Know What You Get in Your Pet Insurance Policy

This week, Gail suggests you 'pawse' before signing up for pet health insurance. Because for most of us, pets are family.

Dear Gail,

I just spent $295 in vet bills on my Persian cat. We think she ate a mouse or something else that was partly decayed. The vet had to induce vomiting and keep her for a day for observation. She’s fine now, but we were pretty scared.

This cat is like one of our children. In fact, Matty was our first "child." We’d do anything for her. Which is why I’m wondering if it might be worthwhile to get pet insurance. Do you know anything about these policies? Are they legit?

Thanks,

Iris

Dear Iris —

I’m glad Matty is on the mend. As a pet owner myself, I understand how you feel about her. Pet ownership is on the increase. 58 million American households include a dog, cat, bird, or other companion animal. For most people, a beloved pet is truly a member of the family and we would spare no expense to ensure our pet is healthy and happy. (Yes, happy. Today we even have anti-depressants for pets!)

According to the American Pet Products Manufacturing Association, we spend an estimated $30 billion — that’s billion — on our pets each year. This includes veterinary care, grooming, boarding, toys, beds, etc. More than 60% of pet owner buy Fluffy or Matty (!) or Fifi presents, especially around the holidays.

Most of us are prepared to pay the routine costs associated with pet ownership: annual check-ups, vaccinations, and food. The North County Humane Society estimates these run around $800/year for a dog and $700/year for a cat. (Cats are smaller so they eat less. Of course, you could always opt for a small dog.)

It’s the unexpected, catastrophic costs for Kitty or Skippy that can make you want to claw the drapes — or chew a chair leg. Take your pick.

This is the reason pet insurance is increasingly popular. While these policies have been around for more than 20 years, the real growth has come in the past ten. According to one report, we paid $88 million in pet insurance premiums in 2002.

Like all insurance, you’re paying for something you may never use. But in the event you need it, you want to be sure the coverage is there. Jeanne Salvatore of the Insurance Information Institute says, "Make sure the company is licensed in your state."

But don’t stop there. Call your state insurance department and ask if there have been any complaints filed against the firm. "You want to be sure it’s a legitimate company with financial resources of back up its claim," says Salvatore.

And be certain you know what the policy does — and does not — cover. For instance, some will pay part of the cost of routine vet visits. There might be a cap on the amount that will be paid for emergency care. Some pet insurance companies offer a discount if you insure multiple pets. A standard policy covers dogs and cats, but if you’ve got a parrot or iguana, you need to hunt around for one that insures "exotic" pets.

Dr. Richard Bednarski, director of the Veterinary Teaching Hospital at Ohio State University, recommends reading the fine print. "The policy probably won’t cover pre-existing diseases or conditions that may be inherited."

For instance, hip dysplasia is common in Labrador Retrievers. So if your Lab needs a hip replacement (at a cost of $2,000-3,000), don’t count on your pet insurance covering this. If you specifically want this type of coverage, you might be able to add a "rider" to the basic policy and pay a little extra.

But the question is, just what are the chances your pet is going to require expensive medical treatment? In other words, you need to weigh the cost of the insurance against the likelihood of submitting a claim.

For instance, according to one pet insurance company I visited online, a policy for my 6-year old Jack Russell Terrier, Ange, would cost around $25/month, or $300/year. This covers "accidental injuries, emergencies and illnesses" as well as X-rays, blood tests, lab work, and prescriptions. For another $100/year I could add coverage for routine office visits and her annual shots. Tack on the $2/month "processing fee" and I’m at roughly $425. And that’s not including the "cancer" rider.

Because Ange is (currently) healthy and I try to be a responsible pet owner (i.e. I make sure she is fenced or on a leash, eats right, gets her shots, etc.), my annual veterinarian bills are about $200/year. Is it worth paying an additional $225 each year to cover the risk of an unexpected event?

That, of course, is the essence of insurance. Either you take the risk, or you pay someone else (the insurance company), to take the risk on your behalf. And if you’re the kind of pet owner who would stop at nothing to save or improve the life of your pet, the dollars can add up quickly.

"The cost of an episode can be staggering," says Bednarski. For instance, if your dog got hit by a car, you could easily run up $6,000-8,000 in vet bills, especially if the dog is in intensive care (at $500/day) for several days. "In that case," says Bernarski, "you’d probably glad you had the insurance."

So you’ve got to weigh the chances of this happening over the (relatively) short life of a pet. If you assume the only thing you’ll end up paying for is, say, 15 years of routine vet visits and the possibility that you might spend, $500 for illnesses on two occasions over the life of the pet, in Bernarski’s judgment, "It’s probably not worth the annual cost of the insurance."

Of course, you could simply decide to "self-insure." Salvatore, who admits to spending "thousands" to save a cockatiel with cancer, says, instead of paying the monthly premiums to an insurance company, you could deposit the money into a bank account, knowing that it’s there if you need it. "If you are a disciplined person and could put the money aside, then that’s an option," she says. Adding, "You don’t want to be in the position of putting an animal to sleep because you can’t afford the veterinary care."

Another option is to look for a vet who participates in a group veterinary plan — essentially an HMO for pets. This commonly involves local vets teaming up with a veterinary hospital. You pay a flat fee for certain services, such as routine exams and shots, and get a discount on surgical or emergency medical procedures. But you’ve got to use a participating vet. If the one you’re currently using isn’t a member of the group, you’ll have to switch to a new vet.

The good news is our pets are living healthier lives, which means they’re living longer. According to a 2001 survey by the American Veterinary Medical Association, almost 17 percent of cats and more than 15 percent of dogs are older than eleven. In both cases, this is a significant increase over what was seen just five years earlier when just 13.3 percent of casts and 13.7 percent of dogs were at least 11 years old.

The bad news is, like humans, the longer our pets live, the more chances they have of developing conditions that are typically associated with old age, such as diabetes, cancer, arthritis, and heart disease.

In addition, as consumers our expectations about the level of treatment we demand for our pets has been steadily increasing. Joint replacements, MRIs, cataract surgery, CAT scans, and chemotherapy are just a few of the medical procedures that we are increasingly providing for our pets if it will improve their lives and keep them with us longer.

It’s the reason Americans spent $19 billion on veterinary care alone in 2001. Almost twice the amount spent in 1996.

Whether or not you decide to take out an insurance policy in the event something happens to your pet, every pet owner ought to also consider what would happen to your pet if something happened to you. 17 states have adopted laws that enable you to easily set up a trust for your pet if you die. At the very least, you should arrange with a family member or trusted friend to care for your pet if you’re no longer around.

Even though they have fur or feathers, those tail wags and wet kisses are priceless. Let’s face it, for most of us, pets are family.

Best wishes,

Gail

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