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Pet health insurance

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At Alpine Animal Doctors we do our best to keep the cost of veterinary care as low as we can but there’s no getting around the fact that sometimes animal health care can be expensive. Complex surgical procedures following a serious accident or injury can run into thousands of dollars. When an animal develops a serious medical condition treatment can also mount to substantial sums.

The probability you will face an emergency at some point is quite high. There are more than 6,000 diseases and medical problems that can affect animals and, on average, one out of every three pets will need veterinary care each year. The majority of that treatment will be for minor illness but there are also accidents, snake bite and poisoning incidents that can be very costly to treat.

One way to protect against unexpected vet bills is pet insurance. Not dissimilar to your own health insurance you pay a monthly or annual premium to protect yourself against the cost of accidents and/or illnesses affecting your pets. A good policy can cover as much as 100% of your vet bills, and knowing that if an emergency arises your costs for treatment are mostly covered can help you sleep easy.

However, as helpful as pet insurance can be in avoiding bill shock arising from an unplanned trip to the vet it not all pet insurance products are created equal. There can be costly pitfalls for the unwary and it can be hard work to find the right plan for your circumstances.

Nor is pet insurance cheap — premiums can range from a couple of dollars a week for very basic cover to north of $1,000 or more a year. There can also be big differences in premiums between policies with similar covers, often because of high marketing commissions (see How do I choose an insurer? and The commission trap).

We also think pet insurance is more complicated than it need be. Some policies have so many exclusions they are effectively useless. Others have unacceptably large excesses or ‘co-payments’. And, based on our experience with our insured clients, some companies seem more reluctant to pay out on claims than others.

Pet insurance is not a subject that can be adequately covered in a few bullet points so there’s a fair bit of information to wade through here. We’re familiar with most of the major insurers through our clients and in the FAQ below you’ll find answers to the questions our clients most often ask, as well as some tips for recognising some of the trickier traps you might come across when you first consider insuring one or more of your fur babies.

Dr. Bek is also happy to discuss with individual clients which type of cover might be most suitable for their pet but, in the end, the decision on whether to insure or not — or which policy to opt for — must be yours and should be based on your specific circumstances.

We think it important to stress that Alpine Animal Doctors does not sell pet insurance policies. Nor do we receive any form of payment or commissions from any insurance company. We can safely say that any advice we may provide regarding pet insurance will be completely neutral.

The pet insurance market in Australia is relatively new. It’s been available for about 15 years but it’s only in the last few years that it has become popular with pet owners (close to 400,000 pets are now covered by insurance plans). There are good policies available that provide adequate cover without too many restrictions but choosing one can be tricky.

Check out our FAQ to get an idea of what to look for and what to avoid. Then, as mind numbing and time consuming as these documents can be, we strongly recommend you download a few Product Disclosure Statements from different insurers and study them to get a feel for the different products. Carefully studying these documents can be the difference between choosing a value for money pet insurance product … or wasting thousands of dollars on inadequate cover for your fur babies.

Do I need to insure my pet?

Not every pet will need insurance. You have to weigh up the risks of them falling ill or having an accident against the ongoing cost of premiums. Dogs are more likely to have an accident than cats, although that’s a fairly sweeping generalisation. Bigger breeds of dogs tend to have more medical problems than small dogs. Inbreeding and genetics mean some breeds are more prone to hereditary conditions, which can mean higher insurance premiums, or even a refusal to insure.

Individual animals can also be more or less likely to experience problems. The chances of a small housebound dog having a serious accident are less than the ‘dumb mutt’ with no road sense, who eats everything he comes across, chases snakes and is generally accident prone. Again, that’s a generalisation but we all know one of ‘those’ dogs. They’re prime candidates for comprehensive insurance cover.

Where you live can also be a factor. Paralysis ticks and venomous snakes are more prevalent in some areas than others and snake bite in particular can be expensive to treat.

It’s probably fair to say that pets living in rural areas and getting plenty of ‘free range’ outdoor exercise are more likely to be good candidates for insurance cover than those that live a quiet life in apartments, with moderate, controlled outdoor exercise.

How do I choose an insurer?

