Understanding pet insurance and animal liability for homeowners

Americans love pets. Two out of every three households in the US own a pet. This equates to over eighty-five million people. Pets offer companionship that is unmatched by any other. The relational bond between people and their pets can increase fitness, reduce stress, and add joy to their owners. In fact, the Center for Disease Control (CDC) notes that owning a pet has many health benefits. These include the below list.

Health benefits from owning a pet:

• Decreased blood pressure
• Decreased cholesterol levels
• Decreased triglyceride levels
• Decreased feelings of loneliness
• Increased opportunities for exercise and outdoor activities
• Increased opportunities for socialization

The benefits associated with owning a pet come at a significant cost and commitment. According to a recent report from the American Pet Products Association, Americans spent approximately 95.7 billion dollars on pets in 2019. This equates to Americans spending just under $100 per month on pets. The amount necessary varies significantly depending on the type of pet, breed, size, needs, and even the spending habits of the owner. Below is a chart that breaks down the 2019 pet costs by category. The survey forecasts the annual amount spent on pets to increase by 3.5% in 2020.

In addition to health benefits, owning a pet also comes with risks. In particular, older adults often desire the companionship associated with pets, but animals jump and get under the owner’s feet. This leads to falls and potential broken bones. The CDC estimates that pets cause 86,000 falls on an annual basis. Sanitary risks also exist with pet ownership. Animals can carry parasites, which can lead to sickness, particularly in people with compromised immune systems. Animal feces carry all kinds of bacteria that can make people ill. Dogs and cats may also cause allergic reactions for some pet owners. Pets are animals and may cause unintentional property damage. Several innate behaviors in pets can lead to property damage.

Innate behaviors in pets that can lead to property damage:

• Chewing
• Digging
• Separation Anxiety
• Chasing
• Jumping up
• Biting
• Aggression

One of the most significant risks is a third-party liability exposure associated with a pet harming another person. According to the CDC, approximately 4.5 million dog bites occur in the United States each year and 800,000 of those bites result in medical care. This means a dog bite happens to 1 out of every 73 people.

Pet liability insurance

In order to manage these risks, pet owners need to make sure their homeowners insurance or renter’s insurance policy includes coverage for their pet, known as pet liability coverage. If a homeowner gets a new pet, then it is important that he or she notify their insurance company. Owning a pet changes the underwriting risk profile, so if the insurer does not know, then they could claim the insured falsified its insurance application. As a result, if a homeowner does not disclose the existence of a pet, then he or she may not have coverage in the event of a claim. Insurance companies often exclude certain breeds and pets from their coverage due to the likelihood of a claim. Below is a list of common exclusions.

While a homeowners or renters insurance policy may not cover these breeds, pet owners can look elsewhere for coverage. Shopping homeowners insurance is the first route. Some insurers are willing to cover more exotic pets than others are. If an insurer will not cover one of the excluded breeds or pets, then the owner should ask their insurance agent to explore a canine liability or animal liability policy. This type of policy offers coverage for exotic animals, aggressive dog breeds, or animals with a known history of biting. Pet owners may also consider covering the risks associated with pet ownership with an umbrella policy. Insureds need to make sure the policy does not exclude their pet, but typically, umbrella policies have broader coverage allowances than primary policies.

Statistics indicate that over 70% of rental properties are pet friendly, however, many of these properties do not allow pets over a certain weight and usually exclude many breeds. When homeowners are displaced from their property because of damage, the vast majority expect to be relocated with their pets and do not want to use pet boarding options. In some circumstances, homeowners decide to use Sedgwick’s temporary housing division for pet boarding services while they are in temporary housing so they have more insurance housing options and avoid negotiations with landlords. 30% of landlords choose not to allow any pets at their properties to avoid any chance of damage and because landlords retain potential liability for pet-related incidents. While state laws vary, landlords have a responsibility for the general safety of their property and tenants. Landlords should carefully craft their lease agreements and make sure their insurance coverage adequately addresses this exposure.

Pet insurance

Pet insurance, in contrast to pet liability insurance, provides coverage for an illness or accident a pet may sustain. Veterinarian costs can be expensive. If a pet has an accident or gets sick the owner may not be able to pay for the costs associated with the necessary treatment. In the same way that medical insurance pays for a sick person’s copays or hospital visits, pet insurance pays a portion of costs associated with vet visits. Below is a chart that shows the differences between coverage under a pet insurance policy compared to coverage under a pet liability policy.

As with homeowners insurance, coverage varies significantly from one insurer to the next, however, the below items are generally offered by most plans. Insurers also offer bare-bones plans that may only cover accidents or illnesses, and nothing more.

• The accident coverage portion responds to injuries and emergencies related to accidents, including torn ligaments, bite wounds, cuts, broken bones, swallowed objects, and toxic ingestions. This also includes related services, such as X-rays, MRI, ultrasounds, bloodwork, sutures, medications, hospitalization, and surgery.
• The illness coverage reimburses owners for the costs of major and minor illnesses, such as cancer, arthritis, hypothyroidism, ear infections, digestive problems, and urinary tract infections (UTIs).
• The hereditary and congenital conditions coverage responds to the costs of genetic conditions and birth defects that do not appear until later in the pet’s life such as heart disease, intervertebral disk disease (IVDD), eye disorders, and hip dysplasia.
• Alternative therapy coverage includes recovery treatments such as acupuncture, physiotherapy, chiropractic care, rehabilitative therapy, hydrotherapy, and low-level laser therapy.
• Behavioral issues coverage includes treatment for symptoms such as excessive licking, fur pulling, pacing, and destructive chewing.
• Chronic conditions coverage includes ongoing diseases such as diabetes and cancer.
• Prescription medication coverage pays for prescription medication to help alleviate pain, reduce inflammation, or fight off an infection.
• Prescription food & supplements responds if a vet recommends prescription food or supplements to help a pet with certain health conditions.

Pet insurance usually does not include coverage for “wellness” visits, although many insurers offer it as an optional add-on item. Wellness coverage varies but may include coverage for items such as annual exams, spay/neuter procedure, routine blood panels, heartworm testing, fecal testing, urinalyses, routine vaccinations, teeth cleanings, and flea/tick treatments.

By understanding the insurance coverage availability and limitations for pets, owners have peace of mind knowing that both their loved animal and their wallet have protection. While new products in the insurance industry offer coverage for the health and wellbeing of your pets, liability coverage is likely already worked into homeowner’s property insurance policy if they have been declared their pets as a part of their household.