Should you buy pet insurance? Most policies are a bad buy long-term

Pet health insurance companies promise to provide affordable, lifelong coverage.

But when nonprofit Twin Consumers' Checkbook's researchers analyzed policies offered by 12 insurers, they found every plan was a bad buy for most pet owners over the long term. That's mainly because pet insurance itself is expensive.

Checkbook found that, over their pets' lifetimes, most policyholders will spend thousands of dollars more for premiums, copays and other out-of-pocket costs with insurance, compared to paying all vet costs on their own.

Because most buyers sign up for pet insurance when pets are young and premiums are lowest, it looks like a manageable expense.

But most insurers don't adequately warn prospective customers that as pets age — and are more likely to need expensive medical care — many companies aggressively increase premiums. Coverage eventually becomes unaffordable, with many insurers charging more than $200 per month.

Embrace, for example, advertises that "plans for cats start at under a dollar a day." But when Checkbook calculated the out-of-pocket costs for nearly 13 years of Embrace coverage for a mixed-breed cat, they found premiums would total $11,267.

For the premiums alone over almost 13 years, among the companies Checkbook compared, a pet owner would pay $6,500 to $23,500 to insure a mixed-breed dog and $3,100 to $11,100 to insure a mixed-breed cat. Purebreeds' coverage costs more.

For example, when Checkbook obtained premiums in Minneapolis for a selection of breeds as puppies and at age 12, ASPCA Pet Health Insurance quoted $64 per month for our mutt when a puppy, but for a beagle we'd pay $74 a month and $125 per month if a Dogue de Bordeaux. When our canine reaches age 12, ASPCA will charge us $207 a month for our mixed breed, $239 for a beagle and $401 for the Dogue de Bordeaux.

Pet insurance is sold and bought with emotional appeals. Buyers are promised insurance will help pay for expensive treatments and avoid euthanasia should their pet fall seriously ill or injured. And insurers do pay up when claims come in. But many plans' rising premiums force pet parents to cancel coverage. That's a cruel twist, because once they do, their pet is again at risk of economic euthanasia — defeating all the good intentions that motivated them to insure their pets.

Checkbook has long advised that pet insurance is not worth it for many people, especially those who aren't willing to bear large vet bills should their pets suffer serious injuries or diseases. If you'd pay whatever it takes to treat your pets, insurance might make sense if hefty vet bills would strain your finances. But if your pet needs only low to moderate healthcare over its life — most do — you'll pay far more in premiums and copays than you'll get in benefits.

For example, when Checkbook's researchers assumed a hypothetical cat had only low medical needs over its life, they found that Embrace would pay little more than $1,200 in benefits. When they assumed the dog suffered moderate levels of health troubles, Embrace would pay out only about $4,700.

It was only when Checkbook's hypothetical pets suffered major costly health problems did pet owners typically come out ahead financially — but only if they selected a company that offered good coverage for low premiums. If our pooch had high lifetime vet bills totaling $33,177, his family would save $1,401 to $17,424 with 11 of the insurance plans vs. without.

But the problem with spending so much to insure against disaster is the odds of calamity are long. Every six seconds a pet owner faces a vet bill of $1,000 or more, according to ShopPetInsurance.com. Pet insurers also cite this statistic. That sounds scary, but in a country of 144 million cats and dogs that's only about a 4% chance over a year.

Meanwhile, the average annual accident and illness pet insurance premium in 2020 was $594 for dogs and $342 for cats. By comparison, the average annual cost for veterinary care for a dog for illnesses was $204, and $349 for emergency care. For cats, the average annual costs are $244 for illnesses, $154 for emergencies.

Even when we focus on insured pets, whose families might be more likely to seek care, the financial risk from vet bills is rarely disastrous. The owners of 8% of Embrace's insured cats filed claims for lymphoma in 2016, according to information Embrace supplied to Checkbook, and the company's highest-cost cancer claim was almost $15,000. But the average cost of cat cancer without insurance was about $2,900.

At the same time, the owners of 17% of Embrace's insured dogs filed claims for cruciate ligament injuries, and the insurer's nightmare claim for repair of that was $21,047. But the average for that treatment without insurance was only $4,500, Embrace reported.

The most common claims are for minor problems. In 2020, the top five claims for dogs insured by Embrace were for intestinal problems like diarrhea and vomiting, ear infections, allergies, urinary tract infections and itching. The average cost of care without insurance to treat intestinal issues was $790; for ear infections it was $290, according to Embrace.

Bottom line: Ignore the marketing hype and don't be swayed by the five-figure medical bills and huge insurance payouts companies claim. Those examples don't include the high cost of premiums in their calculations. Carefully evaluate available coverage and its cost over your pet's lifetime and decide if it makes sense for you.

Twin Cities Consumers' Checkbook magazine and Checkbook.org is a nonprofit organization. Star Tribune readers can access Checkbook's ratings of local veterinarians, along with full reports on pet insurance and veterinarians, free until May 5 via Checkbook.org/StarTribune/Vets.