What is Pet Insurance and How Does it Work?
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Pet insurance, a relatively new industry, can help families cover veterinary costs associated with pet ownership.
The North American Pet Health Insurance Association reported a growth in pet insurance in the US to 5.36 million in 2022, with 80.1% of insured pets being dogs and 19.9% cats.
Pet insurance covers eligible expenses from licensed vets, including specialty and emergency clinics. Comprehensive plans may require a deductible for comprehensive coverage.
Pet insurance is a health plan that an owner pays for reimbursement of eligible veterinary expenses when a pet is seen by a veterinarian for a covered condition.
Most pet insurance plans are for dogs and cats, but some insurers offer coverage for other animals, such as birds, reptiles, and exotic pets.
There are three types of pet insurance plans: accident-only, accident and illness, and routine wellness or preventative care.
Accident-only plans reimburse for veterinarian bills related to accidents, while accident and illness plans cover both types of veterinary care.
Routine wellness plans provide reimbursement for immunizations, flea treatments, and spay/neuter.
Deductibles, coverage limits, and premiums can vary by insurer.
How Does Pet Insurance Work?
When purchasing a pet insurance policy, you choose a deductible, reimbursement percentage, and annual limit, which affect your premium and the maximum amount you can recover.
Pet insurance plans typically involve paying out of pocket for veterinary care, with the insurance company reimbursing the cost.
After paying the initial cost, you request a duplicate receipt and send it to the insurance company along with a claim form.
Payment can be quick or slow, with some companies offering a specific payout turnaround time. The reimbursement amount depends on the policy details, procedure type, policy allowance, and deductible.
Some companies, like Trupanion, partner with specific veterinarians that allow the pet owner to pay ineligible costs out of pocket.
- Deductibles
Pet insurance deductibles are the out-of-pocket costs for veterinary care before insurance coverage begins. They can impact monthly premiums, with higher deductibles resulting in lower premiums. Deductibles come in annual or per incident forms, with per incident requiring a new deductible for each pet condition. An annual deductible, similar to human insurance, pays out the remaining amount after meeting the deductible in a given year, less the reimbursement rate.
- Reimbursement rates
The reimbursement rate is the percentage of vet bills your insurance company covers after meeting your deductible. It typically ranges from 70% to 90% of the cost of care, with some providers offering as low as 50% and as high as 100%. A higher reimbursement rate increases your pet’s care reimbursement, potentially leading to higher premium payments.
- Annual limits
Pet insurance policies have an annual coverage limit, ranging from $2500 to unlimited coverage. The higher the limit, the higher the premium. Annual limits do not roll over, meaning if you don’t meet your limit in one year, it doesn’t carry over to the next. Unlimited coverage may have a lifetime limit.
Pet insurance covers various types of pet-related expenses, including accident only, comprehensive or illness plans, and routine care as mentioned above.
Accident-only plans cover veterinarian costs for accidents, while comprehensive plans cover accidents and illnesses, including allergies, cancer, hereditary conditions, surgery, hospitalization, breed-specific conditions, and arthritis.
Routine care plans cover preventative costs like dental cleaning, vaccines, annual checkups, blood work, and spaying or neutering.
Pre-existing conditions are typically excluded from most insurance coverage, but some companies have waiting periods for certain conditions and provide coverage if your pet is symptom-free for a certain amount of time. However, most companies do not provide coverage for this.
Waiting periods for accidents and illnesses are relatively short compared to pre-existing conditions, but the earlier you get your pet covered, the less likely you will have a claim denied and the sooner you may have coverage for pre-existing conditions (if covered).
Signing up for health insurance as young as possible is more beneficial, as pre-existing conditions can negate related coverage. Some pet insurance companies have age restrictions, which may limit or make coverage unavailable depending on the pet’s age.
Pet insurance does not usually cover veterinarian costs such as pre-existing conditions, non-vet-related costs, and regular care unless a routine or wellness plan is purchased.
Examples include breeding, pregnancy, cosmetic procedures, DNA testing, accidents, elective procedures, preventative procedures, and experimental treatments.
