Is pet insurance worth the cost?

Most of us would never consider going without health insurance. The cost of one hospital stay or auto accident can have major financial impacts without health insurance as a safety net.

But what about our beloved four-legged and two-legged companions, and those with feathers or scales? Caring for a pet can be pretty expensive, requiring veterinary care, prescriptions, routine office visits, and vaccinations. Your pet’s long-term health is just as critical as yours, so ensuring they live long, happy, and healthy lives is worth planning for. 

Does it make sense to buy insurance for a pet? Does the benefit of having pet insurance outweigh the costs of paying for care on an "as needed” basis? Unlike human healthcare insurance, the answer can be, “it depends.”

Here’s how to evaluate what options make the most sense for you and your pet based on your lifestyle.

What pets can you insure?

While most of us may think that pet insurance is only for dogs and cats, insurers write policies for all sorts of pets. Coverage is available for dozens of types of birds, reptiles, amphibians, and small mammals. Some insurers will even cover more exotic animals, though policies generally exclude venomous or poisonous creatures. So if you have a dragon (not the fire-breathing kind) at home, you can probably insure it.

What can be insured against?

Pet insurance, like health insurance for humans, falls into two broad categories:

• Routine care: vet visits and medications.
• Catastrophic coverage: protects against large expenses, such as surgeries and more expensive medications.

Start by understanding what level of coverage makes you the most comfortable. For example, suppose you can cover regular vet visits and medications but want a cushion against major expenses. In that case, that may be a different policy than one that covers more routine care.

One common mistake to avoid: many people calculate their costs for regular visits and medications to see how they compare to the cost of insurance premiums. While this may feel like the intuitive way to weigh the cost of pet insurance, for most pet owners, the protection and peace of mind insurance provides will never be “profitable.” Insurance is designed to protect against unforeseen major costs and to offer protection to your furry family members to keep them healthy. Therefore, insurance companies won’t sell policies that will likely lose money for them.

A great example you may be more familiar with is the fact that you don’t buy auto insurance with the expectation that your annual repair costs will be higher than your premiums. Instead, you buy insurance in case you’re in a major accident that would otherwise cost tens or hundreds of thousands of dollars.

Should you consider pet insurance?

A pet insurance policy mainly designed to cover routine vet care with a low limit for major expenses is almost certainly not worth it. Some reimbursement for routine expenses is a good payback, but you’ll likely want financial help for unexpected events, like when your cat eats a poisonous plant or your dog is injured while playing fetch.

Think of it like this: If your beloved companion needs expensive surgery or treatment, you want to be able to make the decision that’s best for them and not be forced to make a decision that’s best for your wallet or one that puts you into a difficult financial situation. 

Some key considerations are how much you can pay in the case of a serious emergency alongside your tolerance for financial risk. If you can easily afford even a major bill from the vet, then pet insurance may not be necessary. However, if you can’t, and like most pet owners, your attitude is, “I love my pets and would do anything for them,” pet insurance could provide a lot of peace of mind. It  can give you the freedom to make decisions based on what’s best for your pet, without having to consider the impact on your pocketbook.

How can you choose a policy?

If your employer offers pet insurance, especially with a discounted group rate (or your employer subsidizes part of the cost), that may be a better deal than what you can find on your own.

If not, national insurers (Nationwide, Lemonade, Progressive), organizations (ASPCA, American Kennel Club), and many niche insurers offer policies. A quick search of “pet insurance for [your type of pet] will turn up several options, though fewer companies are likely to insure certain exotic pets.

Keep in mind that unlike most insurance plans for humans that often pay upfront, pet insurance generally requires the pet owner to pay the bill and then apply for reimbursement. Some vets may accept pet insurance directly and only bill you for the remaining balance. Ask your regular vet if they have arrangements with any insurers or if they recommend any.

Most insurers offer several plans with different deductibles (the amount you must pay before insurance coverage begins) and limits. They will also vary in how they cover routine care. Calculate what your maximum out-of-pocket expenses could be if your pet required expensive care for different policies as a starting point for which policies might be best for you and your pet to understand which option is best for your situation.

Double-check what conditions and procedures are covered and how that compares to the medical care your pet will most likely need. As with insurance for humans, many policies don’t cover everything.

Pet insurance isn’t for every pet owner or pet. But the peace of mind it can provide, knowing you’re in a position to make decisions about your pet’s health based on their needs and not your wallet, can make it a smart choice. Just make sure to do your due diligence and consult your planner before choosing a policy.