Although there are more than twenty companies offering pet insurance in Australia what looks like choice and competition is somewhat illusory. Almost every policy is actually underwritten by just two companies — Hollard (PetSure) and Allianz, two of the largest insurers in the world. In May 2017 one major insurer, PetPlan, switched from Allianz to Lloyd’s MS Amlin so we now have three underwriters in Australia, although with only one insurer using MS Amlin there is little real additional choice. Another recent entrant to the market is RACQ but with policies only for those who live in Queensland. Whoever you buy pet insurance from all claims processing and administration will be dealt with directly by one of these underwriters.

The brands you see advertising pet insurance — including well known names like Medibank, RSPCA and Woolworths — are all basically marketing companies (RSPCA don’t actually sell pet insurance; they merely license their name to a commercial insurer). Most policies will therefore have some very similar features, but there are also differences, sometimes seemingly minor but potentially having major implications on premiums, cover and claims.

One of the most important things to understand about the business model being used here is that the companies selling pet insurance get their revenue from commissions, in the form of a percentage of the annual premium, which covers sales, marketing and profit. What’s left goes to the underwriter and is the premium that goes into the pool to cover all insured animals.

This is standard practice across the insurance industry as a whole. What many consumers are not aware of is that with pet insurances these commissions can be dramatically different across brands. With some brands commissions can be double, or even triple, those of a competing brand. In some cases as much as half of the annual premium you pay will be eaten up by commissions. Other brands have commission rates as low as 15 per cent. 

The only way to accurately evaluate the different offers is to study/compare the Product Disclosure Statement (PDS) for each policy. The PDS is a document that sets out, in plain language, all the terms and conditions of the policy. Insurers are legally required to provide a PDS and it must, to a certain extent, disclose commission rates.

You can find the PDS for download on the insurer’s website. Search the document for “commissions” to get an idea of who is taking the higher percentages.

Which cover is best?

Every pet owner has different needs so there’s no simple answer to this. Most pet insurers offer a range of products. Each company might call the classes of cover by different names but they can be broadly grouped as:

Accident: Limited to conditions such as broken bones, injuries etc. The most basic cover, and the lowest premiums. While this type of policy does not cover illness it can be quite popular because of the lower annual cost. An accident requiring complex surgery and rehabilitation can be very expensive and is probably the event that most worries pet owners.

Illness: Covers the cost of treating specific conditions but excludes accidents. Exactly which conditions are covered depends on the policy but in general treatment for serious illness such as cancer would be covered, as would conditions such as diabetes, gastrointestinal problems etc. Policies limited to illness are becoming rarer, with more insurers combining accident and illness cover in a ‘comprehensive’ policy.

Comprehensive: Combines cover for both accident and illness. These policies provide the most extensive cover but also attract the highest premiums. Most also offer specific ‘sub cover’ for things like ticks and snake bite.

Comprehensive Plus: Sometimes called ‘Major Medical’ or ‘Platinum’ policies these products combine full comprehensive cover with additional benefits such as some coverage for routine vet visits, consultations and vaccinations etc.

Our recommendation would always be for at least comprehensive cover.

How much cover will I need?

At the most basic level you may already have some form of pet insurance included in your existing Home and Contents insurance. Usually the cover is only a few hundred dollars (typically $500) but it’s worth checking.

For the major pet health insurers it’s basically as little or as much as you like, but with a maximum limit. How much cover depends on the policy you select and the level of premium you are willing to pay. Cover varies between a low of around $500 a year up to a high of around $20,000. The average is around $8-$14,000. This amount is the maximum your chosen insurer will pay out in any one year across all claims. As far as we know there is no policy that does not have some form of capped maximum.

In other words, if you take out a comprehensive accident and illness policy with a sum insured (or ‘annual benefit limit‘) of $8,000 and your fur baby has a bad year with lots of on-going treatment then, while your claims for individual treatments may be quite modest, if when added up they exceed $8,000 for the year the maximum amount your policy would pay out in any one year cannot be more than $8,000, less any claim excess.

What should be covered?

