Is Pet Insurance Worth It?

There are so many different kinds of insurance available to purchase. Life insurance, car insurance, home insurance, renter’s insurance, health insurance — the list goes on and on. And to make things even more complicated, many of the different kinds of insurance work in different ways. As one example, health insurance usually covers preventative care like annual physicals. On the other hand, car insurance does not cover preventative maintenance like oil changes or tire rotations — it only covers you if you are in an accident.

In honor of National Puppy Day on March 23, we’re going to take a look at one form of insurance coverage that you might be thinking about — pet insurance. We’ll explore what pet insurance is, how it works, and when it makes sense to help you decide whether it is right for you.

What is Pet Insurance?

As its name suggests, pet insurance is a type of healthcare insurance that will pay for certain qualified pet expenses. In most cases, you will pay monthly premiums and you will need to pay for the procedure yourself upfront. Then you can submit a claim to the pet insurance company to be reimbursed. In many cases, there is a deductible that you will have to meet before you receive any reimbursement.

While many policies have some of the same similarities, each policy is different. Like most other types of insurance policies, it’s important to read the policy itself and understand what is and is not covered before you need to use it. That way you don’t find yourself in a financial bind, especially during an emotional time while your pet needs major medical care.

How Does Pet Insurance Work?

Each pet insurance policy can be slightly different, but most pet insurance policies work in a similar fashion. Most pet insurance carriers will require your pet get a checkup before issuing the policy — this is to prevent you from getting pet insurance for a pet that is already sick. After you apply, there is generally a waiting period before the coverage begins.

Once your policy is approved, you will pay a monthly premium based on the type of animal, breed, age, location and overall health. When you want to use your pet insurance, you will typically pay the provider first. This is in contrast to health insurance, where often you present your insurance card before service and may pay nothing out of pocket, or only a small copay. With most policies you pay the full amount, and then submit the expense for reimbursement.

In most cases, you will first have to meet an annual deductible. The exact amount of deductible varies by policy but often ranges from $0 to $1000 / year. After you’ve met your deductible, the insurance company will pay a specified amount of 

As an example, say you purchase a pet insurance policy that has a $500 deductible, covers 50% of expenses after the deductible and has a $7500 annual maximum. If your pet has a medical emergency that costs $9000, then you would first pay the $9000 bill out of your own pocket. The insurance company would then reimburse you as follows:

• You would pay the first $500 (your deductible)
• The insurance company would then pay 50% of the next $7000 (up to the $7500 annual maximum)
• You would be responsible for everything over the $7500 annual maximum

In this scenario, the insurance company would reimburse you $3500 (50% of $7000).

Is Pet Insurance Worth it?

While most pet insurance is issued for cats and dogs, there are policies that cover all types of pets. Generally higher deductibles, lower coverage rates and lower annual maximum amounts will translate into lower monthly premiums. If you want a policy with a lower deductible, a higher reimbursement rate and a higher annual maximum, you should be prepared to pay a higher monthly premium. You can mix and match each of these three items to find a combination of premium amount and benefits that makes the most sense for your situation.

One way to decide is to think through both the standard case as well as a worst-case scenario. A standard case would be your pet has no major illnesses. A worst-case scenario could be an illness or required surgery of $10,000 or more. How would your finances be affected by either of those scenarios? Mint can help you with historical breakdowns of how much you have spent on vet and other pet-related bills. This can help you make a decision on what is best for you.

The Bottom Line

Nobody plans to get sick, and that includes animals. Whether pet insurance is worth it to you will depend on your overall financial situation. If you have a comfortable emergency fund, you may feel comfortable skipping on pet insurance and planning on paying for any medical pet emergencies out of your savings. If a large medical bill is out of budget, you might want to consider protecting your finances with pet insurance.