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Pet Insurance: Should You Be Offering It?
Coverage for four-legged dependents on the rise

By Lin Grensing-Pophal  7/22/2005

If you don’t believe that people will go to great lengths to care for their pets, consider the plight of Buddy, a two-year-old Pomeranian diagnosed with tracheal collapse, which requires an operation to allow oxygen to get to his heart and lungs—an operation that will cost about $4,000. That’s a lot of money to most people, and especially to Buddy’s “parents,” who are older and on a fixed income.

According to the American Veterinary Medical Association, Americans spend more than $19 billion annually on veterinary care and medications. In an effort to help cover these expenses, American Demographics estimates that 5 percent of American pet owners have pet insurance—up from less than 1 percent in 1995.

In fact, pet insurance is offered as a voluntary benefit by a growing number of employers, who negotiate a group rate with the underwriter and require interested employees to pay the premium. The employer's expense is virtually zero, except for administrative cost and time if a payroll deduction is involved, and any cost of communication (e.g., payroll stuffers, posters, etc.).

And it’s a benefit that many employees appreciate and could not purchase at a low group rate on their own.

Bill Gorman, group sales manager at Brea, Calif.-based Veterinary Pet Insurance (VPI), says that in 1998 when he started with the company there weren’t more than 15 companies offering this benefit—today VPI works with more than 1,100 companies that offer pet insurance as a benefit to their staff, including Home Depot, Sears, Computer Associates, Viacom, Procter & Gamble and AT&T.

“I think that the human/animal bond has become more prevalent,” says Gorman. “A lot of us who are basically empty nesters focus more on our pets.” For companies looking for cost-effective ways to provide valued benefits to their employees, Gorman suggests, “the timing is good.”

Growth of Voluntary Benefits


Jeana Trantina is one employee who took advantage of pet insurance as a company benefit when working with Boeing Employees’ Credit Union (BECU) in Seattle. “Employees were able to enroll in the benefit through the HR department, which included a payroll deduction—before taxes—for the coverage,” says Trantina. “Essentially,” she says, “BECU just made the payment process of having this benefit more convenient for their employees, along with decreasing their taxable income.”

Trantina was one of many employees who used the benefit and says, “Personally, I really appreciated it.” Still, she admits, “there were not that many participants in the plan.” Most employees, she says, “really didn’t understand it.”

Like other companies, BECU offers pet insurance in addition to a variety of other voluntary benefits at discounted rates, including homeowner’s insurance, auto insurance, whole life insurance, pre-paid legal services and pre-paid funeral.

What’s happening, Gorman says, is that “voluntary products are being offered more and more, and pet insurance is just one of those products that’s being made available, especially at major companies. It’s a win-win for them. You can get a group deduction for employees, and it doesn’t really cost the company anything.”

Pet insurance, says Gorman, “is about the third most requested voluntary product behind auto and homeowners insurance.”

A Real Need?

Of course, not everyone sees a need for employers to make pet insurance available.

“I don’t see a great demand for pet insurance. None of my clients have ever asked about it,” says Scott Simmonds, an insurance consultant in Saco, Maine, who works with more than 700 small businesses.

Simmonds cautions that “most pet insurance policies have a limit of coverage of about $3,000 for a sickness or injury. Premiums run about $400 to $500 per year for true insurance (beware of discount programs that masquerade as insurance, he cautions!). "So you’re going to pay $3,000 to $5,000 for coverage over the life of your pet.”

He adds, “how many catastrophic injuries will one pet have?”

Still, as Simmonds notes, his clients are primarily small businesses; VPI works with larger organizations where the demand (and the benefit) may be greater.

When considering this type of coverage, the bottom line is whether it will be valued by your employee population. “Pet insurance,” says Gorman, “is one of those few products that is really consumer driven. The reason most companies offer it is that the HR person is a pet person or some of their employees are.”

Statistically, Gorman explains, about half of a company’s employees will have pets. And, of course, a smaller number of those will be interested in purchasing insurance for those pets.

When looking for a company to provide this benefit, Gorman advises, use the same due diligence you’d use when making any business decision. Choose a company that’s stable—that’s been around for some time—get references and carefully compare the plans you’re being offered.

Consider, also, the specifics of the plan. While most are fairly similar, Gorman admits, there are some important variations. VPI, for example, is “the only carrier to my knowledge that offers a 'well care' rider that, in the case of fleas, covers the vaccine, the heart guard and the topical solution.”

Apparently, just as when dealing with humans, prevention is an important consideration—and something pet owners are willing to pay for.

Lin Grensing-Pophal, SPHR, is a Wisconsin-based business journalist with HR consulting experience in employee communication, training and management issues. She is the author of Human Resource Essentials: Your Guide to Starting and Running the HR Function (SHRM, 2002).

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