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Wednesday, March 31, 2010
The basics of pet insurance
Source: Kat Zeman, Insure.com
Table of Contents
Americans regard their pets as members of the family. Whether someone has a fluffy four-legged creature or a slithery reptilian companion, many people demand similar services for their pets as they do for themselves — and that includes health insurance.
According to the American Pet Products Manufacturers Association, Americans spent roughly $10 billion for pet health care in 2008. The insurance industry isn't ignoring these numbers. Jack Stephens, founder of Pets Best Insurance, says that Americans spend roughly $250 million annually on pet insurance. That figure is expected to increase to $1 billion by 2011, he says. That makes pet insurance one of the fastest growing insurance lines.
Loran Hickton, spokesperson for the North American Pet Health Insurance Association, says that there are 12 to 20 companies that sell pet insurance in the United States and about five in Canada.
Policies for pets have shot up in popularity because modern technology and medicine now allow pets to undergo procedures and surgeries that were inconceivable in the past. But such procedures are not cheap. For example, it can cost anywhere from hundreds to tens of thousands of dollars for a dog to undergo cancer treatments — depending on the size of the dog and the stage of the cancer. A hip replacement for a dog can cost as much as $10,000. Pet insurance makes these treatments feasible. Some have called it a way of avoiding economic pet euthanasia.
Actually, that's precisely the reason Stephens says he founded the first pet insurance company in the United States in the early '80s, Veterinary Pet Insurance (VPI), which he later sold. VPI currently insures roughly 473,000 pets — including exotic types — throughout the United States, says Brian Iannessa, VPI's spokesperson.
How much is that policy in the window? Insuring your pet doesn't have to cost you an arm and a leg. Pet insurance can run between $10 to $50 a month, depending on the breadth of coverage, Hickton says. For example, you can buy accident coverage (which pays for things like your pet being hit by a car) for as low as $10 to $15 a month. Or you can purchase accident and illness coverage for $20 to $30 a month. That will cover accidents as well as illnesses like the stomach flu. Finally, you can buy high-end coverage that will cover all of your pet's health needs (including surgeries and treatments) along with a wellness plan that covers preventative care and annual health screenings.
Some employers offer a workplace benefit that will give you a discount on pet insurance. Iannessa says that VPI has a partnership with more than 2,000 employers in the United States.
Some of the employers that partner with VPI include the Ford Motor Co., Office Depot and Chipotle Mexican Grill restaurants.
As with human health insurance plans, coverage varies from company to company. For example, VPI is unlikely to sell you pet insurance if your pet is more than 10 years old. But if you want to insure your boa constrictor, lizard, ferret or turtle, VPI is the only insurer in the nation that will insure exotic pets (with the exception of insurance companies that cater specifically to zoos). Pets Best will provide certain types of coverage to older pets — assuming your pet does not have any serious pre-existing conditions. But Pets Best focuses solely on pooches and felines. If you are looking to insure your horse, for example, you have to find an equine insurance company. Most standard pet insurance companies do not cover horses because they are considered a higher risk.
Your pet's level of coverage will depend on the policy you purchase. If you purchase a high-end policy, your pet will be covered for surgeries, illnesses, infections and disease, plus annual health care screenings.
The major differences among pet insurance plans are the amount of your deductible, the maximum amount the insurer is willing to pay per incident and the maximum amount the insurer will pay out during the lifetime of your pet. These factors determine the cost of the policy.
For example, the most popular plan offered by Pets Best is its Pets First Plan. It costs roughly $300 a year ($25 a month). In this plan, your deductible could be $100 and the insurer would pay up to $7,000 per incident (you can choose higher deductibles for a cheaper premium). Your coverage would be capped at $100,000 for the pet's lifetime. If you want something even less expensive, you can purchase the Basic Plan. It will cost you about $200 a year. Pets Best will pay $2,500 per incident and up to $42,500 for the lifetime of the pet.
In addition to insurance, most pet insurers will also offer wellness programs that cost roughly $144 per year, according to the Insurance Information Institute (III). This type of plan reimburses you for preventive pet care including physical exams, diagnostic tests, X-rays and lab fees. There is no deductible to pay.
Also, much like health insurance for people, you can buy "HMO coverage" for your pet in some states. These "HMO" polices are sold by veterinarians but they are not insurance policies and are not subject to the same state regulations required of insurance companies. According to III, these policies are similar to wellness plans and offer discounts on vaccinations, spay/neuter procedures and dental cleanings. Some also include basic health check-ups.
Jeanne M. Salvatore, senior vice president of public affairs at III, recommends verifying that your pet insurer is licensed in your home state before you buy insurance.
One of the potentially most expensive dog-related costs is not covered by pet insurance: Dog bites. Liability claims against dog owners when their pet bites someone would fall under home insurance claims. Man’s best friend is sinking its teeth into nearly one-third of all home insurance liability claims, costing $387.20 million in 2008, up 8.70 percent from 2007, according to III. See home insurance for dog owners at Insure.com.
By far, dogs are the most commonly insured animal — followed by cats. According to VPI, the Labrador retriever is the most commonly insured dog. In 2007, more than 38,500 labs were insured by VPI. Others that made the list include the golden retriever, Yorkshire terrier, shih tzu, boxer, German shepherd, Chihuahua, Maltese, pug and cocker spaniel. The American Kennel Club lists the Labrador retriever among its most commonly insured breeds, along with beagles, dachshunds, poodles and miniature schnauzers.
VPI calculated the average amount that its policyholders spend on nonroutine veterinary care per year for each of the top insured dog breeds. The German shepherd tops the list with an average nonroutine medical cost of $296 per year. The dog logging the lowest medical cost on the top 10 list is the shih tzu ($207 per year).
"The medical care costs appear directly related to the size of the breed," Iannessa says. "But that could be due to the fact that larger breeds can require larger doses of medication."
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