Should you buy pet insurance or “self insure” your furry friend?

Owning a pet is an expensive business and it is getting more pricey to protect our furry friends.

Research shows that pet insurance premiums have increased by a fifth amid rising vet fees.

The costs and responsibilities of pet ownership are sadly putting many people off.

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There has been an increase in the number of puppies who came into RSPCA care last year, with the charity warning that people may still be impulse buying young dogs they aren’t ready for, years after the first post-pandemic puppy boom.

In 2023, 569 dogs under the age of one arrived in the care of the animal charity, compared with 355 in 2022 and 378 in 2021 - marking a 50% increase in two years.

It comes as there is more focus on the cost of owning a pet.

The Competition and Markets Authority (CMA) launched a formal investigation into the vets market in early March 2024, warning of a lack of transparency when it comes to pricing and little competition, which it says is impacting customers.

The investigation is due to finish next year but an update in July suggested there may be issues around limited treatment information and local competition for consumers as well as a lack of clarity on who owns a vet practice.

Standard pet visits or consultations can cost around £50 on average, according to ManyPets but the cost of treating injuries such as a fractured bone or road accident can easily run into the thousands of pounds.

For example, treatment for arthritis in a dog can cost more than £2,000, according to the Association of British Insurers (ABI), while it can cost £1,000 to treat diabetes in a cat.

Many pet owners will take out insurance to cover these costs.

But pet insurance premiums have now risen by 21% annually as of February 2024, according to data firm Pearson Ham. 

Year-on-year analysis reveals a 13% increase in insurance prices for cats and a 23% rise in insurance premiums for dogs.

Alternatively, rather than paying a premium for something that you may not need, it could be best to “self-insure” by putting aside money.

Even this option isn't straightforward though.

The pros and cons of pet insurance

The principle of pet insurance, as with most insurance, is that you pay regular premiums and your pet’s medical expenses will be covered if they become ill or injured. 

That can give you peace of mind that your pet will be looked after just as you would want to protect other family members.

But the fundamental problem is that policies are often riddled with limitations and exclusions.

Most put a limit on how much they will pay out per illness or injury, so even if you’ve paid a small fortune in premiums, you could still find yourself footing the bill for veterinary treatment after a certain time period or cost limit.

You also have to pay an excess every time you claim.

This has steadily increased over the years, so you can expect to pay the first £100 or £125 of every claim. 

On top of the excess, once your pet is deemed to be old – a mere eight years old for dogs and cats with many insurance firms – you also have to pay a proportion of each claim. This can mean you are paying as much as 20% of the claim plus the excess.

Finally, once you’ve made a claim for an ongoing condition you can’t switch insurer as existing conditions are nearly always excluded from new policies. That can leave you trapped with your current provider, paying steadily rising premiums.

All these limitations make the fact that premiums have risen by double the rate of inflation even more irksome. 

The average annual pet insurance premium is £327, according to the ABI, but this only rises as your pet ages.

The cost of self-insurance

You can avoid those huge premiums if you self-insure.

This could involve putting money away in an easy-access savings account.

This may well be the best option on average, but don’t underestimate how much you could have to pay if you are unlucky enough to have a seriously sick or injured pet. 

The average claim is now around £800 so if you saved the average monthly premium of £27.25, you would only have around £327 to cover this after a year.

Some injuries can be far more expensive so make sure that you are in a position where you can pay a large bill in an emergency.

For example, claims for spinal surgery often cost £8,000 to £10,000, according to the ABI.

If you take out insurance, look for the best deal, taking account of all limitations, not just price. 

Compare the pay-out limits to get as much cover as possible and get a lifetime policy. 

These will pay out up to a set amount each year. That amount resets after 12 months, so you should never hit a point where you are paying all the vet’s bills despite having insurance.