With vet bills soaring and fancy new treatments available, it’s an option more owners are considering. Plus, 8 ways to cut the cost of keeping a healthy pet.

A few years ago, pet insurance would have ranked right up there with life insurance for children and dread-disease coverage on my list of policies you don’t need.

Now I’m not so sure.

I still believe most people are better off forgoing pet insurance and instead putting the money they would have spent on premiums into a savings account. Pet coverage can cost $2,000 to $6,000 over the life of an average pet, and the chances are slim you’ll ever need to shell out that much for treatment.

But if you’re the type of person who would do anything to save your pet, including spend thousands of dollars on medical care, pet insurance might be a preferable alternative to going into debt.

New treatments and monstrous bills
What’s changed in recent years is the state of veterinary science, as well as the economics of running a veterinary practice. Vets today can offer treatments that were unheard of just a few years ago — and at prices that could make you howl. Consider:

Americans are expected to spend nearly $11 billion on veterinary care in 2008, according to the American Pet Product Manufacturers Association. That would be an 8.5% increase from 2007.

But pet owners with insurance are still in the minority. Less than 3% of the nation’s estimated 71 million pet owners have policies, although that number has grown from less than 1% in 1995.

Insurers have teamed with the American Kennel Club and Petco Animal Supplies to offer the insurance, and more than 1,600 companies — including Office Depot and Google — provide the coverage as an optional employee benefit.

Deductibles, exclusions and surcharges
The oldest pet insurer, Veterinary Pet Insurance, has seen its revenue climb at a 26.8% annual rate since 1998. The company, which has about 71% of the U.S. pet insurance market, had gross sales of $149 million in 2007.

Veterinary Pet Insurance, for example, offers two levels of coverage:

Item Standard Plan Superior Plan
Per-incident deductible
$50
$50

Co-pay
10%
10%

Cap per accident or illness*
$2,500
$4,500

Annual cap
$9,000
$14,000

Kitten premium**
$113
$193

Mature dog premium***
$268
$471

Adult cat premium****
$94
$164

Adult dog premium*****
$134
$239

* The Standard Plan pays up to $780 for removing a foreign object from an animal’s intestines; the Superior Plan pays up to $1,363.

**Annual premium for a domestic shorthair less than a year old in Los Angeles.

***Annual premium for an 8-year-old Labrador retriever in Los Angeles.

****Annual premium for a 3-year-old cat in Seattle.

*****Annual premium for a 3-year-old mixed-breed in Seattle.

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