What Is Pet Insurance?

Pet insurance is an insurance policy bought by a pet owner which helps to lessen the overall costs of expensive veterinary bills. This coverage is similar to health insurance policies for humans. Pet insurance will cover, either entirely or in part, the often expensive veterinary procedures. Evaluating and comparing pet insurance plans is necessary in order to find the right plan for you.

As with human health insurance, there is usually a deductible, which is an out-of-pocket expense before the coverage begins. Most providers will base the amount of the insurance premium on the average cost of veterinary care in the owner’s region. Also, the policy may not cover all veterinary procedures.

Key Takeaways

  • Pet insurance is a policy purchased by a pet owner to offset the overall cost of their animal’s medical bills.
  • Similar to human health insurance, pet insurance relates specifically to pets and veterinary costs.
  • There may be an out-of-pocket deductible payment before a plan pays a percentage of covered procedures.
  • Cost and coverage vary based on many factors.

Average Veterinary Care Costs

The connection between humanity and animals stretches back into the dawn of history as humans have taken them into their homes and hearts. In many cases, pet owners see their pets in the same way they see their children. Progress in veterinary science allows owners to seek out many procedures for their animals that were previously for humans only. These procedures can be expensive. As CNBC reported, PetPlan states that the average cost of an emergency veterinary treatment runs between $800 and $1,500 for cats and dogs.

Primary pet care includes annual exams and vaccines, blood work, and dental cleanings. However, there is explosive growth in specialized areas of pet care such as neurology and oncology. Also, pets may have medical emergencies, just like their human owners. PetCareRx.com lists the average annual examination cost between $45 and $50, while vaccines run around $18 to $25 each.

For some potential pet owners, the prospect of high medical expenses can be a deterrent to adopting a pet. Additionally, for those who do adopt, the possibility of expensive procedures and medicines can lead to a decision to put a pet down, known as “economic euthanasia.” 

How Much Does Pet Insurance Cost?

To help with yearly costs and unexpected emergencies, a pet owner can buy a policy that will save some out-of-pocket expenses. As with human healthcare insurance, a pet owner will pay a yearly or monthly premium. Some of the factors impacting the cost of pet insurance include:

  • Species—Dogs usually cost more than cats because they are bigger and more claims are submitted for them.
  • Breed—Some breeds are predisposed to certain illnesses and injuries.
  • Gender—Statistically, more claims are submitted for males than females, so females cost less.
  • Age—The older the pet, the costlier the insurance, thanks to the ravages of age.
  • Location—Insurance costs more in major metropolitan areas than it does in the suburbs and rural areas.

The North American Pet Health Insurance Association (NAPHIA) states that the average cost for pet insurance in the U.S. in 2019 was $585.40 per year for dogs and $349.93 for cats. The total value of the U.S. pet insurance market was $1.56 billion.

Most companies have only three insurance tiers from which to choose. There is accident-only, or basic, coverage, which generally runs $11 (for cats) and $16 (for dogs); accident and illness, or comprehensive, coverage, which generally runs $29 (for cats) and $49 (for dogs) per month; and wellness coverage, which is for preventative procedures and generally runs $20 to $25 per month. Insurance will not cover the full amount of all medical treatment. The average co-pay is 80% of the amount you claim, but some companies advertise that they offer 90% or even 100% coverage on some procedures.  

For young pets who typically only need yearly checkups, the cost of insurance may outweigh the cost of services. However, should an emergency arise, the cost of veterinary care could surpass the insurance premium. Also, as senior pets usually need more procedures, the coverage could save money, whether there is an emergency or not.

67%

The number of American households that own a pet, according to a 2019-2020 American Pet Products Association (APPA) survey.

History of Pet Insurance

Pet insurance began in Sweden in 1890, but it didn’t reach our shores until 1982, when the canine screen star Lassie received the first pet insurance policy in the U.S. Since that beginning, the popularity of the product has grown. According to NAPHIA, 2.81 million pets were insured across North America in 2019.

Is Pet Insurance Worth the Price?

Even a healthy pet has necessary expenses that a new owner must cover. Consider this hypothetical example. When the Fosters adopted Rufus, an adult rescue dog, they knew that they would have some expensive first-year costs. They knew the dog would need to be examined by a vet (up to $90), spayed or neutered (up to $200), given blood work to test for general health and typical diseases (up to $90 per test) and given vaccines ($20 to $150 in the first year and $100 each year after).

In total, the Fosters would need to shell out somewhere between $400 to $550 for their new pet in its first year in their home. If the pet incurred any other issues during the year—such as more blood work, medication, or an emergency visit—the costs would end up being even higher, potentially more than $750 per year. As the average price for pet insurance in 2019, as noted above, was $585.40, paying the insurance in the first year of owning Rufus made sense to the Fosters.

However, in year two Rufus’ general costs were expected to be a lot lower. The annual checkup (up to $90), general blood work (up to $90), and second-year vaccines (around $100) would amount to a total of $280. The Fosters realized that there was a risk of Rufus having an emergency that would cause them to spend more than the estimated $280, perhaps even more than the $585.40 it cost to get yearly insurance, but they decided to forego it, as Rufus is a generally healthy dog.