If you’re like most pet owners, your animal is not merely a nonhuman creature that happens to live in your home. It’s a full-fledged family member. It deserves dignity, respect, and love.
And you’d probably be willing to endure temporary financial pain to squeeze some more quality time out of your pet’s existence.
That means you’ve also probably considered pet health insurance, an increasingly popular product that’s a lot like human health insurance, though it’s rarely as costly. Pet health insurance through a company like Pumpkin is easier to understand than its human counterpart, which can be downright inscrutable. But deciding whether a policy makes financial and practical sense for your pet isn’t always straightforward.
If you set your expectations around cost and coverage, weigh the merits and demerits of a policy, and consider potential alternatives, you can make the right decision about whether pet health insurance is appropriate for your furry friend.
Anatomy of a Pet Health Insurance Policy
Every pet health insurance policy has three attributes that affect its premium and out-of-pocket costs: annual coverage limit, deductible, and reimbursement percentage.
Annual Coverage Limit
The annual coverage limit is the maximum payout for covered costs in any year. Any covered care costs incurred above the annual coverage limit are the responsibility of the policyholder. For example, if your policy’s annual limit is $10,000, and you incur $12,000 in covered care costs this year, you’re responsible for paying $2,000 out of pocket.
All other things being equal, a higher annual coverage limit means higher monthly or annual premiums.
The deductible is the dollar amount the policyholder must pay out of pocket each year before coverage kicks in. For example, if your policy has a $250 deductible, you must pay $250 out of pocket on one or more claims each year before your insurer reimburses any covered claim costs.
The relationship between deductible and premium is inverse. A higher deductible means lower monthly or annual premiums and higher out-of-pocket costs.
After a policyholder meets the annual deductible, the reimbursement percentage is the proportion of covered care costs eligible for reimbursement. Most insurers have three reimbursement percentage options: 70%, 80%, or 90%. For example, on a $1,000 vet bill, a 70% reimbursement amounts to $700 reimbursed and $300 paid out of pocket, assuming you’ve met the deductible. A 90% reimbursement amounts to $900 reimbursed and $100 paid out of pocket.
The relationship between reimbursement percentage and premium is direct. A higher reimbursement percentage means higher monthly or annual premiums and lower out-of-pocket costs.
Most pet health insurers require policyholders to pay vet bills in full and submit a claim, which the insurer then approves and sends proportional reimbursement for within 30 to 60 days. Some insurers offer optional or standard direct payments to vets so policyholders don’t have to float out-of-pocket payments eligible for eventual reimbursement. Either way, the term “reimbursement percentage” is standard in policy literature.
Types of Pet Health Insurance
In terms of coverage, pet insurance comes in three basic types: accident-only; accident and illness; and accident, illness, and wellness. Each reduces covered health care costs and procedures. But the savings varies significantly by policy type, pet age and breed, and policy-specific factors like reimbursement percentage and deductible.
A closer look at out-of-pocket costs for three common canine procedures illustrates this. As of 2018, according to Healthy Paws Pet Insurance and Trupanion, the average out-of-pocket costs of these procedures in the U.S. are as follows:
- Benign Skin Mass Removal: Upward of $1,000 after diagnostic work. Accident and illness and accident, illness, and wellness policies cover this procedure.
- Cyst Drainage: Up to $500. Accident and illness and accident, illness, and wellness policies cover this procedure.
- Emergency Surgery for Fractured Pelvis: $3,000 to $4,000. All three policy types cover this procedure.
Accident-only is the least generous and most affordable type of pet health insurance. Monthly premiums range from $5 to more than $40. It doesn’t cover procedures, like benign skin mass removal or cyst drainage, that aren’t directly associated with accidental injuries. But it can reduce the out-of-pocket cost of treating a fractured pelvis by $2,000 to $3,000.
Accident-only coverage defrays costs associated with unexpected injuries that occur after the policy’s effective date, such as:
- Emergency surgery to repair physical trauma
- Emergency surgery to remove foreign bodies in the digestive tract
- Intervention to treat suspected poisoning
- Wound care
- Setting fractured or broken bones
- Diagnostic procedures, imaging, consultations, and follow-up visits related to covered injuries
- Medications to treat covered injuries and complications
Accident-only policies typically have low to moderate annual reimbursement limits. Deductibles and reimbursement rates vary by plan and insurer.