A good comprehensive pet health insurance policy should cover at least the following:

  • Emergency care after an accident or injury;
  • Hospitalisation & specialist care;
  • Cruciate ligament surgery;
  • Cataract surgery;
  • Dental*;
  • Fractures;
  • Heart surgery;
  • Spinal surgery;
  • Brain surgery;
  • All major illnesses;
  • Cancer treatment;
  • Infectious diseases;
  • Ear/eye conditions;
  • Gastrointestinal problems;
  • Skin conditions;
  • Hereditary defects such as dysplasia, entropion and ectropian, cryptorchidism and congenital defects;
  • Tick paralysis;
  • Poisoning;
  • Snake or spider bites;
  • Age related diseases including cognitive disorders;
  • Laboratory and diagnostic tests;
  • Radiology;
  • Prescription medicines and drugs;
  • After-hours emergency house calls.

Depending on your circumstances you may be willing to forego some of the above to reduce your premiums but we see all of these issues in our hospital quite often and for many of them treatment can be costly.

*Dental coverage is not extensive. Many policies don’t cover it at all. Those that do often have limitations and/or specify a limited amount of cover and have conditions, e.g., coverage is dependent on you having your pet’s teeth checked by a vet twice a year. Preventative care is not covered.

How much does it cost?

Depends on the amount and extent of cover you choose. The lowest premium we are aware of is $1.50 a week ($80 a year) for very basic cover with a maximum cap of $500. For more realistic cover you’ll find premiums ranging from $5 a week ($312 a year) to $20 plus (more than $1,000 a year) which would give you around $15,000 of cover with up to 100 per cent of vet bills paid.

If you have more than one pet you want to insure, e.g., a dog and a cat, some insurers offer multi-pet discounts.

The most popular policy is comprehensive accident and illness cover with an annual maximum of between $8,000 to $12,000. For a typical policy like that you can expect to pay a premium of between $8 and $12 a week, depending on the insurer, the coverage and the excess chosen.

In making your choice you have to weigh up the total cost over the life of your pet against the savings you’ll make in the event of one or more major claims. For a medium to large size dog you might be looking at between $5-8,000 in premiums over the life of the dog (average 12 years). That might seem a lot but when a single emergency can cost $3,000 or more, over time you can easily end up with claims exceeding total premiums. Pet health insurance is just like any other insurance cover — it’s there to give you security, it’s not something to try to make a profit from.

There is also the option of ‘self insuring’ where some pet owners prefer to put a lump sum in a separate bank account and then add regular amounts to that during the life of their pet(s). This can work very well for some people and, if your pet never suffers a serious accident or illness, the money in the account is still there for other uses.

The problem we often see with this self-insuring is when the pet owner is unexpectedly faced with something particularly serious — particularly when it happens in the animal’s early years — and the amount put aside proves inadequate to cover the full cost.

When should I take out pet insurance?

As early as possible. Insuring a three-month old puppy with no pre-existing health conditions is cheaper than insuring a 5-year old dog. And your lifelong cover is usually guaranteed whatever conditions the animal may subsequently contract.

Some people suggest that the best time to take out pet insurance is before your new kitten or puppy is examined by a vet for the first time. The rationale is that by doing this there can be no possibility of a pre-existing condition being identified and noted on your pet’s veterinary record (which a vet is obliged to do). Some insurance companies have been known to refuse to pay out on ‘pre-existing condition’ grounds even if the noted condition does not manifest itself until years later.

Which is the best policy?

We can’t really answer that. Your pet health insurance should be chosen based on the specific needs of your pet(s) and your family budget. There are a couple of insurers that, in our experience, have flexible, moderately priced policies and pay claims promptly but we can only advise if these might be suitable for you after talking to you about your pet’s specific needs. If you’re considering pet health insurance and are not sure what to do you are welcome to contact Dr. Bek for a chat (5756 2444).

TRAPS AND PITFALLS

Some pet health insurance policies contain obscure conditions that can end up costing you money, or see your pet refused treatment. Check this list for some of the conditions to watch out for.

Co-payments and ‘gap’ payments

It is important to understand the difference between the amount insured, or the annual benefit limit we discussed in How much cover will I need?, and the ‘maximum benefit payable‘ (MBP) defined in the policy. The MBP is the maximum the policy will pay out on a single claim. Almost all current policies will not pay out the full amount of the sum insured for any one claim. In most cases a claim will pay only up to a set percentage of your veterinary bills. This percentage varies widely, from a low of around 50% to a high of 85%. The average across most policies using this method is around 75-80%.

