Is pet insurance really worth it?

Being a pet owner is about a lot more than hanging out at the dog park or cuddling with your cat on a rainy day. They need constant care and it can get expensive especially if they develop health problems or get in an accident. The veterinarian fee is on a per service basis and depending on what's wrong, vet bills can add up to thousands of dollars — which is why many companies offer pet insurance. For a monthly premium, your pet is covered in the event of illness or injury. In Canada, the average insurance premium is approximately $39 a month for a dog and $29 for a cat — not bad if you’re worried about massive vet bills.

But is pet insurance really worth it? According to a PC Financial poll, only 4.6 percent of Canadians insure their pets. Before you sign on the dotted line though, you need to know that not all policies and providers are created equal. For example, some could increase your monthly payments as your pet ages. Others may have exclusions and limitations. (This Consumer Reports article lists all the things you should look for before buying insurance, including the fine print about what could lead to unexpected claim denials).

If you do decide to get pet insurance, you will need to decide on the level of coverage. Will it be accident, illness, dental, wellness or a combination? Your premium will vary depending on the coverage selected. If you opt for accident only insurance, it’s often the cheapest (a rate of approximately $13 a month).

But be warned: the premiums add up. For example, Moneysense notes that premiums on a medium-level policy with Canada’s biggest pet health insurance provider, PetSecure, costs $520 a year. Assuming you made a claim you’d still have to pay a $500 annual deductible and 20 percent of the bill. After those deductions, the average reimbursement from the insurance policy is only $187.40. Over the life of your pet you could end up shelling out thousands.

So what’s the alternative to insurance? You can continue to pay expenses as they come up or if you’re worried about getting a big bill one day, create a high interest savings account for your pet care expenses and save monthly. Take the money you would have spent on insurance every month and put it into the savings account. If you don't end up needing to use it on your pet, then you can just pocket the money.