Accident & Illness
Monthly premiums for accident and illness coverage range from less than $20 to more than $60. It covers all three of the common example procedures and can reduce out-of-pocket costs by up to 90% in each case, assuming no deductible and a 90% reimbursement rate.
Accident and illness policies cover costs associated with unexpected injuries, plus those related to:
- Acquired or inherited illnesses, such as heartworm and cancer
- Skin or internal infections not directly related to trauma or foreign-body ingestion
- Metabolic disorders
- Physical rehabilitation
Accident and illness policies typically have moderate to unlimited annual reimbursement limits. Deductibles and reimbursement rates vary by plan and insurer.
Accident, Illness, & Wellness
Alternately known as routine care or preventive care coverage, this is the most comprehensive type of pet health insurance policy. Monthly premiums for this type of coverage range from around $20 to more than $100. Like accident and illness policies, it covers all three common procedures and can reduce out-of-pocket costs by up to 90% in each case, assuming no deductible and a 90% reimbursement rate.
In addition to coverages laid out in accident and illness policies, this type of policy covers routine preventive and interventional care, such as:
- Routine office visits, aka “well pet” checkups
- Spaying and neutering
- Medications to treat conditions not covered by accident and illness policies
- Routine vaccinations
- Prescription diets
- Teeth cleanings and other types of nonemergency dental work
Accident, illness, and wellness policies typically have high or unlimited annual reimbursement limits. Deductibles and reimbursement rates vary by plan and insurer. This policy type’s comparatively generous terms appeal to owners of older, sicker pets.
Pros & Cons of Pet Health Insurance
Pet health insurance sounds like a great deal. And for many pet owners, it is. But there are both benefits and drawbacks to consider when weighing whether pet insurance is right for you.
Pet health insurance defrays the cost of major medical care and can lower the long-term expense of owning illness-prone breeds. Less tangibly, it provides peace of mind and reduces the likelihood of premature euthanasia.
- It Can Dramatically Reduce the Cost of a Major Vet Bill. Pet health care isn’t quite as expensive as the human equivalent, but it’s not cheap either. Even after accounting for the annual deductible and unreimbursed percentage, pet health insurance covers most of the expenses associated with major interventions, such as trauma surgery or long-term treatments for chronic conditions like cancer.
- It Provides Invaluable Peace of Mind. A conversation about pet health insurance must venture beyond mere dollars-and-cents considerations. You hope your pet won’t ever need major surgery or costly treatment for a chronic condition. But that doesn’t mean you can’t appreciate the peace of mind provided by a comprehensive pet insurance policy. There’s comfort in knowing coverage is there when you need it.
- It Can Lower the Cost of Owning High-Risk Breeds. Purebred dogs and cats are more prone to certain ailments and hereditary conditions, according to a 2013 American Veterinary Medical Association study. Pet health insurance companies price policies accordingly — you’re almost certain to pay more to insure a purebred boxer or Siamese cat than a mixed breed. Over time, however, your policy’s lifetime reimbursement for necessary care could offset its cumulative premiums and then some.
- It Reduces the Likelihood of Economic Euthanasia. It’s heartbreaking enough to choose to euthanize a pet with no realistic hope of recovering from a grave illness or injury. It’s devastating to put a pet down because you can’t afford further treatment. While pet health insurance isn’t a total safeguard against “economic euthanasia,” it dramatically reduces its likelihood.
- It’s Easier to Understand and Manage Than Human Health Insurance. On balance, pet health insurance is easier to understand and use than human health insurance. Its most consumer-friendly attribute is a total lack of payer networks. In effect, all vets are “in-network,” regardless of carrier, so you don’t have to worry about receiving an outrageously high bill or having your claim denied outright simply because you went to the wrong vet.
- Your Employer May Offer It as an Optional Fringe Benefit. As an employee benefit, pet health insurance isn’t as commonplace as human health insurance or retirement plans, but it’s growing in popularity. And the option to pay premiums directly from your paycheck is more attractive for many policyholders than remembering yet another bill each month.
