The simple answer to the question “What is Pet Insurance?” is the obvious one: it covers some or all of your pet’s medical bills, in return for monthly or annual premiums.
Unfortunately, when you dive deeper into the subject you find that there really is no simple answer to the question. That’s because there are several variations of pet insurance, plus the same annoying and confusing deductibles and copayments that we face with our own health insurance. There’s even the “preexisting conditions” issue that has come to dominate medical insurance discussions in the human world.
It’s easy to dismiss pet insurance as simply a money-making gimmick when you adopt a young puppy or kitten, and are given pet insurance sales pamphlets during your first appointment with the vet. Puppies and kittens eventually become mature dogs and cats, however, and the medical bills that older pets can run up are often staggering. It costs thousands of dollars to treat senior dogs and cats for relatively-common pet illnesses like kidney disease, diabetes or cancer – and those costs often lead to one of the saddest decisions any pet owner could ever have to make, the one that veterinarians euphemistically call “economic euthanasia.”
Pet insurance has actually been around since the late 1800s, when it was offered only in parts of Europe for horses and farm animals. In the mid-1900s it became available for British house pets, but the first American policy wasn’t written until 1982 and it was for a celebrity: the TV dog Lassie. Pet insurance is somewhat popular in nations like Sweden and the U.K. where nearly one-quarter of pets are covered. In the U.S., though, less than one percent of pet owners have insured their dog or cat, and many still don’t even know that insurance is available.
To better understand the confusing world of pet insurance – and figure out if it’s worth the premiums – it’s first necessary to look at how these policies work, and what they will and won’t cover.
Most of us are somewhat familiar with the basic structure and limitations of human health insurance. There are a number of similarities, but let’s start with the good news.
So far, so good, right? Now, unfortunately, it starts to get more complicated as pet policies start to look more like our own health insurance in several ways. Here are the three most common.
In three respects, pet insurance resembles the way that humans’ health coverage was handled before the Affordable Care Act (also known as Obamacare) was passed.
So, pet insurance is less complicated than our own health coverage in some ways but more restrictive in others. Next, we’ll take a look at the issues which only apply to pets.
It’s obviously against the law for human medical insurance companies to discriminate against applicants because of their genetic background. It’s accepted practice for pet insurance companies, though, and for very good reasons.
A large number of purebred dogs are more susceptible to specific illness or injuries because of their genetic makeup, and companies usually charge more to insure them. As just a few examples, Labs are at risk for a number of eye diseases, German Shepherds are more likely to develop hip dysplasia, Lhasas may contract a hereditary kidney disease and boxers (one of the most expensive breeds to insure) suffer from cancer at much higher rates than average. Cats aren’t immune to this issue; for instance, insurance costs more for Siamese cats because of their predisposition to respiratory problems. A few companies even refuse to cover a few select breeds of dogs or cats.
A breed’s behavioral tendencies can also play a role in pricing. For instance, purebred dogs like golden retrievers and pit bull terriers more commonly ingest foreign objects which are quite costly to remove and treat.
There’s another factor in the price of pet insurance: size. It naturally costs more to treat larger animals, particularly dogs, because they require larger doses of medications and often more technicians. Large dogs are also more likely to develop joint and bone problems. And it’s common for some smaller short-nose breeds to develop airway obstructions and diseases. All of those facts are reflected in pet insurance premiums.
As a general guideline, the North American Pet Health Insurance Association says that the most expensive dog breeds to insure are English bulldogs, Burmese Mountain dogs, Rottweilers and Great Danes. The most expensive cat breeds are Siamese, Bengals and Himalayans. The least expensive pets to insure are small mixed breed dogs and cats which have spayed or neutered. But don’t despair; the difference in premiums isn’t enormous, perhaps an extra $10-15 per month.
You’ll notice we’ve only been discussing dogs and cats, and that’s because nearly all of the pet insurance policies issued in the US are written for them (approximately 90% are for dogs). The average price for dog insurance is nearly double that of cat insurance, for the reasons we’ve mentioned, particularly size. A few companies offer pet insurance for horses or other pets like reptiles or birds, but that’s the exception and not the rule.
