Pet Insurance

Is it cost effective to purchase health insurance for your pet?

Improvements in animal health care have led to an ever increasing variety of treatments available for your pets - coupled with spiralling costs per animal. We are now at the situation where animals can be saved (via expensive diagnosis and surgery) that perhaps would have been 'put to sleep' a couple of decades ago. As an animal loving nation this is no bad thing, but the costs of such treatments and the resulting after care can add up to huge veterinary bills.

One is told that the potential costs of such treatments can be insured against and many companies now offer such pet insurance schemes, but are they worth it, what do they cover and how likely are you to claim more than it costs in fee's?

Types of Pet Insurance

What's usually covered?

What's isn't often covered?

Read the small print

Average cost of a claim

What's the chance of a vet bill costing £500, etc?

How much will the policy cost?

Postcode lottery on Premiums?

Is it worth it?

Types of Pet Insurance

They are called different things by different insurance companies but the type of cover you can buy typically falls into one of three categories.

  1. Annual - This is payed for either monthly or annually and covers treatments happening within 12 months of the policy being taken out. The amount covered is usually up to a limit on a per treatment basis. e.g. The policy states £1000 maximum per treatment. Bandy the cat has broken his legs and it cost £800 for lots of work. He gets better but later in the year has to undergo surgery to fix his ear back on after a territorial fight (legs still recovering...) costing £400. Both these are covered as neither exceeds the £1000 limit per treatment for the policy per year. This is the most common policy.
  2. Lifetime Cover - These are best suited to long term or on-going illnesses such as diabetes, arthritis or genetic diseases in pedigree animals. There is a maximum claim limit for any treatments (treatments are lumped together here) per year and this limit is reset every year. Note the policy has to be renewed each year for this to be the case.
  3. Maximum Amount - A bit like the lifetime cover in that there is no time limit but this policy has an absolute maximum amount payable out per illness which isn't reset per year.

Options 2 and 3 are usually more expensive than 1 but as mentioned are better suited to long term chronic illnesses or conditions which option 1 perhaps wouldn't cover. Some policies combine aspects of some or all of the options.

What's usually covered?

Not always, but usually. 

What isn't often covered

Oh and it's likely that your dogs and cats need to have had all their jabs before the policy starts to be able to make a claim for any subsequent illness.

These are just examples and sometimes they are covered depending on the policy. It's really just a matter of being aware of how complicated the TOC's are and... 

Read the small print

The key thing is to read the terms and conditions very carefully if you want to be clear about what is and isn't covered by the policy. This is especially true when trying to compare policies. Don't assume that because you are using an insurance comparison site that they are comparing exact like for like policies. At the end of the day these sites compare a series of fixed pointers in the policy, like maximum amount claimable per treatment per year and come up with a ranking based on price. It's then up to you to examine each policy closely to see if it covers what you want.

Average cost of a claim?

Is there any data available that allows one to make a more objective judgement about the financial justification of taking out pet insurance as opposed to maybe just saving the money in a savings account? Lot's of insurers quote various scary figures to convince you to sign up and here is a quick survey of some of them to try and get an idea of the average claims policy holders make.

What's the maximum a vet's bill might be over a pets lifetime?

This final quote allows us to back-calculate the likely data distribution Tesco have and look at the probability of making differing value claims during the animals lifetime.

Assumptions:

  1. Log normal distribution of claims
  2. 35% chance of one claim per year
  3. Average claim is £300
  4. 90% of claims are less than £750
  5. Use a binomial distribution (claim or no claim) to work out likelihood or claim greater than X £'s over pets entire lifetime.

Assuming the pet lives for 10 years (about average dog) then it is found (based upon the above assumptions and assuming quoted Tesco data is correct) that you have

The data included all pet species and so a cat will likely work out cheaper than a dog and a large dog will work out more expensive.

Remember these figures use the Tesco data which suggested a far higher average claim figure than Petwise. If an insurer reading this wants to give me their entire dataset of claims I will be happy to re-run the analysis :)

Policy Costs

Now we have an idea of how much your average pet will cost in vet treatments over its lifetime how much do the policies themselves cost per year? You really need to examine the small print to compare properly but here we've looked at the top policies (gold or equivalent) from several insurers to see how much it will typically cost.

