Like health coverage for people, pet policies can be complicated. Consumer Reports Money Adviser recently analyzed the coverage and premiums from four pet health insurers and found people are willing to spend -- up to a point.

Before he died in 2008, Gremlin the Cat racked up nearly $10,000 in veterinary bills to treat salivary cancer, a rare disorder. The 13-year-old gray tabby was treated twice in a New York City veterinary hospital to shrink a tumor and died a few months later.

Gremlin's owner, Carol Sherwin of South Salem, N.Y., says she doesn't regret spending the money on Gremlin's care. But just to make sure her new kittens, Isabelli and Fang, don't take a similar bite out of her wallet, she plans to buy pet insurance. "They are my furry children," she says, "and I want them to be healthy and happy for as long as possible."

High cost of vet care

Some people will do anything for their pets. But a majority of owners draw the line after spending $500 for veterinary care, according to a recent survey by the Associated Press and Petside, a website. As costs move closer to $1,000, fewer pet owners are likely to pay for care.

That's where pet insurers say they can help. For monthly premiums of less than $10 to more than $90, they promise to pay a portion of a pet's bills for medical and surgical care, and -- depending on the policy -- some other types of care.

What you pay depends on where you live, your pet's breed and age, the deductible, and the coverage. Pet insurance, says Dennis Drent, CEO of Veterinary Pet Insurance (VPI), the largest insurer, is intended to help owners avoid having to choose "economic euthanasia" -- letting a beloved animal go because they can't afford the vet costs.

Pet insurance is not widely held. At most, three percent of dogs and one percent of cats are insured, by some recent estimates. By focusing on the potentially high cost of care, insurers are hoping to change that. Coverage is promoted on TV, online, in supermarkets, in retail stores like Petco, and in veterinary offices.

Do you need it?

Is it worth the money? <em>Consumer Reports Money Adviser</em> shopped online and analyzed coverage by three brands: VPI, ASPCA Pet Health Insurance, and 24PetWatch QuickCare -- whose parent companies together control an estimated 87 percent of the market. The experts also examined a relative newcomer, Trupanion, which offers a simpler approach than the others. Counting variations in coverage and deductibles, CR looked at nine plans.

To compare them, the investigators used as a model Roxy, a purebred beagle, age 10, in Westchester County, N.Y. Her vet calls her a "basically healthy" dog.

Over the years she's had a few health problems. She was treated twice in an animal emergency room after downing potentially poisonous chocolate. She was also treated for a puncture wound after a fight with another dog. She's had two costly dental cleanings under anesthesia, suffered a few ear and eye infections, and as a pup had gastrointestinal distress.

Consumer Reports Money Adviser adjusted Roxy's total vet bills into present-day costs to create a model to judge how her lifetime expenses would have been covered under the nine policies. They also looked at how the value of the coverage changed if potentially costly elements to her medical history were added: chronic arthritis; incontinence as a result of spaying; hypothyroidism; the removal of a benign tumor; and euthanasia. Here are the findings:

Coverage limitations

Like human health insurers have traditionally done, pet insurers exclude pre-existing conditions from coverage. An insurer also might exclude a pet's condition from coverage at renewal. To address this, ASPCA Pet Health Insurance offers a "continuing care" option to new customers, which added 36 percent to Roxy's estimated premiums.

Richie of Forest Hills,  NY, advises people shopping for pet insurance to stay as far away as possible from any ASPCA policy. He tells ConsumerAffairs.com, ASPCA Pet Health Insurance "has many exclusions, but very few covered items." He claims that if you renew your policy on July 1, and your pet falls ill on June 30, the company treats this illness as a pre-existing condition and will not cover any expenses.

Cost-sharing

Pet owners face either a deductible, a co-pay, or both with most insurers. They might impose a maximum limit on treatment for individual illnesses, or on the yearly or lifetime reimbursement.

Exclusions

Carriers often exclude hip dysplasia, a chronic malady. QuickCare Gold won't cover any illness claims for Chinese shar-peis or their crossbreeds, though it will cover accidents. VPI has its own long list of excluded conditions.

Extra fees

They include a one-time fee of $25 for Trupanion and $2 a month for VPI and QuickCare customers who pay their premiums monthly rather than annually.

Claims quirks

With these plans, you foot the bill yourself and wait for reimbursement. ASPCA limits coverage to "reasonable costs" based on veterinary pricing in the area in which the fee was incurred. VPI posts a long schedule on its Website outlining the maximum payouts for each illness or injury. It's unlikely that most people won't slog through those details until after a claim is paid. They probably should. While consumer complaints to the national Better Business Bureau about all four insurers are few, they focus heavily on disputes over contract language. (The BBB rates newcomer Trupanion A-, and gives the others A+, its top rating.)

Costly or unnecessary add-ons

Some carriers let you add "wellness care" coverage to their accident and illness policies. The investigators say it's generally not worth the cost. ASPCA's Level 3 coverage adds spaying or neutering, an annual physical, three common vaccines, and fecal and heartworm tests to its Level 2 accident and illness coverage. The coverage also promises higher maximum benefits.

But for Roxy, it added $2,766 to the insurance cost over 10 years and paid out just $1,159 in benefits. VPI offers a "CareGuard Core" rider that costs $12 per month-$144 a year-but it never paid out that much in any year.
Playing the odds

Overall, CR found that the pet policies it analyzed were not worth the cost for a generally healthy animal. In healthy Roxy's case, none of the nine policies would have paid out more than the projected premiums over a 10-year period.

If you're unlucky enough to have a pet with a costly chronic condition or illness, or a young animal in need of major care, you could get a positive payout from pet insurance -- if your pet develops the condition while covered.
For a dog with chronic problems and very sick kitties, the Trupanion plans provided the highest net benefits.

Trupanion doesn't pay for wellness care or exams, and it imposes other limitations. But after a per-incident deductible, it promises to pay 90 percent of the bill, with no lifetime ceiling.

Insurance tips

While it's impossible to predict your pet's odds of contracting a costly illness, you can take a number of steps to keep him or her healthy and minimize veterinary costs.

  • Save in advance for vet bills. Dog owners spent an average of $225 last year on routine vet visits and $532 on surgical visits; for cats, the averages were $203 and $278, according to the American Pet Products Association. Consumer Reports Money Adviser's preferred alternative to pet insurance is to add a couple hundred dollars each year to an emergency savings fund for pet care.
  • Spay or neuter your pet. Among other advantages, neutered animals are less likely to get into fights. And spaying reduces the risk of breast cancer.
  • Get annual checkups. Make sure vaccinations are kept current.
  • Shop with your eyes open. If you're considering pet insurance, download a sample policy and its terms and conditions from the insurer's website and read them thoroughly for limitations, exceptions, and co-payments. (If the site doesn't include a sample contract, call the company to ask for one.) CR recommends coverage with simple, percentage-based payouts, and no reliance on judgments of what's "reasonable." Avoid riders for wellness care. If you plan to use the insurance for catastrophic coverage -- say, $1,000 and up -- go for the highest deductible you can comfortably afford.