Has Pet Insurance Become a Necessity?

After Nicole Bodzon, 28, a consultant in Conifer, Colorado, paid $1,600 for her pug, Pepe, to have a possibly cancerous tumor removed from his eye, she thought she might benefit from an insurance policy.

But it took her a while to figure out how to maximize the benefits. A year later, Pepe had another tumor removed. Unfortunately, the insurance that Bodzon had since purchased didn’t cover pre-existing conditions, so she paid the bills herself.

Bodzon represents the demographic of pet owners on the ground floor of the pet insurance industry. While Americans struggle to afford health insurance coverage and deal with rising health care costs, they are facing the same challenges for their pets. That is setting the stage for explosive growth in the sector.

Nearly one million pets are insured in North America. That is about 1 percent of the U.S. pet population. According to Kristen Lynch, executive director of the North American Pet Health Insurance Association, most plan purchasers describe themselves as affectionate pet owners, many of them female, single or attached, who live in large urban areas. Most pet insurance customers are childless. Empty nesters are also prominent.

Advances in technology have made procedures for pets, such as hip replacements, physical rehabilitation and even chemotherapy, more available. That has pushed up spending for veterinary services, which have more than tripled to an average of $206 per year in 2008, from $60 in 1998.

That has enriched the insurance industry. Revenue for U.S. pet insurance plans was around $302.7 million in 2009. That will more than double to $753 million by 2014, according to estimates compiled by consumer research firm Packaged Facts.

FINDING A PLAN

A pet owner can find a plan to suit a wide category of conditions. Options can be found through companies that sell pet-related products like Kroger or groups like the ASPCA. Groups like the American Pet Insurance Co. underwrite smaller insurers that can be found and researched over the Web, like Trupanion.

Veterinary Pet Insurance, a unit of Nationwide Insurance, is the largest U.S. provider of pet insurance, with 485,000 pets covered. Its comprehensive major medical plan even covers pre-existing conditions and hereditary diseases for as much as $37 per month for dogs and $24 per month for cats. Other plans offer high deductible options and policies for foreseeable procedures that vary by species, breed and age.

The value of pet insurance, however, seems to depend more on the owner’s characteristics. The desire to seek more frequent and attentive care may be the deciding factor in buying an insurance plan to cover a pet’s bills. Improved efforts from companies to release insurance products offering a greater range of options provides pet owners with more ways to care for their pets’ long-term health.

In many cases, insurance allows pet owners to engage in more preventive care, showing up at veterinarian offices for any little bump or limp they may notice. This could result in fewer costly procedures if problems are caught early. Most pet insurance companies will require payment upfront, for which pet owners may seek reimbursement following treatment of their pets.

For Bodzon, the equation eventually worked out in her favor. After she settled down with her fiance, with four dogs and four cats between them, they bought pet insurance for each one, for a total monthly premium bill of more than $100.

“It is only to protect our finances, so we don’t go bankrupt treating our pets. Or worse, we might have to make a difficult decision to put them to sleep for a treatable illness,” says Bodzon. “We could not afford to pay the deductible if they all became ill at the same time though, we know that.”

(Editing by Bernadette Baum, Beth Pinsker Gladstone and Richard Chang)

Topics USA