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How Does Pet Insurance Work?

Pet insurance is a health insurance plan for pets that works in a similar manner to health insurance for humans, with one major difference – reimbursement. Most of the pet insurance companies require you to pay for services first, and then submit your claim with your bill and receipt showing you paid for services to their claims department. Pet insurance is designed for accidents and unexpected illnesses, so that as a pet owner you don’t have to make hard decisions, decline lifesaving care or put your pet down due to fears over cost. Not all illnesses are covered by insurance plans, and there are waiting periods for both illnesses and accidents, so insuring pets when they are healthy and reading the fine print on your policy are both crucial to the success of any claims you may file.

Pet Health Insurance: The Lowdown

Pet health insurance is exactly as it sounds – it is a form of insurance coverage available to pet owners as an insurance policy against high out-of-pocket veterinary costs if your pet comes down with an illness or has an accident. While most of us hope that nothing ever happens to our pets, some accidents and illnesses – swallowing a foreign object, getting hit by a car, tearing their ACL or having cancer are all very costly and not anything that a pet owner wants to pay out of their own pocket. As with regular “people” insurance, pet owners are responsible for a small portion of the bill – usually between 10-30%, and the insurance policy will reimburse for the rest, assuming it’s a qualified condition. Similar to regular health insurance of days of old, pet health insurance doesn’t cover preexisting conditions, which can be anything diagnosed or suspected prior to having an insurance policy.

Here’s a basic breakdown of how it works:

With pet insurance Without pet insurance
Pet is treated, services are billed to and paid by owner, owner sends in a claim and is reimbursed for services minus the deductible in approximately 5 days. Pet is treated and owner is billed and must pay for all services out of pocket.

Pet insurance is also a rapidly growing industry, which is good news for pet owners. While the majority of pet insurance is still using the reimbursement model, more and more pet insurance companies are using Vet Direct Pay, in which a qualified group of vets will accept payment from the pet insurance company directly, not the pet owner, meaning you are only responsible for your deductible. As pet insurance companies grow their in-network vets, this type of model will only increase in popularity. In addition, you can call and get a pre-authorization from your pet insurance company in some cases, and this can also help both you and your vet know what to expect from each health situation.

Pet Insurance Plans: What to Expect

There are several types of plans you can get from different pet insurance companies. Some companies offer accident-only plans, accident and illness plans as well as wellness plans and add-ons, while others offer only one of those options or an all-in-one plan. It’s important you know what you are buying as a responsible pet owner.

Accident only

Accident only plans are typically going to cost less per month than other, more comprehensive plans, but they are also going to cover a lot less. They will over cover qualifying events, such as your dog getting hit by a car or getting injured by another dog or animal. If you have a pet that may not otherwise qualify for pet insurance due to a pre-existing condition, getting them covered by accident-only coverage at a minimum can at least give you peace of mind if the unthinkable happens. Accident-only plans can also work if your pet is older and has “aged-out” of enrolling in other policies – although not all providers have upper age limits, so make sure you shop around if your pet is older than 14.

Some things an accident-only plan may cover include:

  • Bloat
  • Foreign body ingestion
  • Poisoning
  • Cuts and lacerations
  • Torn cruciate ligament
  • Cuts and lacerations

These plans tend to have one annual limit and one deductible choice, like the accident-only plan from Embrace, which has a $5,000 annual limit and a $100 deductible.

Recent accident to one of our furry friends:

Accident: Foreign body ingestion

Treatment: Surgery, medication, overnight stay in animal hospital

Bill: $2900

Accident and Illness

Accident and illness plans are the most comprehensive plans and offer coverage for everything in an accident-only plan as well as illness coverage, which includes cancer, kidney disease, surgeries and much more. These comprehensive plans also tend to cover alternative therapies such as chiropractic care and acupuncture, as well as diagnostic care such as CT and MRI. Often, accident and illness plans allow the pet owner to select from a variety of reimbursement, deductible and annual limit options, creating a customizable plan to suit their needs.

Advancements in veterinary medicine allow for many pets to live longer, happier and more comfortable lives even with a chronic illness or frightening diagnosis. With an accident and illness plan, you can rest a little easier knowing that your pet is covered for a variety of conditions, and all you are responsible for is your copay and your deductible. Of course, most pet insurance policies require you to outlay the money first and get reimbursed after filing a claim, but this is still better than owing all of the money for pet emergency or illness care.

