Is Pet Insurance Worth It? –Forbes Advisor

If your pet gets injured or sick, pet insurance helps cover medical expenses. What was once an obscure insurance product has been gaining in popularity. Pet insurance purchases have increased for both dog and cat owners (and nearly doubled for cat owners), according to the 2021-2022 National Pet Owners Survey by the American Pet Products Association.

If you want pet insurance for accidents and illnesses, our analysis found the average monthly cost is about $57 for dogs and $28 for cats, based on $5,000 in annual coverage with a $250 deductible and 90% reimbursement level.

If you’re thinking about hopping the pet insurance bandwagon, you may be wondering if pet insurance is worth it. Here are some things to consider.

The Cost of Caring for a Pet

Before determining if pet insurance is worthwhile, it’s essential to know what costs you’re up against. For starters, expenses such as food, toys, treats, licensing and grooming supplies cost an average of about $465 for dogs per year and $501 for cats per year, according to the ASPCA.

And that’s not including the cost of routine and preventative pet care, such as vaccinations, flea and tick medications, and routine checkups. That’s another $410 per year for dogs and $300 per year for cats.

While these costs add up, they don’t hit as hard as the cost of unexpected medical emergencies. For example, if your dog tears its ACL while chasing down a ball, surgery could cost you thousands of dollars.

Many pet owners may not be able to absorb these medical costs out-of-pocket. More than a third (36%) of Americans are unable to cover a $400 household emergency in cash, according to a 2021 Federal Reserve analysis of household well-being.

And if you’re unable to pay for the proper care for your pet, long-term expenses could spiral upward. For example, suppose your pug is experiencing chronic subluxation (meaning his hip from him wo n’t stay put). If you don’t have the funds to treat this medical issue, you might take a “see how it heals” course of action, which could result in chronic pain and recurring medication expenses.

It’s also worth mentioning that some pets are prone to hereditary conditions that could increase their cost of care. For example, large dogs like border collies, Labrador retrievers, Great Danes and German shepherds are more likely to have hip dysplasia, which could cost between $3,500 and $7,000 to treat, sometimes even more, depending on the situation.

What Does Pet Insurance Cover?

Now that you’ve taken a crash course in the cost of caring for a pet, you’ll want to identify what pet insurance covers. A per insurance policy will state the amount the insurance company will pay for medical expenses.

Accident and illness plans typically cover:

• broken bones
• toxic ingestion
• Dental illnesses like gingivitis
• Chronic conditions like diabetes
• Breed-specific conditions like hip dysplasia
• Emergency care
• Surgery
• Dysnitic testing
• Hospitalization and surgery
• Prescription medications

An accident-only pet insurance plan will cover veterinary expenses related to an accident, like a torn ligament or a pet swallowing something poisonous. But an accident-only plan will not cover veterinary expenses related to an illness, like ear infections or cancer.

Some pet insurance insurance plans have the option to add wellness or routine care coverage. This add-on covers expenses like routine check-ups, microchipping, vaccinations and flea/tick prevention.

Pet Insurance Deductibles, Reimbursement and Coverage Caps

When you choose a pet insurance policy, you will choose a deductible amount, which is the amount you pay before pet insurance starts to pay. Common per insurance deductible amounts range from $50 to $1,000. Generally, there are two different types of pet insurance deductibles:

• Annual deductible: You’ll be responsible for paying the deductible each policy term. Once your deductible is met during the policy term, you won’t have to pay it again until the next year.
• Per-condition deductible: You will pay a deductible for each condition or incident. For example, if your pet has chronic allergies, you would pay a deductible for medical expenses related to that treatment. Once your deductible is met, you won’t have to pay it again for vet expenses related to that condition. However, you will have to pay another deductible if your pet develops a new condition or incident.

You will select a reimbursement level, which is the portion of vet expenses your insurer will pay (after the deductible). Common reimbursement levels are usually 70%, 80% or 90%. However, some insurance companies like Figo will reimburse 100% of your vet expenses.

Your pet insurance company may also let you choose an annual coverage cap, such as $5,000. Some companies like Pets Best, Trusted Pals and Spot have unlimited coverage.

What Does Pet Insurance Cost?

Our analysis found the average annual cost is about $684 for dogs and $336 for cats, based on $5,000 in annual coverage with a $250 deductible and 90% reimbursement level. But your costs will vary depending on factors such as:

• Pet’s breed. Some pets are more susceptible to certain conditions than others. For this reason, it may cost more to insure certain pets. For example, larger dogs usually cost more to insure.
• Pet’s age. As pets age they are more susceptible to accidents and illnesses.
• Pet’s gender. Female pets may be considered a lower risk, which can result in lower pet insurance premiums.
• Location. Vet costs vary by location. If the vet costs are higher in your area, you may pay more for coverage.

Related: How much does pet insurance cost?

So, Is Pet Insurance Worth It?

Insurance companies aren’t in the business of paying more out in claims than what they take in in premiums. But that doesn’t mean the odds are always against you. If you get socked with a large, unexpected vet bill, what you’ve paid in premiums can be far less than what you receive in reimbursement. And that’s the main point of insurance: To have financial protection against large disasters.

Here’s one scenario:

• Premiums: Suppose you’ve been paying for pet insurance for your dog for three years at about $684 a year. That’s $2,052 so far in pet insurance premiums.
• A big vet bill: Then your dog ingests one of your toddler’s toys, which ends up costing $4,000 in vet bills. If you have a $500 deductible and a 90% reimbursement level, your out-of-pocket cost for the incident would be $850 ($500 deductible + 10% of 3,500 = $850).
• The result: Adding up premiums for three years and the toy incident, you’ve paid $2,902. Without pet insurance, you would have paid $4,000 for the vet. You’ve avoided paying about $1,100 by having pet insurance.

“What’s important to know is that four out of five pets will have an unexpected emergency. You don’t know if that’s going to come three months or three years after you get your pet,” says Walter Haugland, vice president of marketing for Pets Best. “It’s almost impossible to plan for the unexpected. So, that’s where pet insurance comes in.”

When deciding if pet insurance is worth it, ask yourself:

• What are you willing to pay out-of-pocket for vet bills?
• How would you pay for costly vet expenses if something did come up, like an accident or an illness such as cancer?

You might have an idea right now of how much you’d be willing to pay in vet bills for an emergency. But if your pet is actually faced with a life or death situation, “you might be willing to stretch the budget further than you ever imagined,” says Haugland.

“Overall, buying pet insurance can give pet owners peace of mind and options so they can make the best care decision possible for a pet, without the financial risk,” Haughland says.