typically have more health issues.
To get a more specific idea and help you decide is pet insurance worth it for your pet, here are some real costs from our Millennial Money Man Facebook Community:
- Two cats (Stormy and Sprinkles), $15/month per cat, $500 deductible, covers 90% with no coverage limits
- Ari, a 2.5-year-old pup, $45/month, $200 deductible, covers 90% including exam fees
- Ava, a 1.5-year-old pup, $40/month, $250 deductible, covers 90% including exam fees
- Goldendoodle puppy named Kenai, $34/month, $200 deductible, covers 90% including exam fees
- Golden Retriever puppy named Maia, $43/month, $700 deductible, covers 90% and covers 50% of prescription dog food, also covers herbals and supplements
- Bella a 7-year-old Lhasapoo, $50/month, $300 deductible per illness or injury, 90% coverage, yearly cap of $15,000
- Fenway a 1-year-old pup, $24/month, $500 deductible, 80% coverage, plus a separate $30/month wellness plan
- Theodore a 9-year-old Shih Tzu with a number of health issues, $78/month, $250 deductible for each condition and caps on all, cost includes a wellness plan
Interestingly, some employers are adding pet insurance to their list of employee benefits. Fortune Magazine reported that 1 in 3 Fortune 500 companies now offer some form of pet insurance, from discounts to paying 100% of premiums.
The cost of treatment
Pet insurance is there for what-if scenarios – the things you never expect to ever happen. But what do those what-if scenarios normally cost? Here are the average costs for common procedures according to Trupanion:
- Hip dysplasia $7,815 for long-term medications and surgery
- Diabetes $10,496 for long-term medications and blood work
- Swallowing a foreign object $2,964 for surgery to remove an object
- Cancer $5,351 for chemotherapy
- Surgery for fractured pelvis (common injury if hit by a car) $3,717
- Seizures $1,984 for medication and MRIs
If any of these things happened to your pet, as long as you were paying your premium, you would first meet your deductible, and then depending on your coverage, the remaining bill would be covered up to a certain percent.
Pros and cons of pet insurance
This list of pros and cons should help you as you decide is pet insurance worth it for you.
You can get low monthly premiums.
Most companies require that you pay bills upfront.
You get to choose your vet.
There are still limitations.
Comparing companies is easy.
As your pet ages, premiums go up.
If you live in an HCOL area, pet insurance is significantly more expensive.
Pros of pet insurance:
- You can get low monthly premiums. For young pets or low-tier plans, premiums can be as little as $20/month and offer fairly comprehensive coverage.
- You get to choose your vet. Unlike health insurance, pet insurance companies don’t have networks of providers. And because most pet insurance companies are reimbursement only, your provider won’t even deal with the insurance company because you submit the claim.
- Comparing companies is easy. You can quickly and easily get quotes from any number of pet insurance companies and do a side-by-side comparison of costs. The language is much simpler to understand than what you read in health insurance plans.
Cons of pet insurance:
- Most companies require that you pay bills upfront. If you take your pet in for treatment, it is very likely that you will have to foot the bill, then submit it for reimbursement. So, you’ll still need cash on hand to pay when your pet sees the vet.
- There are still limitations. Pet insurance doesn’t cover 100% of vet bills. There are limits to what you can claim, what they payout, etc. It’s important to realize that pet insurance isn’t an easy out for expensive vet bills.
- As your pet ages, premiums go up. Just like humans, the older your pet gets, the higher the chance that they’ll need to see the vet. Insurance companies know this and raise the costs as your pet gets older. Your premiums could easily double over the course of several years.
- If you live in an HCOL area, pet insurance is significantly more expensive. One of the factors of pet insurance is your location. They use “usual and customary costs” of veterinary care in your area to determine what they charge you. I heard from one person whose monthly premium dropped from $87/month to $37/month after moving to a lower cost of living area.
Pet insurance alternatives
With the question of is pet insurance worth it, it’s important to see what the alternatives are before moving forward. Here are four options you might want to consider.
Self-insure your pet
Self-insuring is when you set money aside to be used in the event of an unexpected expense. It’s going beyond just using your emergency fund to cover vet bills; it’s money specifically for those bills. And, many pet owners who self-insure use pet insurance premiums as a savings guide.
If you’re interested in self-insuring your pet, get quotes from a couple of different pet insurance companies, and put the average monthly premium aside each month going forward. You can run rates again every year to make sure you’re contributing enough.
You can also research breed-specific health issues and/or common emergency expenses to see how much you should have set aside.
Bonus tip: take advantage of a high-yield savings account so your money grows at a faster rate than what you would see in a regular savings account.
Take advantage of what your community offers
My city opens its annual pet clinic up once per year to offer low-cost vaccinations and exams for cats and dogs. The rates are about half of what you would pay out of pocket. To see if your area has a similar option, contact the city hall or ask in an online community forum like NextDoor.
This isn’t a true alternative to pet insurance, but it can save you on preventative care, which can help your pet stay healthy.
Like you’ve already read, wellness coverage is preventative care for your pets that are intended to help your pet avoid getting sick. Some pet owners add wellness plans to their pet insurance while others pay for this instead of insurance
Wellness coverage for pets offers things like:
- Physical exams
- Heartworm testing
- Fecal testing
- Nail trimming
- Flea and tick control
Wellness coverage is really only ideal if you’re bringing your pet in for these services in the first place. And because many wellness plans pay through reimbursements, it would help to compare what the vet charges for each service compared to what the wellness plan pays out.
Financial assistance programs
For pet owners who are experiencing financial hardships, there are organizations that help defer some of the costs of emergency pet care. These programs are funded by charitable donations and grants, and each has its own set of guidelines and requirements.
Here are a few financial assistance programs for pet owners offered by not-for-profit 501(c)(3) organizations:
- FACE- Helps pet owners with emergency and critical care.
- Handicapped Pets Association- Dedicated to helping with elderly, disabled, and injured pets.
- Magic Bullet Fund- Financial assistance for canine cancer treatment.
- Red Rover- Resources and support for low-income individuals and survivors of domestic violence and their pets.
So, is pet insurance worth it?
Consumer Reports ran a report on years worth of vet bills for two pets – Guinness the dog and Freddie the cat – to see if pet insurance would have saved their owners money. Three insurance companies gave them the estimated cost of coverage (including premiums) and what insurance would cover.
What they found was that for a healthy pet, even if they did occasionally see the vet for emergency care, pet insurance costs more over the pet’s lifetime. For Guinness, he did pass the breakeven point with one company, but he had been undergoing treatment for cancer.
That’s something to think about – for healthy pets, pet insurance will likely cost you more in the long-term.
What pet insurance offers most people is peace of mind, not savings.
You are less likely to be faced with the decision to forgo care because you can’t afford it. This is really valuable to most pet owners.
The bottom line is that insuring your pet is very much a personal decision. If you’re still on the fence, check out several different insurance companies and compare rates and coverage. If you decide not to get pet insurance, considering to self-insure will still reduce some financial and emotional stress if something does happen.