Smart Money Podcast — Budget-Friendly Pet Care: Demystifying Pet Insurance and Hidden Costs

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Learn to navigate pet insurance options, costs, and smart budgeting strategies for your pet’s health care.

Is pet insurance worth it? How can pet owners afford the rising costs of veterinary care? Hosts Sean Pyles and Ronita Choudhuri-Wade discuss the ins and outs of pet insurance and various budgeting strategies to help you manage pet care expenses effectively. They begin with a discussion of the importance of pet insurance amidst escalating vet bills, with tips and tricks on the potential financial benefits of pet insurance, the low adoption rate of pet insurance in the US, and interesting trivia like the first US pet insurance policy issued for Lassie. Then, NerdWallet pet insurance expert Sarah Schlichter joins Sean and Ronita to discuss the basics of pet insurance. They discuss the different types of pet insurance plans available, common misconceptions about pet insurance, and other critical factors to consider, such as deductibles, co-pays, and policy exclusions. Plus: potential hidden fees and the nuances of claim payouts, key features to look for when comparing providers, and alternative financial strategies such as vet subscription services.

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This transcript was generated from podcast audio by an AI tool.

You know you need to insure your health. You know you need to insure your car and your house. But what about your four-legged family members? Is there actual value in pet insurance?

These days, there are so many advanced treatment options out there for animals to help them extend their lives, but not everyone has the budget to take advantage of those, and so pet insurance can help with that and really spare your family a heart-wrenching decision about how much treatment you can afford to try.

Welcome to NerdWallet’s Smart Money podcast. I’m Sean Pyles.

And I’m Ronita Choudhuri-Wade.

This is episode two of our nerdy deep dive into the cost of pet ownership. Last time we walked you through some of the financial considerations before deciding to buy or adopt a pet, and one of the potentially significant expenses is those trips to the vet.

Yeah. You never know when your dog is going to find something on the sidewalk and decide to eat it, and I am looking at you, Mo. Or your cat decides to jettison one of its nine lives, run up a tree, and somehow not land on its feet coming down. I don’t know. Does that happen?

It could happen. I’m sure it does every day somewhere in the world. But even routine checkups at the vet can be pricey. Immunizations aren’t free. Then, maybe your pet pal needs some special prescription food or medication. Enter pet insurance.

Yeah, this is a big question for a lot of people. Is pet insurance worth it? And how do I know if a plan is a good one?

I think I just heard Mo in the background.

Mo has thoughts on pet insurance as well.

Of course. I hope it’s not as complicated as human health insurance, at least in this country.

Not quite. But there definitely are options that you’ll want to look at and consider before deciding to go with pet insurance, and we’re going to explore those today. Do you have pet insurance, Sean?

I do not. Though, I do have a membership to a vet care service that provides essentially preventative care. I pay around $70 a month for my dog Pepper and closer to $50 for my cat Argus. The price is kind of steep, but both pets have garbage teeth and need annual cleanings, which is included in my membership. I don’t know. I guess it’s kind of worth it. But I do always wonder whether I should switch to pet insurance, especially before my pets develop some preexisting condition that insurance wouldn’t cover. What about you, Ronita? Do you have insurance for Mo?

So we do. Mo has a lot to say. He’s happy with his pet insurance. We knew we were getting a terrier, and there’s a lot of energy, there’s a lot of curiosity, so we thought we’d look into it sooner, basically as soon as we decided to get Mr. Mo. But really what helped us decide on pet insurance is that my husband’s work provided a discounted premium rate, and that, the money, and the costs, and the discounted rate essentially cinched the deal for us. But while almost 87 million households owned a pet in the U.S. in 2023, only 5.7 million pets were insured, according to the Insurance Information Institute. And those pet owners paid $3.9 billion in premiums. And dogs are insured far more than cats. It’s almost 80 to 20%. Do you want some more pet insurance trivia, Sean?

Oh, yeah. I’m all about the pet trivia.

