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TA: Is Pet Health Insurance Right for You?

NOTE: Following the recording of the accompanying podcast episode, a news story broke that Nationwide dropped 100,000 pet health insurance policies. While this doesn't specifically change anything discussed, it's worth noting existing conditions are almost never covered so, it may be worth asking about a company's policies regarding the dropping of coverage before purchasing coverage for your pet.


First, let me start off by stating that I’m not advocating for insurance or any insurance company or plan. Regardless of whether you choose to carry an insurance policy, however, we ask a lot of our sporting dogs and I think it’s only responsible to have some sort of financial plan to deal with unforeseen circumstances with your dog, should they occur.


I think it’s important to remember that insurance companies are businesses. Separate from any feelings that might give you, if they don’t at least break even, they will no longer be commercially viable and therefore no longer able to service your needs. If all things were equal, this would mean you’d be better off taking your would-be premium payment and putting it in a savings account. According to the North American Pet Health Insurance Association (NAPHIA), there are currently about 6.25 million active pet health insurance policies in North America, about 21% of which are for cats, and the reality is that many of the dog owners will never file claims that meet or exceed the premiums that have been paid for those policies. But it’s also true that many most of those dog owners aren’t turning their dogs lose in wildlife management areas, state forests, and national grasslands, they aren’t shooting over their dogs with shotguns, and they aren’t expecting their dogs 20-40+ miles in a day searching for game. A small segment of those dog owners will file claims that vastly exceed the premiums (payments) they’ve paid and there’s a good chance that they’ll come from the group of highly active dogs, to say nothing of the health complications that, sadly, are running through many purebred dog breeds.


From the perspective of the insurance companies, they’re distributing the risk of those high-risk/high-payout customers across their entire customer base. As a potential customer, you should ask yourself:

1.        Are you in the high-risk category?

2.        Are you willing and capable of assuming that risk yourself?


If you’ve made it this far, it’s also import that you understand there are 3 basic types of pet health insurance policies: Accident Only (AO), Accident and Illness (A&I), and Wellness. There are also available endorsements or riders that may bolster coverage of any one of those types of policies (for example, prescription medications). AO policies cover things like motor vehicle accidents, poisonings, and lacerations. A&I policies cover all the things from the AO policy plus illnesses such as cancer and infections. Wellness policies might be coupled with an A&I policy or may be a standalone policy that covers routine care such as annual exams and vaccines. Since wellness policies are really just covering what is otherwise a predictable cost, I will not be discussing those in this article.


Every year NAPHIA compiles their State of the Industry report and according to the most current one, the average cost in the USA for an A&I policy is $675.61/year and $204.16 for an AO policy. According to the AKC, the average lifespan for medium size dog breeds in 10-13 years and 8-12 years for large size breeds, which includes most of our sporting dogs. If we use a 12-year life span as our baseline, that means those policies carry roughly a $8100 (A&I) or $2500 (AO) cost over the lifetime of our dog.  When you consider the cost of a single TPLO surgery can approach the $10k mark, you can see that you can come out ahead very quickly with even just one incident.


There is something like 30 different companies offering pet insurance policies and I’ve found the framework to be consistent across most of them, so here are some things you should consider as you’re shopping for a policy (and this may not be inclusive of everything that matters to you and your case):


1.        Coverage Limits: some policies have annual limits and some have per incident limits. Some policies allow you to select different limits, which obviously affects your premiums.

2.        Deductible: We’re probably all familiar with what deductibles are and how they work from our own health insurance, auto, and homeowners or renters insurance policies. This can dramatically change your premiums and you should consider why you want to carry insurance. If you’re only concerned about a catastrophic event like a CCL injury or poisoning, it may make more sense to have a high deductible and save on your premiums.

3.        Reimbursement percentage: as far as I’m aware, there are no 100% coverage policies available, instead they’re 70-90%. What does this mean? If you have a $1,000 deductible with a 90% reimbursement policy and get an $11,000 vet bill, your deductible covers the first $1,000, leaving $10,000 left to pay. The insurance will pay 90%, meaning $9,000, and you must pay the remaining $1,000. In total, you’ve paid $2,000 for an $11,000 bill.

4.        Exam fees/Prescriptions: not all policies will cover the cost of the exam fee or any prescription that result from your incident. These costs may be considerable. I encourage you to have an open discussion with your vet to decide if this coverage is important to you.

5.        Breeding: most policies do not cover any costs associated illnesses and injuries related to breeding and whelping. The ones that do require an additional rider that comes with additional cost. Most people will not find this necessary, but if you’re a breeder, the cost of breeding health complications can be considerable.

6.        Waiting periods: unless waived as part of a special program for new puppies, all policies have a waiting period before coverage is active. This is typically 10-30 days, however, some specific conditions like CCL injuries or hip dysplasia may require as much as 12 months of prior enrollment.

7.        Reimbursement process: some policies may payout directly to the veterinarian and you need to understand the implications of what their “network” could mean, especially if you travel. Many policies will issue reimbursement to you, which will mean you’re required to pay the bill initially. This may require you to use a credit card or make special arrangements with the vet.


If you don’t think an insurance policy is right for you but want to make sure you’re prepared there are some other alternatives.

1.        Emergency fund/savings account: whether you already have a great nest egg or take what would be a premium and tuck it away, this can work greatly to your advantage if you never have any issues with your dog. The risk, of course, is that something does happen and the costs exceed what you’ve already saved.

2.        Discount plan: there are discount plans available (like PetAssure) that are almost like insurance policies. You pay a monthly fee and they cover a certain percentage of any vet bill, regardless of the reason, even routine visits.

3.        Health credit: there are programs available to provide credit at no or low interest rates specifically for health care (like CareCredit). This can provide a great safety net, but is reliant on your credit score and, with a great enough bill, can create unplanned monthly payments that might be quite substantial.

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