Veterinary care in the United States has outpaced inflation every year since 2019, according to data from the American Veterinary Medical Association, and that single trend is what makes the pet insurance calculation so awkward. The premiums are real and payable now; the bills they offset are hypothetical until they aren’t.
For an owner weighing a policy, the technical reality is that pet insurance is not health insurance at all. It is a form of property insurance, and it reimburses a portion of veterinary treatment for an ill or injured pet rather than paying providers directly in the way human medical cover typically does. Some policies also pay out when a pet dies, or if it is lost or stolen.
What the Cover Actually Costs
According to the North American Pet Health Insurance Association, the average 2025 accident-only premium was $112 for cats and $190 for dogs. Accident-plus-illness coverage, the more common product, averaged $435 for cats and $836 for dogs.
Those figures buy a formula, not a promise of full payment. A frequently used structure carries a $100 deductible and an 80% reimbursement rate: subtract the deductible from the vet bill, then multiply the remainder by the reimbursement rate. The higher the bill, the more the policy is worth, which is the whole point of insurance and also the reason cheap policies feel useless in a quiet year.
Run the numbers on a serious case and the arithmetic sharpens. Colon tumour surgery with chemotherapy for a dog averages $8,733, according to CareCredit data cited in the CBS News analysis. Under the example policy above, the owner’s share comes to $1,826.60. Against an average annual premium of $836, that is thousands of dollars saved in a single episode.
The Odds and the Deductible
Under the hood, what the owner is buying is protection against a low-probability, high-cost event. Age, breed, overall health and a tendency to injury or illness all shift the risk, and insurers know it: companies may limit coverage for pre-existing conditions, which gives owners an incentive to insure very young animals that are not expected to run up large bills.
The other half of the calculation sits in the household budget rather than the policy document. If a sudden hundred-dollar or thousand-dollar bill would empty a bank account or make it hard to pay other bills, insurance is a rational purchase. If there is a flush savings account or enough cash flow to absorb a costly surprise, paying out of pocket can make more sense.
A Small Market Growing Fast
Pet insurance is old, but its American footprint is small. The first policy was written in 1890 in Sweden by Claes Virgin, founder of Länsförsäkrings Alliance, initially for horses and livestock; Britain sold its first pet policy in 1947 and by 2009 had the second-highest penetration in the world at 23%, behind Sweden. In the United States as of 2024, fewer than 5% of all pets were covered.
The direction of travel is clear even so. Americans spent $136.8 billion on their pets in 2022, nearly 11% more than in 2021, and the number of insured pets in the US rose 125% since 2018. Rising costs are the engine: as veterinary medicine employs more expensive techniques and drugs, and owners expect more for their animals, the market has grown with the bills.
That growth has a counterpart in access. As costs rise, increasingly pet owners report difficulty covering vet bills, and insurance can bridge part of that gap by partially reimbursing unexpected care. The trade-off for a household on a limited budget is between a certain annual outlay of $435 or $836 and an uncertain bill that could run to five figures.
The AVMA data settles the trend if not the decision: costs rose faster than inflation last year, and in every year since 2019.
Sources
- Is pet insurance worth it? This is the honest math owners should know.
- Pet insurance
- Is pet insurance worth it? This is the honest math owners should know.
- Understanding the whole journey: how insurance can better support access to care
- Sritama De Receives 2026 Global Recognition Award for Leadership of a Globally Distributed Insurance Technology Team
- Ludwig Francillette sponsored
Photo: Shixart1985 (CC BY 2.0)