Okay. Fun fact, the very first pet insurance policy issued in the U.S. was back in 1982 for Lassie, the actual TV star Lassie.

Wow. I mean, why wouldn’t you? You do have to protect the talent after all. Also, additional fun fact about Lassie, she has a star on the Hollywood Walk of Fame. All right. Well, listeners, we want you to bark and meow at us with your stories about your pets and what it takes to keep them in kibble. What are you sacrificing in your budget to have an animal? Do you have pet insurance? We want to hear any and all pet stories over the course of this series. To share them, leave us a voicemail or text the Nerd hotline at (901) 730-6373. That’s (901) 730-NERD. Or email a voice memo to [email protected]. And if you have any audio of your pets, all the better. Ronita, where do we start today?

Today we’re talking with fellow Nerd Sarah Schlichter, who is an expert in all things pet insurance.

That’s coming up next. Stay with us.

Sarah Schlichter, welcome to the Smart Money podcast.

Hi, Ronita. Thanks so much for having me.

We’re very happy to have you here. Now, first question, do you have any fur babies?

Yes, I do. I have a rescue lab named Sylvie. She’s very sweet. She’s actually sleeping on the sofa behind me, and so hopefully we don’t get any deliveries and she doesn’t bark through the interview.

Oh, I love that name, Sylvie. That’s cute. We have you on because you are our NerdWallet pet insurance expert. So let’s start from the beginning. And just tell us, what is pet insurance, and how does it work?

Pet insurance is a bit like human health insurance in some ways. It can help you pay your vet bills if your pet gets sick or hurt. Like human health insurance, it often has deductibles and copays. So you should know it’s not going to pay 100% of your pet’s medical expenses, but it can come in handy if something major goes wrong, like God forbid your dog gets hit by a car and needs surgery or something like that. But there are a few key differences between human health insurance and pet insurance. One nice thing about the pet version is that there’s usually no in-network or out-of-network stuff. With most plans, you can just take your pet to any licensed vet. That’s nice. But not as nice is that you’ll generally have to pay the full bill up front and then submit the receipt to your insurance company for reimbursement. There are a small handful of pet insurance companies out there that can pay your vet directly, but in most cases you’ll initially have to foot that bill.

Can you explain the different types of pet insurance plans available?

Sure. The most common type of pet insurance plan in the U.S. is called accident and illness insurance, and it’s just what it sounds like. It’ll reimburse you if your pet is accidentally injured or if your pet gets sick. There is another alternative that’s cheaper and also less common, and it’s called an accident-only plan. That can cover things like a broken leg or a snake bite, but it’s not going to help you if your pet gets cancer, diabetes, allergies, basically any illness. Neither of these plans is going to pay for routine care, so they’re not going to reimburse you for your pet’s annual checkup or a rabies vaccine or even a spay or neuter surgery. Some folks think it’ll cover that, but it won’t. So if you do want those things covered, you want to look for a wellness or preventive care plan, which many companies will let you add to an accident and illness plan. These work a little bit differently. They usually have set reimbursement levels for certain services, so they might pay you up to $50 for a checkup or up to $150 toward your dental cleaning.

What are some common misconceptions people have about pet insurance?

One big one is that you can wait to buy the pet insurance until something goes wrong. For example, say you discover a lump on your dog’s side. You take him to the vet, and unfortunately it’s cancerous and the vet said he needs surgery. You might think, “All right. Well, I’ll just buy pet insurance to pay for the surgery.” Unfortunately, insurance is almost never going to cover problems that your pet had before you bought the policy. These are known as pre-existing conditions. You’ll see them excluded on just about every plan. For the dog that has the cancerous lump, you can still buy pet insurance and it’ll pay for any new problems in the future, but it’s not going to pay for that surgery.

