Pet insurance: In most cases, it's not worth it

Consumers should have health insurance, but whether you should buy health insurance for your pet, usually for a dog or cat, is a different question. And it might have a different answer. It's true that some pet treatments and surgeries can be expensive. But for many consumers, the question is whether buying pet insurance is a good bet. Are you likely to pay more in insurance premiums over the years or more in vet expenses that insurance would have covered? The key is viewing pet insurance as a money issue, not a "how much I love my pet" issue.

Bottom line: Pet insurance isn't worthwhile if a pet has a normal life and doesn't require pricey surgeries and treatments. At least, that's what Consumer Reports Money Adviser recently concluded when it analyzed nine pet health insurance plans. It used an average 10-year-old beagle as an example.

The dog had common ailments and accidents over the years. Given those circumstances, none of the nine health insurance plans would have been worthwhile, the report found. In fact, the pet owner would be $2,500 to $4,300 in the hole, compared with just paying for treatments out of pocket.

If the dog had chronic and major problems, expensive problems that boosted vet bills over the decade to about $12,000, a few insurance plans provided a relatively minor net benefit of $78 to $1,714 in a scenario analyzed by the Consumer Reports publication.

But the conclusion that pet insurance is not worthwhile is far from unanimous. Some veterinarians, the Humane Society of the United States and a host of pet advocates endorse pet insurance, although many have a financial stake in selling it. They say it provides pet owners peace of mind, can mitigate vet expenses and possibly avoids "economic euthanasia." That's when you put Fido or Fluffy to sleep because you can't afford a pricey test, surgery or treatment. If you would choose to extend your pet's life no matter the cost and would go into debt to do it, insurance could be a good idea, experts say.

If you view cats as outdoor mouse catchers that you can easily replace or view your dog as a farm animal, pet insurance is not for you, said Tracie Hotchner, author of the books "The Dog Bible" and "The Cat Bible."

But for those who consider pets part of the family, an array of medical treatments is available. So, you probably can extend the pet's life, but it will be expensive.

"In a way, it's a good problem, because medical care available for pets today is the equivalent of what humans get," Hotchner said. But that means treatments could carry "five-figure bills," she said.

"The cost of veterinary care can be a challenge for a lot of pet owners," said Betsy McFarland, senior director of companion animals at the Humane Society of the United States. "Pet insurance can be a great option as a safety net. We definitely believe anything that can keep a pet and its family together is worthwhile." Insurance or not, owning a pet can be expensive. Americans this year will spend an estimated $47.7 billion on pets, with nearly $13 billion on veterinary care, according to the American Pet Products Association. Surgical vet visits average $532 for dogs and $278 for cats. Routine vet visits annually add another $225 and $203, respectively, according to the APPA.

If you're considering buying pet health insurance to defray your vet bills, here's what you need to know.

HOW IT WORKS: You pay monthly premiums for certain insurance plans, and premiums can rise. Unlike many human health plans, you pay vet bills out of pocket and then submit claims for reimbursement of treatments covered by your policy.

So, if your dog needs a $3,000 surgery, you'll have to pay the vet and then try to get reimbursement from the insurer, which could take weeks. You might be reimbursed a percentage of the actual cost for treatment, say 80 percent. Or, you might be reimbursed a certain dollar amount for a specific medical procedure. For example, $375 for a laceration or bite wound. If your vet charges more than the insurer's benefits schedule allows, your pocketbook eats the difference.

You'll likely also pay deductibles, an amount you're responsible for before insurance kicks in. Like car insurance, the higher deductible you're willing to pay, the lower your monthly premiums.

KNOW YOUR COVERAGE: Pet insurance is confusing, experts say. Coverages and prices vary widely. Some cheaper policies cover accidents but not illnesses, while some cover cancers and others don't. You might pay $10 a month or $100 a month, depending on what's included and whether you opt for wellness coverage, which reimburses for more routine pet care.

All policies exclude pre-existing conditions, which would be a reason to get a policy when the pet is young, said Janice Brown, founder of Tails Magazine. "The time to purchase health insurance is before the pets get sick," she said.

Policies might have maximum amounts the insurer will pay per year or maximums for the lifetime of your pet. Policies might have waiting periods, leaving your pet uncovered for certain ailments during the first six months or year of your policy, Hotchner said. Some companies won't insure certain ailment-prone breeds and some won't insure older animals.

"If you have a 10-year-old dog, it's probably too late to buy," said Amy Danise, senior managing editor of compares many plan costs in chart form. Examples of common insurers are VPI, Pets Best, Petplan and Trupanion.

SELF-INSURE: Common advice is to self-insure in lieu of buying insurance. Set aside whatever money you would pay in pet insurance premiums and use that for big vet bills. Of course, that only works if you actually squirrel away the money. "It's human nature to say, 'Oh, the dog's fine or the cat's fine,' and they'll use the money for something else," Hotchner said.

And self-insuring won't help much if you get a big bill just as you start saving. But the math is compelling. A $30-per-month policy costs $4,320 over a 12-year life of an animal, for example, and that assumes the premium didn't rise during that time.

Harlan Platt, professor of finance at Northeastern University, pointed out that insurance companies wouldn't stay in business if everybody collected more in reimbursements than they paid in premiums. "People who buy the insurance on average will be worse off as a result," he said.

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