Here’s one more important difference between human and pet health insurance. Very few companies will reimburse the veterinarian before you pay your bill; older readers will remember a time when almost all of their claims had to be submitted manually to an insurance company for reimbursement, rather than being handled by the doctor or hospital. That older system is still the way that nearly all pet insurance companies operate; you’ll have to pay your vet bill in full, and then submit receipts in order to be paid. A few providers are starting to operate on a “human model,” but with those exceptions you’ll have to pay the total amount to the veterinarian or animal hospital before your pet can be discharged, and then submit for reimbursement.
As with most purchases, some comparison shopping is required to find the best price and the best policy for your pet. That does require some research, but thankfully not as much as you have to do to choose your own medical insurance.
The first steps are to determine your budget, of course, and to figure out the type of coverage you’re interested in. Accident-only insurance will cost considerably less than accident-and-illness policies, and those that add wellness coverage for annual vet appointments or vaccinations into the mix will carry even higher prices.
You’re then ready to compare provider offerings side-by-side, and see how different choices of deductibles, copayments and maximum payouts will affect premiums. (Maximums can be computed on a number of scales, including per-incident, annual, lifetime or per body system.) Don’t forget to look at often-ignored issues like how various companies determine preexisting conditions (for example, does a generic symptom early in a pet’s life rule out coverage for any later-in-life illness that could theoretically be related?), and how much premiums will increase as a dog or cat gets older. One more factor can be waiting periods before policies take effect; some companies won’t fully cover your pet for as long as 12 months after you purchase insurance.
On a purely mathematical basis, insurance is probably not a sound investment for the majority of pets. Most independent evaluations have found that over the life of a pet, very few insurance policies ended up paying out a total amount that exceeded the combined premiums that were paid. In most cases, there’s a usually-small monetary loss over the lifetime of a pet. Some policies do “pay off,” however, when a dog or cat suffers from some of the most expensive illnesses or injuries that are possible.
But what’s more important to consider is this: pet insurance “evens out” the cost of medical care over the lifetime of your best friend, while also protecting against an unexpected serious illness early in his life. Health care costs can mushroom as a dog or cat grows older, and regular vet or hospital bills of thousands of dollars are not uncommon for a ten-year old dog or a 15-year old cat. Paying $200-$400 per year to insure a pet throughout his life is, for most people, a lot easier to handle than a series of $2,000-$3,000 bills in rapid succession. And that’s not even considering the distressing “economic euthanasia” dilemma that those bills can cause for owners.
Consider a couple of examples. Consumer Reports tells of a young kitten whose total insurance premiums would have been well under $1,000 but whose heart condition cost more than $7,000 to treat. The magazine also looked at a Lab mix who developed skin cancer when he was 11, requiring two surgeries and lots of follow-up treatments. In his case, treatments cost nearly $10,000; several insurance companies would still have collected slightly more in premiums than the cost of that medical care, but another would have paid out more than the owner had paid in premiums over the dog’s lifetime.
In all cases, though, insured owners faced immediate out-of-pocket costs of just hundreds of dollars, rather than the $8,000-$10,000 they would have had to pay in a short period of time. In situations like that, even if they ended up a little “under water,” those who had been able to afford the much lower annual premiums were saved the potentially-catastrophic financial issue of finding huge amounts of money to save their pet’s life – or having to put him to sleep if they couldn’t afford the bill.
One other quick note: almost all independent evaluations have determined that “wellness coverage” for a pet is not a smart financial decision. Paying the annual vet bills is almost always cheaper.
That’s really an individual decision, based largely on an individual’s financial realities; but if you think about the second word in the term “pet insurance,” you’ll realize that it’s not a purely economic decision based on the return on investment.
Chances are high that at some point in your pet’s life you’ll be facing some very large vet bills, and as often happens, they’ll quite possibly come at the worst possible time. Just as with humans, health insurance for pets protects against unexpected and horrendous expenses that could force a devastating decision, all for a pretty reasonable yearly fee. Most American pet owners don’t take that crucial fact into consideration. Perhaps they should.
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