Yeah, that’s right. In addition to pre-existing conditions, there are usually a lot of other exclusions in a pet insurance plan. Some companies don’t cover your exam fees. Say your cat’s throwing up, you bring her in, and the vet gives her some medicine and IV fluids. That plan would pay for the medicine and the fluids, but it wouldn’t pay for the vet’s actual examination fee. Other things that sometimes aren’t covered are prescription food and supplements. There’s also a lot of variation in the way insurance companies cover tooth issues and dental disease. I hate to say this, no one likes to hear this, but you really do need to read the policy because all the details are in there. The nice thing is that most pet insurers offer sample plans on their websites that you can read through before you buy. And if you’re confused, a lot of companies you can either call or even live chat, and they should be able to answer your questions so you don’t buy something you don’t understand.

Yeah, that’s a good tip. I remember with Mo, when he ate something… What he ate we still have no idea. But he ate something, and then we had to take him to an emergency vet. My husband and I were scrolling through the policy in this kind of high-stress moment trying to figure out what is covered and what’s not. On that point, Sarah, what are some factors that pet owners should consider when deciding if pet insurance is right for them and their pets?

The first thing I would suggest is looking at your budget and being honest about whether you’d be able to handle a big emergency vet bill. If your dog needs a $2,500 surgery, could you pay for it or would you end up going in debt? If paying for something like that would be a financial hardship for you, then pet insurance might be a good safety net. Then, you also want to consider your own personal comfort level with risk. The tricky thing about deciding whether to buy insurance is that we don’t know the future. You don’t know whether your new kitten is going to be healthy for his whole life or if he’ll end up developing some expensive chronic issue that you have to keep paying for.

Right. And what if your pet is mostly healthy?

Well, in that case, you could end up paying thousands of dollars for insurance and really not getting much in return. For most of us, it’s not appealing, but some people would not want to buy pet insurance because of that. You might want to just set up a savings account, a dedicated high-yield savings account specifically for pet expenses. That way the money is there if you need it, but you can spend it on other things if your pet never has any major issues. But on the other hand, for some people, having pet insurance can really give them peace of mind. You may never need the insurance, but at least you know you’re not going to have to agonize over whether you have enough money to give your pet the best possible care.

When we got pet insurance, it was really about that, just having that sense of security. Especially with Mo, because he’s a terrier, right? He is a toy fox terrier, but he’s a terrier, so he jumps and is very active. We just knew that there’s a high chance he might knock into something, eat something, do something with himself, and so that’s why we decided to get pet insurance. On that topic, how could age, breed, and health condition of a pet influence the decision?

Well, if you’ve got a young healthy pet, that’s when you’re going to find the most affordable rates. It’s going to be cheaper then. Also, your pet probably isn’t going to have any pre-existing conditions yet, and so that can also make pet insurance more appealing because most things should be covered. For someone with an older pet, especially one who already has a chronic condition, I don’t know, kidney disease, or arthritis, or whatever it might be, insurance is not going to help with whatever they already have. Then, the other problem is for older pets, the monthly cost of insurance can be quite steep. You may decide that it’s just not worth it to you at that point. You’ll just go ahead and keep paying the bills yourself. Then besides age, the type of animal that you have, kind of like what you just said, that can affect how much you pay for insurance and even whether you want insurance. As a general rule, cats are usually cheaper to insure than dogs are. Bigger dogs usually cost a little bit more than smaller ones. But there are certain breeds that tend to have higher rates. One example is a French bulldog. They’re kind of famous for their breathing problems, and that can get kind of expensive. And just in general, the more expensive animals to insure tend to be the ones more likely to need medical care. And that makes sense, right? That’s why insurance companies charge more because they’re higher risk. You’ll just want to weigh that when you’re deciding whether to buy insurance. You may decide, “Insurance for my Frenchie, it’s too expensive. But I know she’s got higher risks, so I’m going to set aside more in savings to self-fund just in case she runs into these problems that the breed is known to have.”

What are some scenarios where pet insurance would be especially beneficial?

