Trial and error taught Sandy Simpson the importance of a contingency plan. Her first dog suffered from lifelong allergies. Heidi racked up $10,000 in medical bills by the time she succumbed to stomach bloat at age 6.

So when Simpson, a 61-year-old widow, got her next dog, a German shepherd-Lab named Bentley Robert, she bought him pet health insurance when he was 4 months old. A long and costly list of maladies ensued: The disposable razor he ate as a pup, a bout of salmonella, chronic ear infections, anal gland problems, an autoimmune disorder, abdominal masses …

“There were times near the end when they talked about putting him down, and then they said, ‘We could run this test and that.’ I said, ‘Well, let’s do it because the insurance will pay a bunch of that money,”‘ recalled Simpson, who says that even without insurance she would have scraped together her last pennies to treat Bentley.

All told, she estimates she received more than $4,000 in insurance benefits by the time Bentley died in January at 9 1/2 more than recouping her premiums, which she said averaged $150 a year.

Technology plays a role

Insurance, said Jim Wilson, a veterinarian-turned-business consultant and lawyer who helped build the first pet health insurance company in the United States, is for “people who love their pets like children but are unlikely to have the $1,000 to $5,000 readily accessible to cover the cost of today’s veterinary care.”

The best care, particularly in advanced urban veterinary markets, often means access to the newer technologies and procedures that have become available in the last decade. Big guns such as CAT scans, MRIs, nuclear medicine, radiation therapy, hip replacements and kidney transplants have helped balloon spending from $6.9 billion in 1991 to more than $11 billion this year, the Association of American Veterinary Medical Colleges estimates.

“Veterinary medicine is as sophisticated today as human medicine is,” said Mark Warren, president and chief executive officer of Pethealth Inc., Canada’s No. 1 pet health insurer. “But these advancements come with a price.”

The average dog-owning household’s medical expenses jumped from $132 in 1991 to $187 in 1996, according to the American Veterinary Medical Assn. At the Veterinary Hospital of the University of Pennsylvania, for example, an overnight stay in either the emergency service or intensive-care unit can run $400 to $500.

A recent case accumulated more than $20,000 in treatment costs during a six-week stay in ICU, before the dog was euthanized for medical reasons. (Had the dog been insured, a portion of the bill might have been covered.)

As in health plans for people, however the parallels are many issues other than cost play a role in pet insurance.

“We’re not just about saving our clients money,” said Jack Stephens, chief executive officer of Veterinary Pet Insurance Co. of Brea, Calif., the oldest and by far the biggest pet insurer in the U.S. “We’re about helping them so they can always get the best care for their pets.”

Leading insurers

Nearly 60 percent of households in the United States own a dog or cat. The number of lower-maintenance pets birds, reptiles, fish, and “pocket pets” such as rabbits and ferrets is growing.

“With the baby-boom generation becoming empty-nesters,” said David Goodnight, VPI’s executive vice president of business development, “we have a feeling they will replace those kids with pets.”

A recent survey by RewardsPlus of America Corp., a Baltimore company that markets and administers benefits packages to employers, found pet insurance to be the third most requested voluntary employee benefit. Pharmaceutical giants Pfizer and Novartis, which produce pet vaccines and products, are supporting the industry.

Given the rising cost of veterinary care and the strength of the human-animal bond, Stephens predicts that the number of insured pets will increase fivefold by 2007. VPI, which expects to sell 275,000 policies this year, estimates that it holds more than 80 percent of the market. Its pet insurance is now offered as part of MetLife’s voluntary benefits platform.

The other industry player, Chicago-based PetCare Pet Insurance Programs, owned by Pethealth Inc. of Oakville, Ontario, has written 10,000 policies since entering the U.S. market a year ago. PetCare has marketing alliances with Reader’s Digest and the Petco store chain.

The American Kennel Club has entered into a partnership with a British insurer to begin selling policies here next year.

And many smaller pet insurance companies classified as property and casualty have begun the arduous process of applying for licensure on a state-by-state basis. This is a brave move in an industry where failure has been the rule for rookies: About 30 pet insurance companies have folded in the last 20-plus years.

Despite veterinarians’ fears, the industry also has an HMO-type “insurance alternative.” Pet Assure, based in Dover, N.J., offers a flat 25 percent off all veterinary services with no deductibles, exclusions or forms to fill out through any of its network veterinarians.

A number of options

Most pet insurance plans work like those on the human side. Generally, premiums rise with the age of the pet and the frequency of claim submissions. Copayments and deductibles apply, and preexisting conditions are not covered. The pet owner can choose any licensed veterinarian.

Indemnity plans are the rule: The pet owner pays the veterinarian in full, and then submits a claim for partial reimbursement. VPI says its average annual premium for a sick-care policy on a cat is $175. There is a deductible of $50 per incident (or per year for a chronic condition), and the insurer pays up to 90 percent of the balance, depending on the type of plan and the medical condition.

There are also supplemental well-care policies for routine services such as vaccination and teeth cleaning, cancer endorsements, and plans covering birds and exotic pets.

Though VPI covers certain breed-related predispositions skin problems in cocker spaniels, for example congenital anomalies, hereditary problems such as polycystic kidney disease in Persian cats, elective procedures such as declawing, and behavior disorders are not included.

PetCare’s policies are slightly more comprehensive, and they cover congenital or hereditary conditions. PetCare does not offer well-care packages.