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How to choose the right pet health insurance

Credit envy — or just the anxiety that comes from being at an emergency animal hospital — but when you overhear a fellow pet owner requesting a copy of a bill for insurance purposes, the merits of pet health coverage suddenly become clear.
A cat named Beetle lets out a meow as he receives a vaccination. Routine procedures, and even alternative therapies like acupuncture, can be covered with pet health insurance.Norm Dettlaff / AP file
/ Source: contributor

Credit envy — or just the anxiety that comes from being at an emergency animal hospital — but when you overhear a fellow pet owner requesting a copy of a bill for insurance purposes, the merits of pet health coverage suddenly become clear.

“From 1994 to 2003, expenditures for veterinary services rose 76 percent,” says Carol McConnell, manager of veterinary education and services for Veterinary Pet Insurance, in Brea, Calif.

That rise may correlate with higher disposable incomes and the elevation of pets to "family member" status, along with longer animal life expectancies. But McConnell also notes that owners of ailing pets now have more options as veterinarians have added many diagnostic and treatment capabilities borrowed from human medicine.  Taking advantage of those new options can quickly run vet bills up into the thousands of dollars, making insurance premiums of a few hundred dollars a year a good investment for some pet owners.

Pet insurance is not new. European pet owners have been buying it since the 1940s. According a 2005 report from Packaged Facts, a market research company, about 25 percent of British pet owners have the coverage. In Sweden, nearly 50 percent carry it. But in the United States, where it has only been available since the early 1980s, less than 3 percent of pet owners carry insurance. Many are unaware it even exists, says Molly Pavolino, a spokesperson for PetProtect, an insurer in Naples, Fla.

Pet health insurance is not only far cheaper than the human variety, it also lacks the administrative complexity. Instead, pet insurance functions on a reimbursement basis with policyholders choosing their own course of care and providers and then submitting claims after the fact.

Because pets are technically a form of property, the insurance is structured more like a homeowner’s or auto policy.

“With a car, you have a fender bender and look to insurance to cover the repairs after meeting the deductible. As crude as it sounds, this is how pet insurance works," said McConnell. "The point of treatment remains getting the pet ‘back on the road,’ so to speak.” The main purpose of pet insurance, like auto insurance, is to manage the risk of a potentially costly event.

Four major insurers
Evaluating carriers is relatively straightforward, as only four offer coverage throughout the United States. But the policies vary significantly in terms of coverage. Premiums range from about  $10 to $71 a month per cat or dog, with discounts for multiple pets.

Veterinary Pet Insurance is the oldest and largest pet insurer with 70 percent of the market.  In addition to cats and dogs, coverage for birds, fish, snakes, rabbits, guinea pigs and other exotics is also available. Policies include standard accident, illness and emergency coverage, with additional coverage available for routine and preventive care. Coverage also includes FDA-approved medicines along with increasingly popular alternative care therapies like acupuncture and massage therapy.

Pethealth is a Canadian company that offers dog and cat insurance in the U.S. under a variety of names, including PETCO, ShelterCare and UnionPlus. A policy for older dogs has no upper age limit.

Hartville Group, which underwrites PetsHealth Care Plan, also covers dogs and cats. Most of its policies include routine care coverage for annual vaccinations. But it excludes any alternative therapy coverage. It also boasts an annual deductible rather than a per incidence deductible that characterizes the other policies. 

A variation in policy structure can be found with PetProtect, which, according to Pavolino, is structured more like a European policy. With only two policies to choose between, it limits coverage to accidents, illnesses and diseases. The higher-priced policy addresses the expense of finding a missing pet and recovery of the original purchase price of a lost pet. After a $40 deductible per incident, claims are covered 100 percent. Dollar limits per illness apply, which could be exhausted by a chronic condition.

An alternative for keeping costs in check, especially for routine services, may be found with discounters like Pet Assure or prepaid plan providers like Banfield, which provides care through PetSmart stores. But like HMOs, use is restricted to in-network clinics. Referrals to specialists or emergency care — exactly what insurance is bought to cover — could be costly.

Also touted as an alternative to paying a monthly premium is a dedicated savings account. It is an option Bonnie Beaver, former president of the American Veterinary Medical Association and a practicing veterinarian with Texas A&M, recommends for clients who do not want to buy insurance. It can work. But early-life accidents or illnesses could easily undermine the plan, as can a lack of discipline to save.

When evaluating pet insurers, consumers are advised to apply the same scrutiny they would to any other property and casualty insurance policy:

  • Look at the underwriter behind the policy and verify its "Best Rating," which reflects its financial health and ability to pay any future claims.
  • Compare coverage to actual and probable needs given the animal’s breed and its associated health risks.
  • Understand the costs. Each company has a slightly different cost structure in terms of co-payments, deductibles and lifetime caps. Verify whether or the premiums stay level throughout the life of the pet or escalate with age.
  • Know what the coverage limits and more importantly what it excludes.

Before buying, check with your company's human resources department. Many companies, including Home Depot, Procter & Gamble and numerous restaurant chains, offer pet insurance as an employee benefit.

Although new pet owners may swear they would euthanize their animal before ever spending $3,000 to reattach a knee ligament, once faced with the decision such hard lines can be difficult to hold.

“There is no discounting the human-animal bond,” says McConnell. “When your cat is the reason you get up in the morning, and you are in the vet’s office being told there is a procedure that will save its life, you are willing to find a way to pay.” Having pet insurance can make doing so that much easier.