- It Replaces More Drastic Measures, Like High-Interest Loans. By lowering out-of-pocket costs associated with major veterinary procedures and treatments, pet health insurance reduces the temptation to pursue riskier financing options, such as high-interest credit cards or unsecured personal loans.
In strictly financial terms, sometimes, pet health insurance isn’t cost-effective. Vet bills for young and healthy pets with minimal health care needs rarely exceed annual deductibles, while high premiums and coverage gaps limit out-of-pocket cost reductions for older pets. And many or most policies have unwelcome limitations, such as no coverage for preexisting conditions or weekslong reimbursement headways.
- Basic Plans Don’t Cover Everything. Accident-only pet health insurance plans cover vet costs directly associated with accidents, such as vehicle strikes, poisoning, and foreign-body ingestion. They don’t cover much else. When your pet is young, that’s fine — the most likely cause of a high vet bill is an accident. The calculus changes as pets age and grow more susceptible to costly chronic conditions, such as diabetes and cancer.
- Less Generous Plans Ask Policyholders to Pick Up a Substantial Share of Claim Costs. When your overriding concern is keeping premiums in check, you know what you need to do: raise your deductible, lower your annual coverage limit, and shave down your reimbursement percentage. But the trade-off is higher out-of-pocket claim costs and an increased risk of economic euthanasia should your pet suffer a catastrophic illness or injury.
- It’s Not Cost-Effective for Consistently Healthy Pets. High-deductible accident-only policies are exceedingly cheap when pets are young. Unfortunately, they typically don’t cover the sorts of care healthy young pets are most likely to need: vaccinations, neutering, the occasional UTI. Though accident, illness, and wellness policies do cover routine care, they have much higher premiums — perhaps higher on a cumulative basis than the sum of those occasional reimbursements for routine vet care.
- It’s Expensive for Older Pets. Like human health insurance premiums, pet health insurance premiums rise sharply with age. If your older pet remains healthy until late in life, you’re likely to pay more in premiums than you receive in return.
- Annual Claim Limits Can Be Stingy. Though generous pet health insurance policies come with high annual claim limits by default and many offer no-limit options, lower-premium policies often have stingy annual limits — on the order of $2,500 to $5,000. That’s probably not enough to cover the full cost of a catastrophic illness or injury.
- Coverage for Animals Other Than Dogs and Cats Is Rare. Pet health insurance for household animals other than dogs and cats exists, but it’s much less common. That means less price competition and fewer choices overall.
- Reimbursement Can Take Weeks to Arrive. While it’s increasingly common for pet health insurers to reimburse vets directly for care claims, owner reimbursement remains the norm. That’s a problem for pet owners without the means to float a hefty vet bill for the 30 to 60 days reimbursement typically takes to come through. You’re better off paying vet bills directly out of a savings account dedicated to pet health care expenses.
- Plans Rarely Cover Preexisting Conditions. Like human health insurance plans before the Affordable Care Act became law, pet health insurance plans generally don’t cover preexisting conditions. That’s a significant obstacle for pets already diagnosed with debilitating illnesses — one that could leave owners with no choice but to consider alternatives to pet health insurance.
Alternatives to Pet Health Insurance
After reviewing the numbers and conducting research, many people conclude that pet insurance isn’t right for their situation. If that’s the case for you, explore these alternatives:
1. Consider Breeds With Few Health Problems
Some pure breeds have higher rates of hereditary illness and acquired health problems than others (or mutts and rescues in general). For instance, pugs and Persian cats tend to develop respiratory problems due to their compact nasal structures. Corgis and Portuguese water dogs may be at risk for congestive heart failure.
If you’re not sure about your pet’s vulnerabilities, consult the American Kennel Club’s comprehensive list of health testing requirements for recognized dog breeds or WebMD’s overview of common breed-specific health problems in cats.
Working dogs, like border collies and Australian cattle dogs, tend to be more robust. For felines, a common, unspecialized breed like domestic shorthair cats have relatively few hereditary issues. In general, smaller dogs and cats tend to live longer — chihuahuas can reach 15 years or beyond compared to 10 or 11 for Labs.
While no pet breed is immune from health problems and no pet lives forever, buying or adopting an animal with few known issues — particularly a rescue or animal shelter mutt — can reduce the likelihood of purebred-related health issues and therefore reduce your lifetime care costs.