One terrible thing I’ve heard about from the vets that I’ve talked to is economic euthanasia. That’s when people have to have their pets put down, even though treatment is available, but they can’t afford it. That’s probably the biggest thing that pet insurance could help prevent. I mean, these days there are so many advanced treatment options out there for animals to help them extend their lives, but not everyone has the budget to take advantage of those. Pet insurance can help with that and really spare your family a heart-wrenching decision about how much treatment you can afford to try. Then, the other scenario really is an emergency, like you were talking about earlier. I mean, most of us don’t plan for our dog to swallow a sock or tear a ligament or whatever, but it happens, sometimes at the worst possible time for you financially. So, insurance can just reduce that unexpected financial hit.

I see. All right. Let’s get to brass tacks here. What are some typical costs associated with pet insurance?

The average cost of accident and illness insurance in the U.S. is about $56 a month for dogs and $32 a month for cats. That’s data from an industry organization called the North American Pet Health Insurance Association. If you want just the accident-only coverage, it’s much cheaper. It averages about $17 a month for dogs and $10 a month for cats. But obviously there’s a ton of variation. For example, our dog is older and we pay about a hundred dollars a month for her. In general, like I said before, you can really expect rates to go up as your pet gets older. Then on top of the premium, you’ll have to pay your deductible before you start getting reimbursed. Then, even once you’ve met the deductible, you’ll usually still have to pay a percentage of your vet bills. That might be 10, or 20, or 30%.

Could you break down what factors influence the premium costs?

Sure. So aside from what I already mentioned, like the breed and the age of the animal, where you live also makes a difference. If you’re in an area where the cost of living is high, you’re probably going to pay more for pet insurance because vet expenses are probably also high in that area. Then beyond that, your cost is really going to depend on how you customize your plan. So if you want a plan that pays 90% of your vet bills rather than 70%, you’re going to pay more for that plan. But on the other hand, if you choose a higher deductible or a lower annual coverage limit, that’ll make the plan cheaper. One last thing to keep in mind is that, as I kind of said earlier, insurers don’t all cover the same things. So a plan from one company might look cheaper at first until you realize, “Oh, it’s going to cost me extra if I want to add exam fees, or physical therapy, or these other types of coverages.” And another plan that might cost more because it includes more of those coverages, and so that might be worth it to you.

Would you say there are any hidden costs or fees that pet owners should be aware of?

There can be, yeah. Sometimes there’s a small fee if you want to pay your premiums monthly instead of paying the full year upfront. Occasionally you’ll see an account setup fee, usually a one-time fee when you first buy the plan. Then, you might also see little things on your vet bill that aren’t reimbursed, like taxes or waste disposal fees, stuff like that. Then, there’s one thing that’s a little bit complicated to explain, but it has to do with the way the insurance company calculates your claim payout. If an insurance company subtracts your deductible from your vet bill before they apply your copay, they’ll actually end up reimbursing you more than they would if they applied the copay first and then subtracted the deductible. It’s complicated. I’m not going to go into all the math, but this can make a difference over time, and it’s something I would recommend checking for when you’re reading that sample policy. Again, you want to see whether the copay is applied first or the deductible, and what you want is for the deductible to be applied first. That’s something we’ve actually been adding to our pet insurance reviews on NerdWallet just so people understand what to look for. We give some examples of the math, how much of a monetary difference it might make.

That’s really important to look into and could save you some money. Okay, so we’re familiar, unfortunately, with deductibles, copays, and coverage limits in human healthcare. How do those things impact the overall cost and value of a pet insurance plan?

Well, adjusting all of those parts of your plan can help you control how much you pay for the insurance. You can usually make your plan cheaper by choosing a higher deductible, less reimbursement, or a lower coverage limit. But if you choose any of those things, the plan is not going to help you as much with your vet bills, so it’s really about how much of your pet’s care you’re willing and able to pay for yourself. I do want to just caution people about the deductible in particular. Don’t choose a thousand dollar deductible if you’d have a hard time paying that much in an emergency. Choose something smaller. But on the other hand, if you’ve got the money in your savings account and you just want the insurance in case of something really catastrophic happening, then a high deductible might make a little more sense for you.

