Personal Finance

Is It Worth Taking Out Pet Insurance?

The North American Pet Health Insurance Association notes that the pet healthcare industry costs pet owners an astronomical $15.25 billion per year, over a fourth of the total $58.5 billion spent annually by pet owners.

With over 179 million documented pets in America and Canada alone, pet insurance is on the rise. Although only about one in every 200 pets carries coverage, the industry is growing at an average 13.2 percent a year.

Pet insurance comes in a variety of options, from basic offerings available through most pet insurers, to more difficult to secure options such as lifetime, high-level coverage. Savings Experiment categorizes these types of coverage available to interested pet owners as accident coverage, illness coverage and wellness coverage.

“Wellness coverage is for routine annual exams,” Savings Experiment reports, “and according to Consumer Reports and Checkbook.org, it’s not generally worth the cost since an annual checkup is usually something you can safely cover on your own.”

Similar, But Different

Just as with human insurance, coverage varies between policies and company offerings. It is essential to complete proper research to determine the most appropriate options for your furry family members.

Similarly, just as medical histories can influence coverage options for humans, your pet’s health history, breed, age, gender and place of residence are all considered when applying for pet insurance. Pre-existing conditions are not limited to homo sapiens, and insurance agencies know that.

However, there are a few key differences that must be considered when weighing the option of carrying Fido’s insurance, which can ultimately make the decision more appealing.

For one, the option to choose a medical provider (vet) is a luxury Mr. Fluffles has that many people do not. As long as your vet of choice is licensed, most insurers will not enforce limitations on who your pet can or cannot see.

Additionally, health insurance for pets comes in at a lower cost than human health insurance, and the policies are simplistic relative to their human counterparts as well.

Finally, one difference that can catch carriers off guard is that pet insurance often functions similarly to Aflac or other secondary coverings – the initial payments are the responsibility of the pet owner, not the insurance company. In other words, at the time service is rendered, you pay. Afterwards, you can file a claim with the pet insurance company and be reimbursed for some of the cost. While some health providers may defer initial payment until the insurance company responds, this is not a standard business procedure.

Is It Worth It?

That depends.

According to a Consumer Reports article, pet insurance is rarely worth the price paid in premiums and deductibles.

Ninety percent of the sector is controlled by just three pet insurers. In looking at these top three – 24PetWatch QuickCare, ASPCA Pet Health Insurance and VPI, if a pet remains relatively healthy throughout its life, the insurance ends up costing more than standard bills attributed to keeping your pet healthy, Consumer Reports revealed.

However, the situation changes when potential health conditions and accidents occur. In these hypothetical instances, coverage could save the human counterpart quite a bit of cash.

“We projected the net benefit of pet insurance under nine policies for Roxy, a healthy 10-year-old beagle. Over the years, her vet bills have totaled $7,026 (in current dollars). Because Roxy has had few major health problems, the insurance would have cost more than it paid out. But when we added treatment for more serious problems and increased her vet bills to $12,685, five of the nine policies would have paid back at least a little more than they cost.”

Insurance isn’t designed to turn a profit, but rather protect against cat-astrophic events and dog-gone accidents.

This article is part of a collaborative project between NASDAQ contributor and Benzinga Managing Editor Joe Young and Benzinga Personal Finance Writer Rebecca Sheppard.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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