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How to find the best pet insurance policy

Peace of mind for you and your hairy baby.

girl cuddling her pet cat and dog

Care for cats, doctors for dogs

Pet health is an issue that can be as expensive as it is emotive. Our cats and dogs are increasingly being seen as part of the family, and veterinary science is taking high-tech advancements in human medicine and applying it to treating animals. Put these together, and it means that the lengths we're willing to go to treat our pets are as far as the technology available to treat them. But just because animal ophthalmology, oncology, neurology and everything in between exists, it doesn't mean it's cheap.

This buying guide will help you answer the question "Do I need pet insurance?" And it will show you what to look out for when shopping for a policy.

Protecting your pets

Pet insurance is still a relatively new product. In Australia, there used to be only two providers of pet insurance – Hollard and Lloyd's. A couple of years ago RACQ entered the market and in May 2019 American pet insurer Trupanion launched in Australia in co-operation with Hollard.

Pet insurance allows you to claim back a part (or in some cases all) of your vet bill – usually up to an annual limit. The policies in our latest pet insurance review of 86 policies are mostly either basic accident-only cover or more comprehensive accident-and-illness cover (a few are illness-only and two cover accidents and a small list high-cost of illnesses). While pet insurance covers surgery, hospitalisation and medicines, in many cases dental care, vaccinations and preventative treatment isn't included.

In terms of out-of-pocket costs, you might be charged either an excess, a co-payment, or both. The excess is the cost of making a claim, which you might pay once for each condition, each year. In the case of a co-payment the insurer splits the vet bill with you. Depending on the co-pay level, customers can pay up to 35% of the overall bill. Be wary of policies offering to cover 100% of vet bills, only to reduce it once your pet reaches a certain age. 

How much cover do I need?

You should approach this from two angles. Firstly, consider the maximum annual benefit a policy offers – the total amount the insurer will pay out each year. The second thing to look at is the range of features on offer. Identify policies with features you are likely to need. Will your pug's hereditary conditions be covered? Do you really need public liability insurance for your chihuahua?

Annual benefit levels range from $3000 to unlimited. Within this, some policies set sub-limits for treatment of tick paralysis, dental illness, and cruciate ligament injury. Treatment costs vary between animal and breed. For example, treatment for tick paralysis – a common and serious ailment among animals in the bush – might cost up to several thousand dollars if emergency hospitalisation is required. Consult with your vet about the particular health risks your pet is likely to face due to its breed or your location.

You also need to consider exclusions. Because most policies are offered by only four providers there isn't a lot of variation on this front. Dental illness is one exception. Speak to your vet: if your pet's breed is susceptible to tooth problems, you should consider a policy with a high limit for dental illness. Some policies let you "bolt on" extra cover for dental illness, if it isn't covered as standard.

What about preventative care?

Routine preventative treatments, like the cost of vaccinations, desexing and parasite control, aren't usually covered. Many policies offer these extras for an additional fixed cost – different brands call it "routine care", "wellness cover" or "tender loving care". Like human health insurance extras, the trick to getting value is to make more in claims than the cost of the bolt-on.

Think of it as a discount voucher for things that you probably should be doing for your pet anyway. The RSPCA estimates that flea or worm medication alone could cost you up to $150 each year. If you claim the entire annual benefit for routine care, you can save between $20 and $65. It isn't much in the big picture, but it might be the nudge you need to take your pet for regular check-ups.

Some policies let you "bolt on" extra cover for alternative treatments, which can include physiotherapy and hydrotherapy.

Policies can change

Pet insurance in Australia is less than 20 years old – a kitten, by insurance industry standards. We're seeing regular changes in the sector – some big, some small – as insurers get a feel for what works and what doesn't. Sometimes this is good for consumers, but only occasionally.

For example, a few years ago ASIC bopped Petplan (now Lloyd's) on the nose and told it to refund 740 customers a total $231,000 after it failed to properly disclose important co-payment information. Petplan advertised 100% rebates on vet bills, but didn't mention this wasn't for life – when the pet turns eight, the owner is expected to pick up 20% of the bill. And at 10 years that becomes 35%. For some dog breeds these age thresholds are four and seven years.

Lloyd's policies still come with this condition, but now they're actually telling customers about it. Although they offer some of the highest annual benefits in the market, we think it's pretty poor form to reduce the level of cover at an age when your pet is most likely to need it. The insurer says this allows them to keep a lid on premiums.

Restrictions on switching make it hard to shop around

Previously it was impossible to get your pet covered for a pre-existing condition. You can now apply for these exclusions to be waived, but this is very much at the insurer's discretion, and it's no guarantee that you'll get cover. We've also had complaints about insurers using "related condition" clauses to get out of paying claims: if your dog had arthritis in her legs before you got covered, there's a chance your insurer will deny cover for any arthritis anywhere else on her body.

If you're shopping around to insure a pet older than nine, you'll find yourself restricted to seniors' products and some low-value accident-only policies apart from new entrant Trupanion which allows you to newly insure pets up to 13 years of age. The reason given by insurers is that this keeps premiums under control and encourages pet owners to get insured when their animal is young and healthy (so your premiums can subsidise older pets' healthcare needs).

This makes sense, but it does restrict the customer's ability to switch, especially if the insurer changes their policy. Some years ago Hollard introduced benefit caps on vet consults and cruciate ligament treatment, which put some owners with chronically ill pets offside. Conceivably, the policy you sign your kitten up to might look like very different to the one covering your old moggy 15 years later.

For most other types of insurances, it's as easy as cancelling your cover and taking up a new policy. But due to the lack of competition, stringent restrictions on pre-existing conditions, and age restrictions on new pets, for many pet insurance customers the only option might be sticking with a policy that no longer suits them – or dropping cover altogether. This is why our new review of 86 pet insurance policies doesn't recommend any pet insurance policy, although we do compare them for features and value for money.

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