There is an old adage in the insurance industry that says it is better to have insurance and not need it than to need insurance and not have it. But would your pets agree?
Pets are an important part of our lives. That is why many people refer to their animal friends as members of their families. When hard-pressed, they might even admit that pets are family members they actually like.
The deep affection we have for our pets prompts concern for their health and welfare. As a result, an increasing number of pet owners are turning to pet insurance. But, is it a good investment?
Pet Insurance Trend
A survey earlier this year by MarketWatch found that 44.6 percent of pet owners insure their animals. That amounts to 5,676,776 pets in the United States, according to the North American Pet Health Insurance Association (NAPHIA). That figure is a 17.1 percent increase from last year.
The breakdown shows that 78.6 percent of insured animals are dogs while cats make up the other 21.4 percent.
Rising Vet Costs
We spent about $38 billion on pet veterinary care last year, according to the American Pet Products Association (APPA). That is about 26 percent of the $147 billion we spend overall on our animal friends. Other expenditures included $32 billion for supplies and over-the-counter medications; $64 billion for food and treats and another $12 billion on other expenses such as boarding, sitting, training, grooming, and insurance.
This year APPA estimates we will spend $150.6 billion on our pets. Of that, almost $1 billion will be for veterinary care.
The animal welfare organization Anti-Cruelty has compiled a breakdown of pet ownership expenses. The annual cost of owning a dog ranges from $737 for a small breed to just over $1040 for a large breed. The tab for owning a tabby or any other cat is $809 a year. However, some estimates range several hundred dollars higher.
Consolidation
One of the trends boosting veterinary costs is also a factor in increased human health care costs.
As more private equity firms acquire medical practices and hospitals that treat humans, the same thing is happening in the animal healthcare sector. In fact, there are transaction advisors, such as Physician Growth Partners (PGP), that facilitate the sale and merger of physician’s practices to private equity firms. Now, they are doing the same thing with veterinarians.
One of the most active firms scooping up veterinary clinics and hospitals is JAB Holdings. The European company has spent over $9 billion to become the largest operator of veterinary practices in the world.
JAB has been so aggressive that the Federal Trade Commission stepped in to order the firm to sell 11 clinics before it could go forward with any more acquisitions.
“For the second time in a month, the FTC is taking action to prevent private equity firm JAB from gobbling up competitors in regional markets that are already concentrated,” Holly Vedova, Director of the Bureau of Competition said at the time. “Divestitures will help preserve current competition, and the prior notice and approval requirements will allow the FTC to keep a close watch on these markets moving forward.”
In addition to veterinary practices and hospitals, private equity firms are also targeting pet insurance companies.
The Devil is in Policy Details
Included in Anti-Cruelty’s estimates is the cost of insurance. They put the annual tally at $225 for dogs and $175 for cats. However, rates can be higher depending on a variety of factors including your pet’s age and where you live.
There are similarities between your health insurance and your pet’s. One big difference is that pet insurance reimburses you for medical treatment. That means you will pay upfront for treatment and once that is approved, the insurance company will reimburse you.
For serious medical issues, you might have to come up with thousands of dollars upfront before submitting a claim for repayment. In addition, most policies do not pay for routine office visits.
Furthermore, most policies have an annual deductible which you will have to reach before the insurer starts paying. Deductibles usually range from 70 to 90 percent. In addition, there may be a limit on the annual payout.
To add to the confusion, some plans apply the deductible rate before applying the reimbursement rate. Conversely, other plans apply the reimbursement rate before the deductible. Usually the latter results in slightly higher out-of-pocket costs. However, you can find companies that will customize your plan applying higher or lower deductible and reimbursement rates. Just know that those adjustments may lead to higher premiums.
What Pets Insurance Covers
Even with extensive coverage a pet insurance policy probably will not cover all veterinary costs.
Generally, policies will cover accidents and injuries, cancer; emergency care, specialty care, diagnostic tests, illness, prescription medications, surgery, and hospitalization.
Most policies will not cover routine care such as annual checkups, vaccinations, and dental cleaning, spay or neuter surgery. However, with a higher premium, some plans will add features such as spay and neuter procedures.
Pre-existing conditions are also excluded from most coverage. That goes for reinstated as well as new policies. So, if you let a policy lapse then get a new policy – that new policy will consider every ailment your pet had before as a pre-existing condition.
Is Pet Insurance Worth the Expense?
Only you can determine if pet insurance is of value to you. Many of us form deep emotional bonds with our pets. As a result, we can not put a dollar figure on that relationship. However, we and our pets have to live within our means.
If you have several thousand dollars stashed away that could be applied to veterinary costs, you may be able to forgo insurance. If you do not have that kind of money available, a policy could be worth it.
The current health and age of your pet is another factor to consider. Since pre-existing conditions are not covered, insurance may not be an option. In addition, older animals require higher premiums.
If insurance is not a viable option for your pet, you can talk to your vet to see if they have payment plans. Some veterinary practices have advance payment plans that are similar to insurance in that, for a flat fee, they provide coverage for some expenses.
In the end, the decision is between you and your pet. And whatever you decide, you will still have their devotion. As George Eliot noted, “Animals are such agreeable friends – they ask no questions, they pass no criticisms.”
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