What should pet owners look for when comparing different pet insurance providers? We know there’s a couple out there, and we see the ads for them all the time. Are there any specific features or services that can make one pet insurance plan, say, better than the other?

The biggest thing, really, is what’s included and what’s not included in each company’s plan. There are certain things that one company might include, another will charge extra for, and company B over there is not going to cover at all. Things I would look for include exam fees, dental diseases, alternative treatments, like acupuncture, prescription food and supplements, and behavioral treatments. For example, say your dog is being really aggressive and you bring her to the vet for that. Will the plan cover it? Some will, some won’t.

I’m kind of blown away at the fact that there’s dog acupuncture. I didn’t know that was a thing.

Yeah, I mean hydrotherapy and homeopathy, and chiropractic. There’s all these different things now for pets. And again, some of these depend on where you live, whether they’re going to be available to you. But yeah, some pet insurance plans will include coverage for all of those things.

Are there waiting periods for some of the plans?

Just about every pet insurance plan will have some version of a waiting period. Usually when you buy a pet insurance plan, you can’t make a claim immediately. You may have to wait maybe three days for an accident claim, 14 days for an illness claim. So if I buy a plan on the first day of the month and my cat breaks his leg on the second day, the plan most likely is not going to pay for his treatment. Plus, the condition would be considered pre-existing because it happened before the coverage was effective. So if my cat needs follow-up treatment for that injury, even after the waiting period is over, I’m out of luck because it’s a pre-existing condition. Obviously, with that in mind, shorter waiting periods are better. I would also keep an eye out for companies that have extended waiting periods for things like knee injuries or hip dysplasia. You could have to wait six months or even a year for coverage for some of these things with certain companies. And then finally, you might also want to check how quickly companies process claims. The fastest companies will promise to get most claims turned around within a few days. Other insurers might take a month to pay your money back. Obviously, that could make a big difference if you’re on a tight budget. If you’ve got some big vet bill on your credit card and you need the reimbursement to pay it off, you probably don’t want to wait 30 days. So that’s another thing to check.

What advice would you give to someone who is on the fence about pet insurance?

It’s a tough decision. It’s very personal. As I said earlier, it’s impossible to know in advance whether you’re going to get your money’s worth out of this plan or not because you don’t know how healthy or lucky your pet will be. Personally, my husband and I decided to get pet insurance for our dog for a couple of reasons. First, I would rather pay for the insurance, even if we don’t use it, than not have it if she got really sick. The peace of mind, it really was worth it to me. Then secondly, I guess I could say marital harmony. We didn’t want to have arguments over how much to spend if our dog ever got sick. I actually had a coworker once who spent $20,000 trying to save her sick cat. Unfortunately, the cat died anyway, which was terrible. But my husband didn’t understand how anyone could spend so much on a pet. And I agreed, yeah, that is a ton of money. But if you really love your pet, could you live with yourself if you didn’t do whatever it took to save them? Because we have insurance, we don’t have to have that argument.

Yeah, and I hear you on that. When we got Mo, we hadn’t really… We knew about pet insurance, but we didn’t know enough. Only when it was offered at a discounted rate through my husband’s work did we actually look into it. We felt similar to you where it’s like, “Okay.” The peace of mind, the security that we have. It makes sense. But there are alternatives to pet insurance, right?

Probably the best strategy, other than pet insurance, is to set up a separate savings account for pet expenses. You could even put the money you would’ve spent on insurance premiums into that account instead. That way you’re paying yourself instead of the insurer. And if you have the self-discipline to save that money on a regular basis, it could be a better option. But otherwise, if you don’t have cash on hand, you could end up going into debt, like my coworker did, unfortunately, or having to create a crowdfunding account to help you pay an emergency vet bill. Some vets will work with you on setting up payment plans if you’ve got a really big bill, but it’s not something you can always count on.

