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Insuring Your Pet

For many, a pet is a full-fledged member of the family. And just as health-care costs for human family members have risen over the years, so has the cost of veterinary care. It's probably not surprising, then, that pet insurance has gone in a fairly short period of time from relative obscurity to something that more and more people are considering.

With pet insurance, you pay premiums to a pet insurance provider; in return, the provider agrees to pay for some of your pet's medical costs, according to the specific terms and limits detailed in the policy agreement. How much you pay in premiums and the coverage you receive vary widely by provider, and depend on factors that include breed and age.

If you are considering pet insurance, it's important to request quotes from several providers (a list of 12 pet insurance providers, along with some helpful information, is available at www.avma.org, the website of the American Veterinary Medical Association). After obtaining quotes from multiple providers, look carefully at the coverage details offered by each company.

With pet insurance, costs associated with "wellness" care (e.g., regular office visits and vaccinations) generally aren't covered. Pre-existing conditions are also generally excluded. Some providers also exclude certain hereditary or common conditions--for example, many pet insurance providers exclude coverage for hip dysplasia, a disease often associated with larger dog breeds.

In addition to comparing coverages, make sure that you understand your out-of-pocket responsibilities. You may be responsible for a co-payment. You're probably also responsible for a specified deductible amount before a policy will make any payment. And once you've satisfied any deductible, a policy is likely to pay only a certain percentage of covered costs. So, for example, you might have a policy that pays 80% of covered costs after you satisfy the policy deductible. Some providers also cap benefits on a per-illness, annual, or lifetime basis.

One final note--with your health insurance, your provider probably bills your insurance directly. That's generally not the case with pet insurance. Typically, you pay all costs up front, and then you submit claims to the pet insurance provider for reimbursement.

Is pet insurance worth the cost?

The last thing you want is to have to forgo lifesaving treatment for your pet sometime down the road because you simply don't have the money to pay for it. But that's a situation many pet owners eventually face. Pet insurance can provide some peace of mind, but is it worth the cost? That's a tough question to answer.

Let's say that you have a two-year-old Labrador retriever. You get quotes from all the major pet insurance providers, and after carefully comparing coverages and details, you decide on a policy that will pay 80% of covered costs after you satisfy an annual $250 deductible. Your cost for the policy is $40 each month. In most years, you don't have any reimbursable claims--just routine visits or claims that don't exceed the deductible. After six years, your lovable Lab swallows a sock, things go horribly wrong, and he needs surgery at a cost of $4,000. Good thing you purchased the insurance, right?

Remember, you have a $250 deductible, so you will have to cover that yourself. And, the insurance policy will only reimburse you for 80% of the remaining $3,750, or $3,000. Consider this: If, instead of purchasing the pet insurance policy, you set aside $40 each month into an account earning 3%, you would have a little over $3,000--the same amount you would receive from the insurance policy--saved by the time the operation was needed. Of course, this example assumes that you have the discipline to set money aside each month. And, of course, if the great sock catastrophe happened in year two instead of year six, the insurance might seem like a wise purchase.

The bottom line is that pet insurance companies are in business to make a profit, and that is how they set their rates. By purchasing a pet insurance policy, you're shifting some of the potential financial risk from you to the insurance provider, and you are paying for that as part of your premiums. That doesn't mean purchasing pet insurance is a bad decision; you just have to consider the numbers carefully. At the same time, you have to factor in that it's not all about the numbers--you may believe now that there's a limit to what you will spend to treat a pet, but if and when that time comes, emotions often have a tendency to trump logic.