Pet Insurance: Is It Worth It?
Sun, April 11, 2021

Pet Insurance: Is It Worth It?

In 2017, US pet owners spent more than $1 billion on pet insurance, up 23% from the previous year’s expenditures. / Photo by lightfieldstudios via 123RF


Jeff Blyskal, a writer for The Washington Post, succinctly put it, “Pet health insurance sales are jumping like a spooked cat in a viral video.” Not many would’ve guessed that almost everything that is offered to any single person today is also offered to pets, from grooming services, food and sit-down dining options, entertainment and television shows, online brands, technology, end-of-life options, and even insurance. In fact, in 2017, US pet owners spent more than $1 billion on pet insurance, up 23% from the previous year’s expenditures, resulting in more than 1.8 million cats and dogs now covered with insurance, up 17% versus the number of cats and dogs covered with insurance from the previous year, according to the North American Pet Health Insurance Association (NAPHIA). Today, we’re seeing demand driven not only by the rising number of pet owners and lovers but also by the irresistible promise from insurers to provide affordable lifetime healthcare for your beloved pet. But, Blyskal shared that this promise is not always as straightforward as it may seem. The promise that comes with insurance, such as accident and illness plans, can become neither affordable nor a lifeline.


Background and Briefer

The pet insurance industry got its start almost a century ago in Sweden, where almost half of the country’s pets are now insured, as mentioned by the Insurance Information Institute, a trusted source of data-driven insurance information. Moreover, in North America, the Veterinary Pet Insurance Co. sold its first pet insurance policy in 1982 to cover one of the world’s most famous television dogs at that time, Lassie. In 2018, the NAPHIA reported that the pet health insurance sector for the United States and Canada posted a combined gross written premium of $1.42 billion in 2018, up from $1.15 billion in 2017. The total number of pets insured reached 2.43 million for the year-end of 2018, also up 17% from the previous year. Among the 12 major pet insurance companies in the US, NAPHIA further reported that 88.9% of gross written premiums in 2018 were of dogs. 

The 2019-2020 National Pet Owners Survey conducted by the American Pet Products Association (APPA) shared that 67% of US households or about 85 million families own a pet, up 56% from the number of pets in US households back in 1988, the first year that the survey was conducted. In terms of types of animals owned per household in millions, you’d have the following: 5.7 birds, 42.7 cats, 63.4 dogs, 1.6 horses, 11.5 freshwater fish, 1.6 saltwater fist, 4.5 reptiles, and 5.4 small animals. With the number of animal and pet owners in the US, thousands of solutions and services are becoming available to the pet owners and their pets. From 2010 to 2019, the total US pet industry expenditures have steadily gone up, from $48.35 billion in 2010, $60.28 billion in 2015, to $75.38 billion in 2019. 

The Pull of Pet Insurance 

The global pet insurance market revenue is expected to rise and surpass $10 billion by 2025. New research by Global Market Insights, Inc., a global market research and management consulting company, revealed that the demand for pet insurance is rapidly gaining popularity due to the availability of innovative pet insurance policies that are intended to cover various aspects of pet reimbursement. This includes multiple pet policies in a single plan to help lower insurance premiums.

There are also insurance coverage policies that pay for pet cremation as well as scenarios if the pet gets lost. Accident cover policies insure pets in case of accidental injury from motor vehicles, electrocution, burns, bone fractures, fight wounds, snake bites, and others. This is known as the most budget-friendly policy, with typically 80% reimbursement of the total veterinary bill. Health insurance plans are also available, from injuries, illnesses, and wellness care, with dogs representing 80.8% of revenue share due to increasing adoption cases of dogs across the globe.

The report also found that rising pet adoption in developed as well as developing economies is significantly supporting pet insurance market expansion. One thing to note, the major factor limiting the growth of the pet insurance market is the lack of standardized pet health codes for reimbursement, which makes claiming processes difficult and reasons for customer attrition, as well as lack of awareness about the products, impedes industry growth.

The True Cost

Buyers sign up for insurance when their pets are young and monthly premiums are lowest. Naturally, five years later, premiums that companies charge start to rise, and as pets get older, it eventually becomes unaffordable. To state an example, a male mixed-breed dog insured by Pets Best in the District would charge a premium of $35 a month for a puppy, but by age 8, this doubles to $83. By age 12, the premiums comes out as $149 per month or almost $1,800 per year, as shared in The Washington Post. For a 13-year lifetime, a $35 monthly premium will come out as $11,172 in total premiums, which still does not include inflation, veterinary prices, and miscellaneous considerations. But, there are select companies that do not raise prices as pets age. At most, the pattern among pet policyholders is that the average length is not for the life of the pet, but only for three years. Policy owners often do not expect price raises and often cancel this when a price rise occurs.

The best example to look at is actual data for pets in need of insurance and pets that are not. Data from The Washington Post shared that out-of-pocket costs for a dog with a high level of care, prone to accidents and illness come out as $30,210 for a male mixed-breed. There are insurance options available that come out cheaper, from Healthy Paws with a total of $14,870, Trupanion at $15,603, and a few others. On the other hand, the out-of-pocket cost for a male mixed-breed dog with a low level of care comes out as $3,848 versus insurance policy plans from companies, which range from $9,320 to $25,142. If the dogs are likely to not come into an accident or cause any extra expense for pet owners, maintenance of male mixed-breed dogs come out as relatively low and therefore does not seem reasonable to look into insurance options for the pet. This trend is the same for cats with low care, which comes out less costly for a pet owner who does not enroll in insurance. For a high level of care, expenses for cats can come out also equally or more expensive than most insurance policies.

The bottom line, the value of pet insurance depends on the level of need of the pet, whether this pet is ill or not. “If you use it, it has value; if you don’t, it doesn’t,” said Kristen Lynch, executive director of NAPHIA. As recommended by finance and budget managers, instead of buying pet insurance to pay high costs of veterinary care, focus on cutting costs by shopping only for the services the pet needs and for each lowest price. Not all affordable and cheap things come in bundles.