Daily pet costs like food, toys, vitamins, grooming, and boarding fees are not covered. However, some carriers, like Spot, may cover dietary supplements or prescription food if a wellness plan is in place, and boarding fees may be covered if the policyholder is hospitalized for extended periods.
Can I Choose My Own Vet?
Pet insurance allows you to choose your preferred veterinarian, eliminating the need to find an in-network vet or travel far.
Most plans work on a reimbursement basis, allowing you to use coverage with any licensed veterinarian, specialist, or emergency clinic.
Health insurance for your dog does not have provider networks, but some companies may have specific requirements for reimbursement eligibility for veterinarian bills.
In 2021, the average monthly premiums for accident and illness policies for dogs and cats were $49 and $29, respectively, according to the North American Pet Health Insurance Association. However, Lemonade offers the cheapest insurance for dogs at around $10 and for cats at about $10.00, according to our research.
Chewy pet insurance offers a variety of plans and perks to help keep costs down. The average cost for the first year of their CarePlus plan is $1,400 for a small dog, $1,700 for a medium dog, and $2,000 for a large dog.
Chewy also provides discounts for insuring multiple pets with providers Trupanion or Lemonade.
Here is a list of items that may have an impact on your pet insurance premiums:
- Pet type: The type of pet insured has unique risk factors, with cats being cheaper to insure than dogs.
- Pet age: Older pets are at higher risk for accidents and illnesses, affecting premiums.
- Pet breed: Certain breeds are predisposed to certain health conditions, increasing the cost of insurance.
- Pet size: Larger animals are generally more costly to cover.
- Deductible: A higher deductible may lower monthly premiums, but out-of-pocket payment is required before insurer coverage begins.
- Reimbursement rate: The percentage at which the provider reimburses veterinary costs, typically between 70% and 90%, often results in lower premiums.
- Coverage: Accident-only plans are the most affordable but least comprehensive.
- Annual limit: Some insurers allow customization, lowering the annual limit can reduce premiums.
- Add-ons: Optional coverages like wellness plans or vet exam coverage increase the policy cost.
- Pet insurance provider: Shop around to find the best price.
- ZIP code: The cost of veterinary care in your area can affect annual premiums.
Pet insurance is a crucial financial decision for pet owners, as it covers the cost of vet care and other expenses. For instance, if your pet is hospitalized, you may be better off paying for pet insurance premiums of $30 a month or $360 per year.
Having a breed that is more susceptible to certain health conditions, such as hip dysplasia, can result in more vet or specialist visits and expenses that may be reimbursed by a pet insurance plan.
If you have a trusted vet, it’s worth asking about expected costs for certain procedures and comparing them to quotes and reimbursement percentages from pet insurers to decide if you need pet insurance.
What Are Some Disadvantages of Pet Insurance?
Pet insurance is generally beneficial but has some drawbacks. Routine exams for preventative care are excluded unless a wellness plan is purchased.
Out-of-pocket expenses, including deductibles, are the responsibility of the policyholder and pre-existing conditions may be excluded.
Most pet insurance companies require upfront payment of vet expenses, which can take weeks to receive. Some providers offer a vet direct pay option to eliminate the reimbursement process.
How Do I Get Pet Insurance?
Pet insurance quotes can be obtained from various insurance companies by providing pet details like name, type, age, breed, and gender. Additionally, basic information about the pet, such as name and address, is required.
Some pet insurers may inquire about pre-existing conditions, which are medical conditions that the pet has before the policy start date.
Some insurers may require a checkup and waiting period before coverage begins, which can vary by state, insurer, and coverage type.
Final Thoughts
Pet insurance offers peace of mind for pet owners by covering unexpected illnesses, accidents, or emergencies. Despite paying the premium and deductible, you will only pay a fraction of the cost after reimbursement of covered care.
This makes pet insurance a good option, especially if you receive a discount. Regular checkups and vaccines are essential, but unexpected expenses can be costly.
