Is pet insurance worth it?

by Adam Cecil
Is pet insurance worth it?

If you’re dog or cat owner, you’ve probably seen advertisements or received brochures pitching pet insurance. It’s a simple enough concept — your pet visits the vet, and your insurance pays part of the bill. But is pet insurance worth it? Should you shell out $20 to $40 per month just in case something happens to your dog or cat? The quick take: Pet insurance is currently the only viable way to protect yourself from unexpected medical expenses (unless you have $40,000 to put aside), making it totally worth the cost for some animals. However, pet policies are complicated, and often not worth it for older pets. Keep reading for more on whether or not pet insurance is right for you and your furry friend.

What is pet insurance?

Pet insurance is designed to help pet owners pay for expensive and unexpected veterinary costs. It covers the bills when you visit the vet to treat illnesses, like cancer or respiratory problems, or accidents, like getting hit by a car or otherwise getting injured.
Typically, policies don't cover regular wellness visits — i.e., your annual visit to make sure everything’s working correctly. This type of coverage can be added, but it will cost extra.

What types of pet insurance are there?

There are two types of plans: accident only and comprehensive. What’s the difference between the two types of plans? Accident only plans only cover accidents — the aforementioned car, for example — while comprehensive plans cover accidents and illnesses. Accident only plans are cheaper than comprehensive plans, but they also don’t cover the (perhaps more probable) risk that your pet gets sick.
Unlike human health insurance, pet insurance companies usually don’t pay the vet directly. Instead, they reimburse you a set amount, called your reimbursement rate, after you make your claim. Typical reimbursement rates range between 70% and 90% of your total bill after you subtract your deductible (a set amount that you need to pay per-incident or annually before your coverage kicks in).
Sound complicated? Let’s put it another way. To figure out how much your insurance company is actually going to pay:

  1. Take your total claim

  2. Subtract the deductible (if applicable)

  3. Multiply the result by your reimbursement rate

Your policy may also have payout limits — the maximum amount your insurance company will pay per year or per incident. Some payout limits — like a maximum payout per incident or year — can make sense as long as they’re high enough to cover a typical incident. However, other limits — like a maximum payout per body system (e.g. the respiratory system) — can leave you shortchanged later in your pet’s life.

What alternatives are there to pet insurance?

Despite pet insurance being quite popular among pet owners in the U.K. and other parts of Europe, most U.S. pet owners don't have it. And plenty of Americans have pets. Per the American Pet Products Association, there are about 78 million dogs and 85.8 million cats with homes in the U.S. Moreover, approximately 44% of all households in the U.S. have a dog, and 35% have a cat.
insured pets by countryThe most common alternative is to self-insure. That means keeping a savings account or envelope full of cash set aside specifically for an emergency pet health situation.
However, many pet owners do not put any or enough money aside for a pet’s illness or for an accident. (Most people don’t have enough savings to cover their own health emergencies, let alone their pets.) This forces many people to choose between going into credit card debt and euthanizing their pet, a choice that no one wants to make.
Some vet offices may allow you to pay using an installment plan, however, this is not standard and may involve high interest rates. There are also some financial grants available to pets in need of medical services, but this is not guaranteed and should not be considered a viable alternative if you can afford pet insurance.
One spot of good news: More employers are starting to offer pet insurance as a workplace perk. That includes Adidas, Hewlett-Packard, Levi Strauss, Microsoft, T-Mobile and Xerox. You can ask your human resources department if your company has similar benefits available or in the works.
So is pet insurance worth it? Here are the pros and the cons so you can decide.

What's good about pet insurance?

Veterinary care is increasing in quality and cost every year. Operations and other treatments can cost thousands of dollars, sometimes even tens of thousands of dollars. Unless you’re one of the richest people in America, there’s a good chance that you can’t afford to pay tens of thousands of dollars for your pet’s medical care.
At the same time, pets are becoming more and more members of our family. In many ways, we treat them like children — we fuss over their food, we dress them up, we buy buckets full of toys. It only makes sense that we would want the best for their health and that we would be willing to go into debt in order to pay for a life-saving operation.
Policies allows pet owners to protect their wallets from total devastation while still providing their pets the best medical care possible. As we mentioned earlier, they're relatively inexpensive, usually priced at between $20 and$40 per month. (Besides your pet’s breed and age, prices are based on your chosen reimbursement rate. If you want to keep your premiums low, choose a lower reimbursement rate.)
If you were to put that cash into a savings account instead, it would take you over one hundred years to build a nest egg large enough to pay for the worst pet health emergencies.

What's bad about pet insurance?

There are two major downsides. The first is that it gets complicated. As you probably saw in the "What exactly is pet insurance?" section, there are a few calculations you need to make in order to figure out exactly how much your insurance policy is going to reimburse you. Additionally, restrictive payout limits can cripple your insurance policy later in your pet’s life, making it practically useless. Part of this can be addressed by being choosy about what type of policy you buy, though pet insurance companies have a bad reputation for making the shopping process difficult. (Our PolicyGeniuses can actually help you compare pet insurance quotes and find the right fit for your furbaby.)
The other major downside is that it’s often not worth buying for older pets with prior health problems. Pet insurance companies frequently won’t cover pre-existing conditions, and because there is no Obamacare for pets (despite our best efforts), that’s perfectly legal. Depending on how old your pet is and whether or not they’ve had prior health problems, you’ll need to seriously consider whether or not a policy is your best option.

Is pet insurance worth it?

If you’re looking for an option to help you pay for your pet’s unexpected medical bills, it's currently the only viable way to do without relying on charitable grants or going into debt. Despite its complications and limitations, pet policies are simply the best way to protect yourself financially from expensive vet bills (short of putting aside $40,000).
For some pet owners, however, it may still not be worth it, especially if your dog or cat is old or has had health problems in the past. In situations like these, coverage can often be prohibitively expensive and usually will not cover every medical bill.
**This article was updated July 21, 2017. **