How to Find Your Pet Insurance Sweet Spot: A Financial Planner's Perspective

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Our 7-year-old dog, Cody, has been healthy so far. But he's reaching an age where problems may start happening. Injuries can occur, and urinary tract, kidney and dental issues are all possible.

Medical care for pets can be expensive. I've heard stories from fellow dog owners who've paid $3,000 or more for a cystotomy to remove bladder stones or $5,000 or more for surgery following an injury.

We love Cody, and I'll do anything to help him live to a ripe old age. That's why, for the first time, we're considering buying pet insurance.

Hopefully, we won't need to use it for a while, but if we ever need to, we'll be very glad it's there.

I'll share what I've learned so far as I've gone through this process.

Coverage level

Depending on the age of your pet, and the level of coverage you choose, annual premiums can run from a couple of hundred dollars to $1,000 or more.

Fortunately, in most cases, you have a lot of flexibility in finding a pet insurance "sweet spot."

Most insurers let you choose the annual level of medical coverage you want. If you have a puppy or a kitten, you might want to start low — maybe $2,000 to $3,000 — since most younger pets stay pretty healthy, unless they get injured or eat something they shouldn't.

As I was researching options, I found that one insurance company on my shortlist won't insure Cody because he's too old. Luckily, we found another company that doesn't discriminate against older dogs.

As your pets age, you might want to gradually increase this coverage.

Of course, like any kind of insurance, higher coverage means higher premiums. These will go up every year, even if you don't change your coverage.

One consideration: If you lower the coverage level when you renew your policy to reduce your premiums, the insurer may not let you increase it later. Make sure you fully understand the insurer's policies before you enroll.

Deductibles

Like most health insurance plans for people, pet insurance has annual deductibles for co-pays and treatments. You pay this amount out of pocket before the coverage kicks in.

Naturally, higher deductibles mean lower premiums, and vice versa.

What's covered?

Most pet health insurance policies cover medically required treatments, including operations, ongoing treatments and pre- and post-procedure consultations once the deductibles are met.

Some may also cover prescription costs and physical therapy. Some policies also cover the costs of euthanasia, cremation and burial.

However, it's important to read the fine print of any policy before you sign on the dotted line. There may be certain procedures or treatments your policy won't pay for.

For example, if your pet has a pre-existing condition or is above a certain age, the insurer may refuse to cover them or may not pay for additional treatments for that condition.

Getting a quote

Most pet health insurers make it relatively easy to get a preliminary quote online. You just fill out an online form answering questions about your pet, including their age, weight, breed and medical history.

A company might offer several different packages, ranging from lower-cost options with minimal coverage to more expensive policies that cover more routine costs.

Once you decide to formally apply, you might be asked to provide the contact information for your vet or to provide documentation of previous routine physicals or treatments your pet has received.

After the insurer reviews the information, the premium cost may not be the same as the one you were initially quoted. It's up to you whether you want to sign up or not.

It's always good to do comparison shopping, but make sure you're comparing apples to apples. The website Pet Insurance Quotes lets you compare side-by-side quotes from different insurers for the kinds of coverage you want.

Optional riders

Most basic pet health insurance policies cover only the costs of medical procedures and treatments. They usually don't cover the costs of routine physical exams, diagnostic blood work or X-rays, preventive prescriptions, vaccinations or dental procedures, including cleanings.

However, some carriers offer supplemental riders that cover a portion of these routine expenses. Sometimes they're bundled in packages, so you can't pick and choose which ones you want.

So, it's best to choose a package based on routine care costs you know are on the horizon for your pet.

How companies pay

Most pet insurance policies require a waiting period between the date you officially enroll and the date coverage actually begins.

In most cases, you pay for your vet's costs out of pocket and then submit receipts to the insurer. They'll send you a check for the amount they're covering.

However, some pet insurance companies allow the vet to submit their bills directly. The company reimburses the vet for the covered costs, and the vet bills you for the uncovered amount.

Check with the insurer to find out what their policy is.

Paying for your policy

Most insurers allow you to pay an annual policy in installments. You can usually pay by check, electronic fund transfers from your bank or with a credit card.

Renewing your policy

Your policy renews every year, and the premiums will nearly always rise because of the increased health risks as your pets age.

Fortunately, you can generally change your coverage amount, deductions and riders or move from a less expensive package to a more costly package, or vice versa.

Keep in mind, however, that if you lower the coverage level to reduce premium costs, the insurer may not allow you to increase it the following year.

Make sure you understand the change policies before you modify your policy.

Should you get pet health insurance?

Whether you need pet insurance or not depends on how much you're willing to pay for unanticipated pet medical costs out of pocket. If your pets are relatively young and never leave your home, they may have a lower risk of getting sick or injured.

Once they start reaching middle age, their chances of needing expensive medical care start to increase.

You might want to research the kinds of ailments dogs and cats often suffer as they age (and the costs of treatments) and use that information to determine if pet health insurance makes sense.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.