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Is pet insurance worth the price?

Kaila and Mark Nickel were saving to buy a house. But their plans took a detour when Penny, their miniature Schnauzer, started shivering uncontrollably one evening last summer.

In an effort to find out why, the Nickels dipped deep into their down payment fund.

Veterinarians told the Nickels that X-rays revealed an unknown mass in Penny's stomach. The 2-year-old was unlikely to have cancer, so the vets recommended exploratory surgery. The mass turned out to be a collection of blood, yet the doctors never determined where it came from or what caused it.

Penny is doing fine now, but the Edmond, Okla., couple's bank balance is still recovering. The surgery, medication and subsequent vet visits cost nearly $4,000.

Big, unexpected bills like this are prompting more animal lovers to seek pet insurance. Americans spent an estimated $450 million on coverage for their pets last year, and they are expected to spend around $500 million this year, according to American Pet Products Association, a nonprofit trade association.

An estimated 3 million dogs and 800,000 cats are covered by pet insurance in the United States, according to the association.

Policies for pets come with various terms, such as deductibles, co-insurance and coverage exclusions that must be sorted out before committing to a policy, just like health insurance for their owners. Plus pet owners have to decide if a policy is the right solution for them. Here are some of the issues to consider:

>How does it work?

Pet insurance policies can cover costs associated with emergencies, surgeries, medications, routine care or on-going care for conditions such as diabetes. It does not cover conditions that existed before the coverage started.

Coverage, which is typically billed monthly, adds up to about $200 or more annually for cats, and can cost as much as $500 or more for dogs. That depends on the particular plan, the animal's age and where the pet owner lives.

Some breeds are prone to certain illnesses and that can affect how much their owners pay for a policy, and the terms of coverage.

For instance, many policies for bulldogs exclude hereditary conditions like breathing problems that are common with the breed, said Chris Ashton, co-owner of Petplan Pet Insurance. His company covers those conditions, but to do so, it charges an average annual premium of $650. That is more than 70 percent higher than the $380 annual average for all dogs.

Pet insurance policies require the owner to pay the veterinarian first and then submit a reimbursement claim. Deductibles and co-insurance -- portions of the bill the customer is responsible for -- are subtracted from the reimbursement, and those also vary by plan.

Shoppers can find policies on the Internet. Some also can get coverage through work. Employers like home improvement retailer Home Depot give their workers a chance to sign up, but they don't pay part of the premium like they do for human health insurance.

>Is the coverage worth it?

Expensive treatments are becoming common in veterinary care. Dogs routinely receive chemotherapy, and animals also receive heart pacemakers or stem cell treatments to correct hip problems. Those procedures can cost several thousand dollars.

About one in eight pet owners who took their animals to the vet in the past year spent $1,000 or more, according to an poll conducted last fall. That's money many pet owners are willing to pay even if they don't have coverage.

Kaila Nickel never hesitated to spend her savings on her dog. In hindsight, though, she thinks it would have been helpful to have taken out a policy on Penny when they first brought her home.

"I didn't even give it a thought initially because the chances of getting a dog this expensive seemed unlikely," she said in an email.

Even so, pet owners may want to proceed with caution before buying a policy. Pet insurance is generally not worth the money, according to Consumer Reports Senior Editor Tobie Stanger. She said that unless a pet has serious complications, owners will probably pay more in premiums than they receive in claims coverage over the animal's lifetime.

Aside from using cash, credit cards or insurance, pet owners also may also be able to arrange for a line of credit that enables them to pay over time. These programs can be particularly helpful for anyone who doesn't have thousands of dollars available on their credit cards, but these accounts charge interest so pet owners should shop around.

They also may be able to find cheaper animal medicines outside the vet's office. For instance, Walmart stores have recently started selling generic prescription medication to prevent heartworm.

Instead of insurance, Stanger recommends creating an animal emergency fund by setting aside some money each month to build savings. That way, the money is still available if it's not used. That's the approach the Nickels are taking for their dog.

However, few consumers have the discipline to leave that money untouched if another need arises like an emergency roof repair or braces for a child, said Kristen Lynch, executive director of the North American Pet Health Insurance Association. She also noted that people may not have enough time to save up before a big vet bill hits.

Lynch said pet insurance is meant to help people who may not have the resources available when an emergency or big claim hits.

"Pet insurance is well-suited to people who think of their pet as part of their family and can't imagine not having that pet around," she said.

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