Is pet insurance worth it?

If you got a puppy or kitten as a present this holiday season, some financial planning can make all the difference in providing a long and happy life for your furry friend. Pets often become like family members, and pet owners will do almost anything to make sure they are well cared for. But many people don't consider the financial risk or expense that they may incur. If your beloved pet gets sick, the costs can quickly add up.

Pet owners spent an estimated $15 billion on veterinary care in 2014. That's more than a quarter of the $58 billion in overall spending in the pet industry last year, according to the American Pet Products Association. About $870 million of those dollars were spent on pet insurance. That's a lot of money on coverage that insurance experts say is not always necessary or suitable for all pets.

"Pet insurance makes the most sense when your pet is young and the premium is a lower cost to you," said financial advisor Brittany Castro, founder of Financially Wise Women, adding that it "can definitely help you pay for any medical expenses that might come along during their lifespan."

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Dog with headache
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The decision of whether or not to provide this type of care and protection for your pet can be an emotional one, but it can also have important financial ramifications. If your puppy swallows a small toy, for example, it could cost nearly $1,300 on average to have it removed at an emergency clinic or a veterinarian's office, according to a 2014 survey by the pet insurer PetFirst. For a cat with a bout of pneumonia, the average vet bill is about $960.

"Many people might feel that they would rather put money into an account to provide for emergencies with their pet. That may be a very good idea for ongoing veterinary costs, such as payment for check-ups. But what if something unexpected happens and you have to pay thousands of dollars for an operation for your dog?" said pet lifestyle expert and entrepreneur Wendy Diamond, founder and CEO of Animal Fair Media. "You're unlikely to have saved that much money, especially if you've only been saving for a few months. If you have pet insurance in place, this can help with the cost."

But the cost of insuring your pet can add up over time, too. Pet insurance premiums vary widely depending on the age, species, size, type of plan and deductible, as well as the state you live in. The average plan from PetFirst costs about $25 a month. Veterinary Pet Insurance, part of Nationwide Insurance, says its premiums range from $10 to $11 a month for emergency care, which only covers only accidents, to $18 to $34 a month for "everyday care," which covers vaccinations and flea control, to as much as $35 a month for comprehensive care, covering accidents, illness and hereditary issues. Insurance experts say monthly premiums on some policies can exceed $100 month for comprehensive coverage for exotic birds or pets.

Diamond suggests checking out sites such as Consumers Advocate and Pet Insurance Review for more information to compare pet insurance providers before purchasing an insurance policy.

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"Pet insurance doesn't always make sense, and the purchase depends on a number of factors. Pet owners should do their research on the overall costs and coverage provided by pet insurance providers and consider the age and type of pet, the program deductible and the overall premium costs for the estimated life of the pet versus the anticipated veterinary costs," said Madelyn Flannagan, vice president of agent development, education and research at the Independent Insurance Agents and Brokers of America.

Remember, premiums aren't all you'll pay for. Most policies require deductibles and co-pays, and it's important to know what is excluded (many pre-existing conditions, for example) before buying the policy. Watch out for premium increases, too, which can vary by state, according to Consumer Reports.

But Flannagan says pet owners should also factor in "costs that might be associated with chronic illness in a pet, emergency care and the value of your peace of mind in the event of that a pet has a life-threatening disease."