2. Invest in a Pet Savings Plan
A pet savings plan can be as simple as an FDIC-insured savings account or money market account that holds funds earmarked for pet care. To create one on your own, start as early as possible in your pet’s life. Calculate the annual cost of its routine care —including vet visits, vaccinations, food, long-term medications and supplements. Figure out how much you need to set aside each month to reach that amount, plus a reasonable buffer — say 10%.
Then, research costs for nonroutine care, such as common surgeries and treatments for breed-specific conditions your pet could be at risk for. If you estimate your pet will require $3,000 in nonroutine care over a predicted 10-year lifespan, saving $300 per year from age 1 would get you to that goal. It’s impossible to know what’s going to happen in the future, and costs tend to rise over time, but it’s always easier to save more when you start earlier.
3. Seek Financial Assistance
Pet owners can tap numerous financial assistance nonprofits like the Pet Fund for help paying expensive vet bills. These organizations accept applications from owners who face a dire choice between treating an expensive condition like cancer and euthanizing their pet — or even forgoing treatment and allowing the pet to succumb. This route may not be appropriate, though, and success isn’t guaranteed. There’s typically a significant wait for funding, and organizations usually don’t offer assistance for emergencies.
Of course, you can also solicit donations from friends and family members for help covering the cost of a serious injury or illness. Crowdfunding campaigns are increasingly common for pet owners with compelling stories as well.
4. Work Out a Payment Plan With Your Vet
Many veterinarians and animal hospitals offer weekly or monthly payment plans on a case-by-case basis. Some have in-house payment plans, while others participate in a veterinary credit program like Care Credit. Make sure you understand the details of any plan, including your interest rate and repayment term, before agreeing to it.
5. Use a Discount Plan
Pet health care discount services like United Pet Care and Med Plus Discounts offer discounts on veterinary care, medications, and certain products and services. Covered vet services often include office visits, in-office diagnostics, vaccinations, and surgeries. They do not, however, usually include lab work or diagnostics that require a third party.
Covered products and services typically include pet sitting, grooming, training, books, and prescriptions — possibly including prescription food. Veterinary discounts typically range from 5% to 50%, depending on the product or service and provider.
6. Try Hospice Care for Terminally Ill Pets
If your pet develops a serious illness, aggressive treatment can become expensive, be ineffective, or both — not to mention, it’s stressful for your pet. Hospice care can be a more affordable and humane option than euthanasia, particularly if your pet is in a lot of pain. The International Association for Animal Hospice and Palliative Care has resources for pet owners considering a course of treatment that manages pain and promotes comfort at the end of their pets’ lives.
7. Set Up a Dedicated Savings Account
In an ideal world, you’d have at least three different types of savings: personal, emergency, and retirement. I’m a big proponent of goal-oriented savings as well. My wife and I have a handful of small savings accounts to which we regularly contribute funds earmarked for specific projects and goals, like travel and home improvement. If your pet means the world to you, why not set up a dedicated savings account through Simple.com to cover expenses related to their care?
8. Use a Revolving or Installment Loan
Taking out a loan to cover pet health expenses isn’t the end of the world, especially if your credit is in good shape. Consider an unsecured personal loan, low-APR credit card, or home equity line of credit from Figure.com — whatever fits best with your credit profile, budget, and lifestyle. Think twice about taking out a high-interest loan to cover the cost of veterinary care, however.
The pet health insurance market remains tiny in comparison to the human health insurance market, but it’s growing every year. Many American pet owners have carefully considered the pros and cons of pet health insurance and determined this particular type of coverage makes financial and practical sense for them and their beloved furballs.
Pet health insurance does have a lot going for it. By reducing the cost of major surgical procedures and treatments, it lowers the likelihood of economic euthanasia. Beyond dollars-and-cents considerations, pet health coverage provides reassurance that’s difficult to quantify.
On the other side of the ledger, pet health insurance can be expensive, especially for older pets. It doesn’t cover everything. And it can’t work miracles. You can still find yourself making the heartbreaking choice to euthanize a covered pet when there’s simply nothing left to do for them. It’s up to you to decide whether the benefits of pet health insurance outweigh the drawbacks.
Are you considering taking out a pet health insurance policy for your dog or cat? What’s holding you back?