Fido, Don't Forget Your Insurance Card

I just spent $3,000 on a sick pet. Should I buy pet insurance?

Most pet owners love their little creatures, and want them to have healthy lives. But buying pet insurance should be the exception rather than the rule, according to Robert Hunter, director of insurance at the Consumer Federation of America (CFA). He says it makes sense in just two situations: if the pet is valuable monetarily (such as a breeding dog), or if the owner loves the pet so much, he thinks of it as his child.

The latter category is a bit squishy, we know. After all, most pet owners would say their love of their pet knows no bounds. But how much would you really give up for good old Spot? Hunter himself hasn't bought insurance for his four dogs, for example, but has recommended it to his neighbor, who he says loves her cat so much, "she would literally sell her house to try to keep her alive."

Whether you fit either of these profiles is obviously a personal assessment. But one thing is for certain: Pet insurance is confusing. "I would say it's more complicated than human health insurance," says Alejandra Soto, a spokeswoman for the Insurance Information Institute. "You really want to make sure that you understand exactly what's covered and what isn't." As mentioned in the question above, it may not cover all situations, and it may not be widely accepted by vets. Here's an overview of what's available on the market.

Much like health insurance for people, pet-insurance plans can be divided into two categories: preferred provider organization (PPO) plans and traditional indemnity plans. PPO-type plans limit their benefits to a network of vets, while the indemnity plans allow pet owners to visit any vets they choose. And PPO plans provide upfront discounts on costs, whereas indemnity plans require payment upfront, and reimburse owners later.

One of the largest PPO networks is Lakewood, N.J.-based Pet Assure, which has enlisted about 2,000 vets across the country. In exchange for a monthly premium, customers get a flat 25% discount with all participating veterinarians and can insure any pet, regardless of breed or age. Even pets with preexisting health conditions qualify. The only exceptions are animals owned by breeders or farmers, says the company's president and chief executive, Charles Nebenzahl. Monthly premiums typically range from $5 for a cat to $13.95 for a whole family (up to four pets).

Now let's look at the indemnity plans. The biggest and oldest provider in this category is Veterinary Pet Insurance (VPI), which began insuring pets in 1980. Its plan works with any veterinarian in the country, and covers medical treatments for illness and accidents (if, say, Coco has a run-in with a car). Policies also offer coverage for routine doctor visits and maintenance procedures such as annual vaccinations, tests and so on. Premiums vary based on the species, age and breed of pet, as well as the type of plan, and can be as high as $30 a month. For an individual quote, visit the company's Web site.

The second-largest provider of indemnity plans is Pet Health, owner of PetCare Insurance. The company covers accidents and illnesses treatments, but not maintenance procedures, says Mark Warren, the company's president and CEO. The benefit of its policies is that they have higher payout limits compared with other indemnity plans. Since the company sells insurance primarily online, premiums are generally flat and are not based on the pet's age or location (other companies will base premiums on the local cost of veterinary care). Costs will vary, however, based on the amount of coverage sought, so be sure to review the different plans online. One could pay as little as $8.50 a month to insure a cat, or as much as $37.95 a month for certain dog breeds. For the various plans and a schedule of benefits, visit the company's Web site. Pet Health offers insurance only for cats and dogs.

So how to pick the right policy? A veterinarian or even an employer might help narrow the field. Increasingly, pet-insurance companies have started offering discounted policies through the employer benefits departments of large and midsize companies, says Garry Sullivan, a senior vice president with Aon Consulting, a corporate benefits consultant. "It's still not extremely popular, but there is a growing interest in it," he says.

Those who don't have a discount at work should ask their veterinarian if he or she participates in a network and, if so, what discounts are available, says Insurance Information Institute's Soto. Just as you would do when researching any insurance policy, be sure to ask a lot of questions, and don't sign on the dotted line until you've gone over the paperwork carefully. "Make sure you understand all the fine print and all the exclusions," Soto says. For more on caring for your pet, see our story "10 Things the Pet Industry Won't Tell You."