Because veterinary treatment can be expensive, subscribers often ask us whether they should buy health insurance for their pets. Several companies offer these policies, some of which appear very affordable. But before springing for insurance for your spaniel, consider several points.

Carefully review the provisions and limitations of any policy you consider. Many policies have significant limitations and/or impose high deductibles. For example, a policy offered by Veterinary Pet Insurance (VPI) for a five-year-old beagle costs $325 a year and includes the following restrictions—

  • Benefits are limited to a per-procedure price schedule. For example, the plan pays $355 for treatment of a fractured leg using a splint or cast—considerably less than what most veterinarians actually charge. If the fee your vet charges for a procedure or treatment is more than the plan pays, and you can’t negotiate a discount, you’ll have to pay the difference.
  • Benefits are limited to a maximum of $7,000 per year.
  • There is a $250-per-year deductible.
  • Routine care, such as vaccinations, annual physical exams, behavioral problems, heartworm protection, flea control, spaying or neutering, and teeth cleaning are not covered.
  • Congenital conditions are not covered.

VPI also offers a “comprehensive” plan with higher per-procedure allowances (for example, $715 for a fractured leg). This plan also covers many congenital conditions, and its annual cap on benefits is twice as high as the standard plan. But, of course, the annual premium is higher: $428 per year.

Is the coverage you get worth the price? Our view is that you shouldn’t buy insurance unless you need to protect yourself from expenses that would seriously disrupt your finances. Buying insurance to cover non-catastrophic expenses means you pay to cover the profit, sales costs, and administrative costs for an insurance company to process bills you could pay yourself. And your premiums also cover a pool of other policyholders, some of whom may be more wasteful—more prone to using excessive care—than you. Insurance also considerably increases your own paperwork.

While we did not evaluate pet insurance policies to determine whether any are good buys, Consumer Reports has done quite a bit of analysis of them. An article published in the August 2011 issue of Consumer Reports evaluating most of the pet insurance policies available found that, over the course of a basically healthy dog’s 10-year lifespan, all the plans would have paid less in benefits than the cost of premiums. However, when Consumer Reports added in treatment for several chronic conditions, some policies did have positive payouts. For cats, Consumer Reports was able to find positive payouts for insurance plans only when extreme and uncommon medical treatments were prescribed.

When considering whether or not to buy pet health insurance, first determine what you would do if your pet required expensive medical care. While many pet owners will pay anything to save their pets, others won’t. If you are in the latter group, pet insurance is not for you. If you belong to the pay-any-price group, consider pet insurance if huge vet bills would severely strain your finances. But keep in mind that in terms of total out-of-pocket costs over the life of your pet, most pet owners will do better without insurance.

Still considering pet insurance? Here are tips for choosing the right policy:

  • Be aware that no plan covers pre-existing conditions.
  • Carefully review the policy, including fee schedules. Red flags are large copays; high annual premiums; and limitations or exclusions for conditions that might require costly care (such as cancer) or chronic conditions that require continual care. Stick with plans that offer a set schedule of fees for specific conditions and treatments, or that pay a percentage of total costs.
  • If the plan has a fee schedule, print it out and ask your vet to compare his or her fees to the insurance plan’s allowances. If the allowances are a lot lower than the vet’s fees, find a different plan.
  • You can usually get significantly lower premiums by choosing the highest deductible you can comfortably afford.
  • Don’t pay extra for some plans’ “wellness care” options. Consumer Reports found them not worth the extra premiums.
  • Watch out for annual premium hikes. If your plan’s premium increases suddenly, consider switching to a different plan—but remember that a new plan will not cover pre-existing conditions.

Another alternative is a prepaid health plan offered by some veterinary practices. Under most plans, you pay the veterinarian a set dollar amount for specific procedures and/or vaccinations (at a discount) throughout the year.