Pet coverage has insurance pitfalls

Enter a thriving pet insurance industry. About a dozen companies offer coverage for pets in the United States. It’s a trend that’s already taken hold in Europe.

In the United Kingdom, about 20 percent of all pets are covered by health insurance. In the U.S. and Canada, statistics vary but generally hover around 3 percent and growing.

Companies sold roughly $248 million in pet insurance in 2007, according to Packaged Facts, a marketing analysis firm that looks at consumer industries. Their report, which will be updated later this year, said it expects the North American market to “turn in an increasingly strong showing,” with average annual increases from 25 percent to 35 percent, and sales potentially hitting $1.1 billion by 2012.

For consumers, though, the differences in policy cost and coverage can be confusing. Policies vary wildly, anywhere from $9.50 a month for an accident-only policy on a dog to $75 a month for a Cadillac-style plan.

When comparison shopping on insurance company Web sites, the rules aren’t always spelled out, so buyers should call to ask about exclusions and limits on payouts. For instance, a $35,000 coverage plan might be limited to only $10,000 on some ailments.

Just last week, California’s lawmakers pushed forward a bill requiring transparency in pet insurance coverage. The bill, which passed the State Assembly and is moving through the Senate, requires insurance company Web sites to clearly state benefit schedules, coverage limits and exclusions.

“Doing research for each individual animal and company is key,” said Dr. Janet Tobiassen Crosby, who writes a blog about veterinary issues. “Each case is very individual.”

Some policies exempt certain breeds or older dogs, or limit coverage for pre-existing or hereditary conditions, which many purebred animals have. Many also have maximum payouts per incident that skew the math. For instance, if there’s a $3,500 per incident maximum and your pooch faces a $4,000 hip replacement or a $10,000 cancer treatment, the out-of-pocket expenses in addition to the premiums might not be worth it.

Even for routine checkups, insurance doesn’t always add up. Consumer gurus like Atlanta’s Clark Howard recommend putting what you might pay for insurance premiums in a high-yield savings account to be used for pet health costs. Still, for those owners who would go to any length financially to save their pets, insurance might be the best bet.

“So much in veterinary medicine is ‘here’s what we’d like to do, and here’s what we can afford to do,’ ” said Dr. Duffy Jones, who owns Peachtree Hills Animal Hospital in Buckhead.

For many, a good savings account will do, he said. But for younger families and pet owners who aren’t typically savers, an insurance policy can mean the difference between losing their beloved animal and a few days recovery in a pet hospital.

“Where we have seen it be the most beneficial is with people with large breeds, like labs,” Jones said. “Typically, those dogs get into major problems in the first few years. They eat something they shouldn’t or go and run into traffic.”

One of his clients without insurance recently had to shell out roughly $4,400 for two surgeries just months apart because a 1-year-old Labrador ate socks on two separate occasions, an emergency that required Jones to take out sections of the dog’s intestine.

But Jones warns that some companies have coverage rules that sneak up and bite.

One client bought insurance for a young dog that needed shoulder work that was covered under the plan. About seven years later, the same dog had knee problems that needed surgery and the company denied the claim saying the policy’s orthopedic limit had been met for that dog.

“Knowing the company you’re using and what’s covered is important,” Jones said. “We had another company that said if you have an accident or issue this year, they consider it a pre-existing issue the next.”

Several companies have entered the U.S. market in the past five years: Embrace Pet Insurance, Fetch, Inc.; EnsuraPet; Trupanion; Pets Best; PetFirst and PetPartners.

At the same time, longtime companies have begun to push hard for more market share. Veterinary Pet Insurance, which has 60 percent of pet insurance written in the United States and Canada, is working with 1,600 companies to offer it as a voluntary employee benefit.

And many pet insurance companies are stepping up their market savvy by teaming up with established consumer brands – SecuriCan with Purina, Hartville with the ASPCA (American Society for the Prevention of Cruelty to Animals), PetPartners with the American Kennel Club, and PetFirst with Kroger.

At The Veterinary Clinic in Marietta, employees in June began receiving pet insurance benefits from Trupanion, said Jayne Hawkins, one of the clinic’s three owners.

Pet health insurance is basically liability insurance and is regulated by each state’s insurance department as property and casualty insurance, similar to coverage for cars and homes. Human medical insurance is subject to federal regulations. For consumers, that means making sure you ask if a company’s insurance products are “admitted,” which means they are guaranteed and approved by the state.

Pet insurance isn’t meant to cover everything, Hawkins cautions. Owners should know beforehand that they’ll need a chunk of change to spend on pet care.

“When someone is going to get a pet, they should have about $1,800 in disposable income a year, by the time you do food and veterinary business” such as vaccines and heartworm preventative medicine, she said.

“If you can spend that in a year on a pet, then you are going to have a well-cared-for pet. If you don’t have that additional, then you’re going to be skimping along.”

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Other options

If pet insurance isn’t for you, here are some other options:

Source: Veterinary Dr. Janet Tobiassen Crosby; About.com.

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Calculate with care

If you are shopping for pet health insurance:

These sites provide price quotes, along with user reviews and some plan information