Image: Brown Chihuahua snarling with teeth showing © Michelle Kelley Photography, Flickr RF, Getty Images

A dog is man's best friend -- loyal, protective and always ready to fetch your ratty slippers. But with a quick snap of his jaws, Fido can quickly become your wallet's worst enemy.

Last year, the average cost of a dog bite claim was $26,166, according to the Insurance Information Institute.

That could buy a lot of Alpo -- around 33,000 cans, in fact.

Insurance claims associated with dog bites actually slipped nearly 5% in 2010, according to III. But payouts associated with bites rose last year and have soared 37% since 2003.

Many dog lovers are in denial about the risk sleeping peacefully at their feet. Even a well-mannered dog can attack suddenly if it is startled or simply not feeling well.

In that sense, pit bulls have "gotten a bad rap" compared with other dogs, says State Farm Insurance spokeswoman Heather Paul.

"Any dog can bite -- small dogs, large dogs," she says.

Should you worry?

How much financial danger does your pooch pose? III says costs associated with dog bites are rising due to growing medical costs and larger settlements, judgments and jury awards.

As Paul says, "You certainly have a lot more attorneys out there that specialize in dog-bite attacks."

Your potential for legal and financial jeopardy also partially depends on where you live.

Under dog-bite statutes, owners are liable for all injuries or property damage their dog causes. Negligence laws make owners liable when someone is hurt as a result of the owner's failure to control the dog.

If you are deemed responsible for your dog's bad behavior, you could end up footing the cost of someone else's:

  • Medical bills.
  • Lost wages.
  • Pain and suffering.
  • Property damage.

Some states give you an initial break -- a sort of "free chomp" allowance -- commonly known as the "one-bite" rule. In these states, an owner cannot be held liable until the animal's "vicious propensity" has been established, typically in the form of a first bite.

Nearly two dozen states have adopted a form of the one-bite rule, most of them clustered in the western and south-central parts of the country.

Regardless of your local laws, a dog with a checkered history can sabotage your chances of getting home insurance.