Is Pet Insurance a Luxury or Life-Saver?

How to be prepared for your furry friend

By Craig Manning | Oct. 22, 2022

Did you know that 91.7 percent of the U.S. population had some form of health insurance coverage as of last year? While that figure still leaves tens of millions of Americans without a healthcare safety net, it also means that the vast majority of people in the U.S. are insured.

No such majority exists for American pets.

Right now, approximately 90.5 million U.S. households have pets, according to the American Pet Products Association. Yet, according to a recent “State of the Industry Report” from the North American Pet Health Insurance Association (NAPHIA), only about 4.41 million pets “were insured in North America at the end of 2021.”

Pet Insurance in Northern Michigan
Why isn’t pet insurance isn’t more commonplace? Northern Express asked local insurance expert Scott Tilford to weigh in, given that Tilford’s local State Farm Insurance agency started offering pet insurance policies about a year and a half ago.

As it turns out, precious few customers have climbed aboard the pet insurance train in that 18-month span. Tilford says he only gets one or two inquiries per month from pet owners interested in getting a policy quote. Compared to many of the other types of insurance that Tilford’s office offers—including coverage for things like cars, houses, condos, and personal articles—pet insurance is small potatoes.

Tilford has a few explanations for why pet insurance might not be taking off among his clientele. One factor: Tilford’s office only does policies for dogs, which means cat owners would need to look elsewhere for coverage. Tilford also thinks that a lot of pet owners simply don’t know pet insurance exists or how it works—and if they do, he reckons they’re put off by some of the inherent limitations of the coverage.

“What’s not covered? Pre-existing conditions, preventative care, flea and tick control, spay or neuter, exam fees, wellness visits,” Tilford says. “From my experience, it seems like most consumers are looking for help with more of those preventative things, the immunizations, the regular checkups, that kind of thing. So, that might explain the hesitancy.”

Breaking the Bank: Pet Costs in America
Of course, annual checkups and flea or tick prevention aren’t usually on anyone’s list of biggest pet expenses. Most sources put the average cost of a routine vet checkup between $50 and $250. Lifesaving procedures, treatments for serious health conditions, and other not-so-routine vet costs are where pet owners usually end up spending big.

Tilford says many pet owners choose to “self-insure” for those expenses, simply by setting money aside for potential accidents, injuries, or illnesses that may befall their animals. But even pet parents who are vigilant about building a “rainy day fund” for their dogs, cats, or other critters can still find themselves out of their depth when emergencies strike, simply because they underestimate how expensive vet bills can become.

Case-in-point: In 2019, Healthy Paws Pet Insurance compiled a Cost of Pet Health Care Report that explored common pet accidents and illnesses in the U.S., average treatment costs for those issues, and more. One key section of the report detailed the most expensive insurance claims Healthy Paws had received in 2019 from its policyholders.

In one situation, a family had submitted claims totaling $56,533 to treat acute kidney failure in their seven-year-old Pitbull terrier. In another case, a pet owner with a 10-year-old Russian Blue feline named Hugo had racked up $34,830 in vet bills, between back surgery to resolve multiple herniated discs and additional treatments for everything from congestive heart failure to diabetes to pancreatitis.

In both cases, Healthy Paws Pet Insurance picked up 90 percent of the bill, leaving the pet parents with significantly smaller out-of-pocket expenses than they would have faced otherwise.

Growth in the Pet Insurance Sector
Anecdotes about pet parents saving a small fortune thanks to their pet insurance policies are helping drive growth to the sector. Indeed, Brian Macias, president of Embrace Pet Insurance—a leading pet insurance provider in the U.S.—tells Northern Express that more and more pet owners are starting to see the value of the coverage.

While routine vet expenses aren’t covered by pet insurance, Macias says the list of issues and expenses that pet insurance does pay for is still quite extensive. Specific treatments covered by pet insurance can include emergency veterinary care, hospitalizations, surgery, prosthetics and mobility devices, diagnostic testing, prescription food or medications, behavioral therapy, and more. Embrace reimburses “up to 90 percent” of these expenses, minus a deductible that policyholders get to choose upfront.

“The goal of pet insurance is to eliminate the financial burden for pet parents when those unexpected issues arise,” Macias explains. “Essentially, pet insurance is peace of mind for pet parents when they need it most.”

Beyond financial peace of mind, Macias thinks there are elements to the pet insurance customer experience that are winning new customers over, too. While pet insurance has often been described as “health insurance for your pets,” Macias says the industry doesn’t have some of the annoyances or shortcomings that often plague the health insurance market. For instance, many pet insurance providers—Embrace included—don’t have an equivalent of the physician networks that exist in the health insurance sector.

“So [policyholders] can visit any vet—in the U.S. and around the world—whenever an unexpected accident or illness occurs,” Macias says. “There are no networks, so the pet parent will pay the vet directly and then submit their claim to Embrace. Once the claim is processed, pet parents are reimbursed in as little as two days with direct deposit.”

Pet insurance also doesn’t usually come with the same sky-high premiums that health insurance for humans does. While Macias says it’s “difficult to pinpoint an exact cost” for a pet insurance policy, given the way that animal age, breed, and other factors can impact premiums, he notes that typical Embrace plans tend to range from $35-$50 per month for dogs and $15-$30 per month for cats.

More awareness around these details, Macias says, is helping drive growth in the world of pet insurance. Per NAPHIA, that market saw overall growth of 27 percent between 2020 to 2021, and some providers are growing even faster. Macias says Embrace “has more than tripled its business in the past three years.”

Tilford agrees that growth is on the way, even if he’s not seeing much of it yet locally. One early indicator, he says, is the increased interest in coverage from dog owners who tend to spend a lot of time exploring northern Michigan’s great outdoors with their four-legged best friends. Hikers, runners, hunters: These groups, he notes, are asking about pet insurance with greater frequency because they want to plan ahead for any potential injuries or accidents that might befall their highly active animals.

The other piece of the puzzle, Tilford thinks, is that more people are coming to terms with the fact that their “self-insuring” method isn’t working—at least not to cover those pricier vet bills. Pet insurance is the logical solution.

“It’s like life insurance,” Tilford says. “A lot of people say, ‘Well, I’m going to skip the life insurance and just invest the money or save it myself, because I’m not planning on dying young!’ But really, when people say, ‘Oh, I’ll save for that’ or ‘I’ll just put some money aside,’ I believe the vast majority of them never do. And then if something happens to their pet and they have a $3,500 vet bill, they end up putting that on a credit card, and then they start having credit problems. So I’d say, unless you’re really disciplined with your finances, you probably ought to look at the pet insurance option. Otherwise, you’re rolling the dice.”

Photo by Mikhail Nilov.