Assuming


 Insurer ExcessAmount Covered per Treatment Annual Premium - Cat
Annual Premium - Dog
 Tesco£50-60
£4000
£73.56
£121.56
Sainsbury's
£50-75
£6500
£104.58
£160.16
RSPCA
Unknown
£6000
£97.19
£157.62
Debenhams
£50
£5000
£110.02
£103.79
Petwise
£50
£5000 £146.38
£137.91
AXA
£50
£7000 per policy
£93.33
£147.30

Data valid as of 01/12/2007

Both Petwise and Debenhams ask almost identical questions in the same format, yet Debenhams are underwritten by AXA and Petwise by Fortis. The fact that Debenhams is offering dog insurance for less than cat is bizarre! Sainsbury's and RSCPA both appear to use AXA and hence the similar prices. Tesco are underwritten by UKI and just seem to be cheaper but you really need to compare the policies to get a proper comparison.

Postcode Lottery on Premiums?

How much difference does it make where you live in the country to how much you will pay in premiums? Here we just look at data for a cat (as above) using Petwise quick quote for speed (didn't get much difference when went for full-quote option in trial)

 LocationPostcode
Annual Premium
Boston, LincsPE21
£126.76
Plymouth
PL4
£146.38
Birmingham B10
£234.70
Oxford
OX4
£234.70
Central London
NW1
£401.52

Data valid as of 01/012/2007 

How much difference!! London is of course more expensive but are vet's bills really 3 times more expensive than in Boston or nearly twice as much as in central Oxford? The London premium (good choice of word...) for a £25, 1 year old, short haired tabby cat is more than the fully comprehensive cost of insuring my estate car!

I also checked with Debenhams and the price for a cat rose from £110 to £298 between Boston and Central London - 270%.

I also checked AXA and the price for a cat rose from £93 to £178 and for a dog from £147 to £284 between Boston and Central London - 191% and 193%.

Finally is it worth it?

There is always the peace of mind that cannot be easily calculated but that aside the data that Tesco showed suggests it likely that in the lifetime of your pet you will face substantial (several hundred pound) vet bills that are not easily planned for.

Personal Opinion: When I started writing this article I thought it was a scam to scare you into buying insurance and in some parts of the country this definitely appears to be the case! However, for premiums between £120-160 per year  I would definitely insure a dog - at the very least it gives you third party liability if the dog is involved in a car accident. Plus dogs are more likely to survive RTA's - all the cats we had as kids were almost instantly killed if they were hit by a car. I would also look at reducing my premium by increasing my excess (if possible). Paying a £200-500 bill would hurt but not put me in a debt situation, but £500-1000 plus would be much harder to swallow. I would also consider buying the RSCPA one if only because it uses its commission (20% or at least £20-30 per policy per year) to help the welfare of other animals in its care.

 

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Date Added: Wednesday 5th March 2008

"The RSPCA already have millions in the bank and kill tens of thousands of animals needlessly. I would certainly not buy insurance with a view to helping an already rich political body. Choose cheaper insurance and donate the difference to the PDSA who *really* help animals which need help. Also, why do the insurance companies not provide a block insurance for those of us who keep more than a couple of cats and dogs? In the end, all insurance companies are more interested in making a profit than providing assistance. Don't bother, but put the money into a savings account instead. In 35 years keeping lots of animals (5+ dogs, 6+ cats)I have never found any insurance worth the money when you take into account the fact that the most common things are not covered like neutering, vaccinating, worming and flea treating, plus the large excess needing to be paid, plus the fact that most vets want to be paid up front and have you reclaim the cost from the insurance company. If I could afford to pay up front, then I wouldn't need insurance. In 35 years of keeping lots of animals, there has only ever been one single time that a vet bill was so large I couldn't pay without a struggle, the rest of the time it's normally no more than £50-£150. If I added together the amount of money the premiums would cos me, then deduct anything claimable, I can see that I would be lining the pockets of greedy insurance companies and frankly, I prefer to use the money on my animals. Since they don't cover vaccinations, I can only assume they prefer owners not to vaccinate since they can make a claim for a dog who needs treatment because it has contracted distemper or any of the other diseases around.Insurance....pah!!!"

fenwoman