What about subscription services that are offered by some vet companies? Can you explain what those are and how to evaluate whether that’s a better option than insurance?

Sure. You’ll sometimes see these offered by bigger chains of vet hospitals, like Banfield or VCA. The plans do vary. But in general, what I’ve seen is that these are more similar to wellness plans than to standard pet insurance. They’re typically going to pay for things like your checkups, vaccines, and preventive screening tests rather than help you with an emergency surgery, something like that. In some ways, they could be a nice complement to an accident and illness policy. The pet insurance will cover you if something goes wrong, whereas the subscription plan can handle the routine stuff that you have to pay for every year. What I’d advise people is, number one, compare the vet subscription service to the wellness coverage you can add to an accident and illness plan. See which one seems like the better value to you. Then second, make sure either of those plans is actually cheaper than just paying for routine care yourself. It’s actually relatively easy to budget for your pet’s annual checkups and shots. It’s not like unexpected injury or something like that. The only real reason to get a wellness plan is if it saves you money. If a vet subscription plan includes services that your pet doesn’t actually need or that you’re not going to use, you’re probably better off just paying for the routine stuff yourself.

So just to review, what would you say are, say, the top three things listeners should know when deciding on pet insurance?

Number one, just know it’s not going to pay for everything. Make sure you understand what is and isn’t covered before you buy the plan, and choose limits and deductibles that you feel comfortable with. Number two, keep in mind that the cheapest plan isn’t necessarily the best value. You may want to spend a little more on a more inclusive policy or a higher coverage limit if that’s in your budget. And finally, I would make your decision with the idea that this might be a policy you have for your pet’s entire life. I mean, with other types of insurance, like your auto or your homeowner’s policy, you might shop around every year or two. And if you see a better deal, it’s pretty easy to switch companies. But with pet insurance, because it doesn’t cover pre-existing conditions, you might end up realistically not being able to switch to another insurer if your pet has already developed a chronic issue. So if you switch, the new company isn’t going to cover that condition. I just really advise you to make sure you feel comfortable with the company and the plan you choose for the long term.

Sarah, this was so helpful and got us thinking about things that maybe we wouldn’t have considered before, and we know what to look for when looking at a pet insurance policy. Thank you so much for helping us out today.

It was my pleasure. Thanks for having me.

Ronita, what I’m thinking about after your conversation with Sarah is just one word, uncertainty, uncertainty about whether your pet will have some injury that would make pet insurance worth it, uncertainty about whether my wellness care membership is a good idea over the long run or if I should switch to pet insurance. The hard part, as ever, is that it’s impossible to predict the future. You just don’t know what’s going to happen with your pet and what your break-even point might be with your insurance.

There is a lot to consider when looking at pet insurance, and it seems like timing does play a part. Sometimes the idea of getting pet insurance may only pop into mind when something happens. But the fact you usually have to wait until it kicks in makes getting it early a good idea.

Well, I suppose, just like so many other things, you have to weigh the risks of not having insurance and what that means if you end up with thousands of dollars in vet bills. I think on my end I’m going to crunch the numbers and see if I might be better off sticking with my current wellness membership and setting aside some cash into a savings account for future veterinary emergencies or maybe making the jump to pet insurance.

Yeah, that’s a tough decision, and it’s a good idea to make that call sooner than later. Pet care costs can start to skyrocket as they get older, and then the really hard decisions come in. Are you going to make pet care decisions purely based on cost? And sometimes you just have to. We’re going to talk about that in our next episode. Here’s a preview.

A pet owner could expect to pay a minimum $2,000, probably more, for an emergency situation. I think setting aside maybe $50 to $100 per month in a savings account and letting that account grow would be a good idea.

For now, that’s all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at (901) 730-6373. That’s (901) 730-NERD. You can also email us at [email protected]. And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.

This episode was produced by Tess Vigeland. I helped with editing. Kim Lowe helped with fact-checking. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all their help.

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