Staying with our previous example of a policy with an $8,000 annual benefit limit, if your pet was involved in a serious accident that required extensive, complex surgery which is going to cost $5,000 then, depending on the maximum benefit payable in your policy, your insurance payout for that one procedure could be as little as $2,500 (a 50% MBP) or as much as $4,250 (85% MBP). It will not be the full $5,000. 

This doesn’t mean you are only covered for 50% or 85% of the amount you thought you were. If the poor, long suffering pooch in our examples were to have an accident in May that needed $3,000 worth of surgery and then, in July, contracted a serious illness that needed a further $4,000 in specialist treatment and, in October needed further treatment costing $1,000 then all three claims would be paid out. At an 85% MBP you would be reimbursed a total of $6,800 for those three claims, less your claim excess.

These ‘maximum benefit payable’ and ‘percentage of vet bills covered’ conditions can be confusing and they do catch out many people. We believe that policies could be both simplified and better structured to match consumer expectations. If somebody takes out a $10,000 cover we think they should be able to reasonably expect that, in the event of a legitimate claim or series of claims, they would be able to claim up to the full amount of that cover over a year.

There are a couple of insurers that do offer 100% coverage of the costs of treatment for illness and accident, up to an annual maximum cover. These policies (currently available only from PetPlan and PetCover) allow you to choose an annual maximum (for dogs you can choose either $10,000, $15,000 or $20,000 cover, with an excess of either $100, $250 or $500 per unrelated condition). The insurer will then pay out 100% of any/all legitimate claim(s) during the year, up to the maximum insured.

For example, if you had the $10,000 annual cover and over the course of the year your dog needed treatment costing $9,900 you are fully covered for that amount, less any excess. If your dog’s treatment costs $11,000 however, your cover would be capped at $10,000.

This type of policy is a more easily understood way to provide pet health insurance but whether this ‘100% cover’ (which tends to attract higher premiums) is actually better than the more prevalent ‘gap’ or ‘co-payment’ covers on offer depends on a number of factors, including the level of cover and premiums, and what exclusions/conditions are in the policy.

For example, PetPlan offers 100% cover but not for the life of your pet. When your dog or cat reaches eight the cover drops to 80% and you are expected to pick up the other 20% of the vet’s bill. At 10 years old it becomes 35%. For some dog breeds these age thresholds are four and seven years.

We strongly recommend that anybody considering pet insurance gets at least three quotes and carefully examines the PDS (Product Disclosure Statement) for each policy. Avoid any policy where the percentage is less than 75% unless you are confident you will always have the funds to cover the difference. We suggest 85% will be the optimum level for most families.

Apart from making sure you get an adequate maximum benefit, check that the MBP does not reduce from year to year as your pet ages.

Having said all that it is only fair to point out that the examples we use here exaggerate the likely costs of any one procedure/claim. In reality, $5,000 for surgery or $4,000 for specialist treatment for a dog or cat would be the exception rather than the rule. A policy with a reasonable annual maximum cap of $10-$12,000 is likely to adequately cover all but the most unusual of circumstances.

Per condition or per claim excess

All policies also have the ‘standard’ excess conditions we’re all familiar with, i.e., you can choose an amount you are willing to contribute for each claim. The higher the excess, the lower the premiums. However, make sure that the excess is not too high. Zero is obviously best because that would see even a simple consultation covered but accepting an excess of around $100 can reduce your premiums quite a lot. On the other hand an excess of $500 per claim would mean that for all but the more complex treatments your excess would probably be greater than the treatment cost.

If you choose to have an excess make sure that the PDS is clear that it will be applied per condition and not per claim. Per condition means that if your pet develops a specific long term condition that needs multiple treatments each year you will only pay one excess each year for that condition. A per claim excess would see you paying an excess for each treatment.

The commission trap

We talked about commissions in How do I choose an insurer? above but it’s worth reiterating the importance of avoiding pet insurance where up to half of your annual premiums are eaten up by marketing and sales. Look for a policy which has the type of cover you want, from a company that’s happy with a 15 to 20% commission rate. Apart from checking the PDS for the commission rates you will often find that any company running frequent big advertising campaigns is likely to be operating at the upper end of premium commission percentages.

