Shrinking market makes it harder for owners to insure their pets

Just as young drivers are forced to dig deep for expensive car insurance, many pet owners face rising costs and a dearth of options as insurers leave the market. With vet bills predicted to rise by 15 per cent, how do customers get the best cover?

Lloyds TSB and Halifax recently announced they are pulling out of the pet insurance market, leaving some 50,000 owners having to find alternative cover. The Lloyds Banking Group, which owns both brands, has said that their underwriters Agria will not be offering renewal terms. Only a few weeks ago another prominent company, Petguard, cancelled hundreds of policies after changing its underwriter earlier this year and informed customers that it would not be able to find cover for existing conditions on any replacement policy.

The good news is that there are still 86 companies offering pet insurance, up from 74 three years ago according to a recent report from analysts Defaqto. The number of policies on the market has also jumped since 2008. A wide range of providers and policies can still make life difficult, though, and it is all too easy to get it wrong.

"There is certainly increasing choice for consumers. However, when taking out a policy, it is critical for owners to get the decision right first time," says Mike Powell, Defaqto's insight analyst for general insurance. "The financial consequences of getting it wrong can be severe."

New research from Sainsbury's Pet Insurance estimates that the average annual spend on a dog is £1,183, with 15 per cent going on medical costs. If you need to pay for overnight stays and operations it can be staggeringly expensive, so even a single visit to the vet can make a policy worthwhile.

"It really does pay to cover yourself for vet fees, which can be incredibly expensive," says Stephen Ebbett, a director of pet insurer Protectyourbubble.com. "The most common pet claims we receive are for lameness, arthritis, fractures, tumours and road accidents. Depending on the length and complexity of the treatment, vet bills for injuries and illnesses can run into thousands of pounds."

The level of cover for vet bills is the most important element but there are variations in how insurers approach claims. Some will set a fee limit such as £3,000 per incident or £5,000 towards all vet fee claims in a year; once you've reached that maximum or the 12 months are up, cover ends. When you come to renew the more comprehensive (and more expensive) policies, the vet fee limit is also renewed; if you stick with the same insurer and need to make ongoing claims, your pet can continue to receive treatment up to the specified maximum. These "lifetime policies" are superior, but if the insurer decides to withdraw from the market, as with Lloyds, the risk is that you have been paying over the odds on the understanding that you have ongoing protection.

This may be a risk work taking, however, as with the cheaper pet insurance policies you know for sure that once you've made a claim for a particular condition you won't be able to continue to benefit from that cover when you renew.

"If a pet develops a lifelong condition, changing policy will be difficult due to the pre-existing condition. The owner will therefore have to meet the full cost of treatment indefinitely," says Mr Powell.

Checking the details of exactly what is and is not covered is vital. Some policies cover only accidents and illnesses but others include check-ups and vaccinations. Many policies will set an age limit. For dog owners, the breed may also be a crucial factor. If your dog is a breed known for aggressive behaviour it may be uninsurable; dogs used to race or hunt, and competition dogs are usually excluded too. Some hereditary conditions may also be excluded, particularly for pedigree dogs.

"Many owners assume their policy includes the vast majority of conditions – and the best ones do. Others place exemptions for relatively common conditions, so be clear about what you do and don't need covered," says Kate Rose, the head of pet insurance at comparison site Confused.com

An important element is third-party cover for when your pet damages someone's property or injures someone. Holiday cancellation cover is useful if your pet is getting on a bit, so that you don't lose out if you need to stay at home to look after them. Check the excess level and consider raising it for a lower premium but not before you've looked for caps on the level of payout.

Case Study

Caroline Blatchford

Kings Worthy, Winchester

Without insurance Ms Blatchford, 49, would have been hard pushed to cover the cost of treating the sore back of Rocky, her eight-year-old Welsh Section B pony. Fortunately, her NFU policy is comprehensive and covers not only vet bills but also treatment such as physiotherapy, orthopaedic work and treatment at a horse hospital.

"His treatment has so far has cost about £1,500 for the vet and another few hundred for the physiotherapist," she says.

Caroline, who owns her own company, Spotty Green Frog, lives with her husband and two daughters, Jessica, nine, and Katie, seven. She pays about £600 a year per pony for her policy, with an excess set at £145 on each claim, which has easily proved worthwhile. There is a second claim in place, pending approval, because Rocky is now lame in both front feet.

"For me, I would not hesitate to insure our ponies for vets' fees. If we had not had the policy in place, we could have been faced with making the decision not to get the best treatment for Rocky," says Caroline.

"He is a very important member of our family and this would have been a difficult decision to take and especially difficult to explain to my two daughters."