Age limits

Most policies allow coverage to begin at about 8 weeks of age but the upper age limit can vary considerably. Ideally you should be able to take out a policy up until your dog is at least 9 years old without too many extra conditions or increased premiums. Avoid policies where the upper age limit is much less than 9 years. And check that, once insured, your pet will have lifelong cover without onerous conditions or dramatically increased premiums regardless of age.

Check for exclusions

Every policy has exclusions — conditions and/or events that are simply not covered. In some policies however they are far more restrictive than in others. The most common are diagnosed pre-existing conditions (we know of no policies which will cover these), hereditary or genetic pre-disposition, and pregnancy and bi-lateral conditions (i.e., where a pet has two of some body part — legs are the obvious example). In some policies if an animal develops a condition in one limb, perhaps a cruciate ligament problem, only the first condition/injury is covered even if the animal subsequently has an identical issue in another leg.

Check that the policy you are interested in does not exclude anything you might be concerned about. Basically, the fewer exclusions the better. A good rule of thumb is how, or if, the policy covers things like cruciate ligament treatment. If it limits cruciate ligament to only one leg you should look elsewhere. Another good test is if the policy covers dental treatment, including gum disease, and if there is a lengthy waiting period before dental cover can be accessed.

Additional benefits

Some policies offer additional benefits in the form of small part payments for things like routine vet treatment, vaccinations, or for boarding kennel fees, coverage while overseas, advertising if your pet strays, theft or death benefits etc., etc.

While these extras are nice to have they’re no substitute for good, flexible cover for surgery and treatment, and they will increase your premiums. 

Sub covers

Some policies separate specific incidents into ‘sub covers’ which are subject to their own conditions. It’s important to make sure you are covered in the event of things like paralysis ticks, snake bite, spider bite and toxin ingestion etc. Often these are not only separately covered within the policy they may also have their own maximum benefit limit.

Check carefully for how much the maximum benefit for these treatments are. Some are as low as $500, which would go nowhere near covering the cost of snake bite treatment for example. Others go up to a much more realistic $4,000. Basically, you get what you pay for; good coverage for these sub covers is invariably reflected in higher premiums.

Premium loading

Don’t choose a policy where the PDS indicates that a rise in claims in any one year will result in increased premiums and/or excess payable. Your pet can go for years with no major issues and then have a year where they’ll need multiple treatments. Read the fine print (the Product Disclosure Statement).

Waiting periods

Check the length of waiting periods for coverage of specific conditions. They should be measured in weeks rather than months after you take out the policy.

Choose your preferred vet

Some policies limit you to using specific vets for treatment. Look for a policy that allows you to take your pets to any vet of your choosing and one that also covers referrals to specialists.

Switching insurers

If you are unhappy with the pet insurance you have it’s easy enough to cancel a policy and take out another policy with a different insurer. But think carefully about it first. Switching insurers may actually leave you worse off.

Not enough real competition in the pet insurance market and stringent limitations on pre-existing conditions can mean that your new insurer can refuse to cover any condition for which your pet has previously been treated and/or a claim has been made on another insurance policy.

PET INSURANCE BRANDS

Listed below are the insurance brands offering full cover pet insurance. The are a couple of other companies offering limited ‘wellness’ plans but these do not provide full insurance cover. We've provided links or your convenience in researching a suitable provider but please note that we have no control over these external sites and cannot guarantee the links. We’ve noticed that they seem to change quite often. It’s also important to note that Alpine Animal Doctors does not endorse or support any insurer.

E&OE. The information provided in the articles on this site is intended as a guide to assist readers to become better informed about health issues that may affect their pets and livestock. They are not a substitute for appropriate veterinary advice and treatment. They should not be used for diagnosis or treatment of any individual animal and no person should place reliance on information derived from them, where such reliance may result in loss, damage or injury. Always consult a qualified veterinarian to obtain advice.

Although Alpine Animal Doctors make every effort to ensure that the information contained in our articles is accurate and up-to-date we can accept no responsibility for errors or omissions that may occur.