Wellness plans

With the exception of Banfield, you cannot purchase pet wellness care as a standalone product. Instead, it works as an add-on benefit with the rest of your insurance if you purchase an Accident or an Accident and Illness pet insurance plan. Pet wellness plans work off a predetermined Schedule of Benefits, which is a stated and fixed amount that the pet insurance company agrees to pay per procedure. Items included in Wellness plans include vaccinations, spay/neuter, heartworm medications and other items that are considered preventive.

Some insurers have one Schedule of Benefits with their Wellness plans, while others have two or more options, agreeing to either pay more per service or pay for more services, or both. Some insurers do not offer Wellness plans as a benefit at all. In the case of Healthy Paws, they argue that covering wellness cuts into what they are able to cut for true emergencies, and that car insurance doesn’t cover tune-ups, so pet insurance shouldn’t either. As a pet owner, that is up to you to decide since there are lots of options for both mindsets.

It’s important to note that pet insurance plans require you to recertify if you want to get a larger plan at some point. This means that anything you are trying to get treated will now be considered a preexisting condition and it won’t be covered. This would look you having an accident-only plan or a bottom tier accident and illness plan, then deciding to get a larger plan a year or two down the line ‘just in case’ your pet gets sick. If your pet is healthy at the time you do this, you should be fine to increase your plan, but if your pet is exhibiting symptoms and you try to increase your plan at that time, whatever your pet is experiencing will not be covered.

The best advice is to get the largest possible plan you can reasonably afford. You can always lower your plan, but as mentioned, it is more difficult to increase your coverage.

Exclusions (What’s Not Covered)

Pet insurance doesn’t cover everything, and in fact, there are some safeguards in place so pet owners can’t get pet insurance on the day their pet gets sick or after they visit the vet and see how high the bill will be. Unfortunately, since only about three percent of pet owners in the U.S. have pet insurance at this time, many pet owners don’t try to get a policy until it’s too late. That’s why we are advocates for pet coverage – we personally experienced a very large ($10,000) vet bill trying to save our dog’s life and didn’t hear about pet insurance until we were in the vet office. Our mission after that was to get the word out about pet insurance.

Waiting period

That said, pet insurance policies have a waiting period, typically three days for accidents and 14 days for illness. If anything occurs in that time, it will be considered a pre-existing condition and won’t be covered. Some other conditions such as cruciate ligaments (ACLs) are not covered for six months unless you have a vet state there is nothing wrong with them.

What’s usually not covered

Pet policies are getting better and better, and many offer wellness coverage and even things like acupuncture, water therapy and chiropractic care. However, there are still many exclusions and these can include:

  • Dental disease
  • Behavior issues
  • Grooming
  • Training
  • Preexisting conditions
  • Hip dysplasia
  • Exam fees (although some do so make sure you check)

How Pet Insurance Works

Pet insurance works off a reimbursement model, where you take your pet to the vet, pay for services rendered, and then submit a claim accompanied by the invoice and receipt of your payment to the pet insurance company.

The three main parts to pet insurance are:

Reimbursement

Pet insurance usually works off the reimbursement model, where you are responsible for paying your vet bill out of pocket, with cash or credit card, and then having the pet insurance company reimburse you for a certain percentage of the bill (usually 70-100%) once you submit a claim.

Deductible

The deductible is the money you have to pay toward your veterinary bill before your pet insurance reimbursement kicks in. Most policies have anywhere from a $50 to a $2500 deductible, and usually the lower the deductible, the higher the monthly rate, but more of each bill is eligible for reimbursement.

Annual Limits

Some insurance policies have a maximum amount they will cover each year. Anything over this amount will be charged completely out-of-pocket. Some policies have no annual max, while others go as low as $5,000. You may have a lower monthly cost, but you can easily go over that with one serious emergency.

To easily explain how this works, if you have a policy with $1,000 deductible, 90% reimbursement and no annual max, and then your pet has a $10,000 health event, you will be responsible for the $1,000 right away, and $900 of the $10,000 bill, totaling $1900 for a $10,000 event.

What Impacts Your Pet Insurance Premiums?

There are several factors that could change how much you are required to pay each month for your pet’s health insurance policy. The overall cost of pet insurance is impacted by how comprehensive you want your plan to be, how many add-ons you choose, what company you choose to go with, and some factors that you can’t control such as where you live, your pet’s breed and age, and if you are insuring a dog or cat (hint: cat insurance is cheaper). If you have multiple pets, some companies offer a multi-pet discount at around ten percent per month.

Here is a breakdown of how premiums are affected by different variables:

Breed

Different breeds can cause your pet insurance premium to be higher or lower, and this is usually based on data from the pet insurance company around health issues that are more common with certain breeds.

Location

Big cities can have higher premiums than smaller ones, as evidenced in our state guides, where we break down monthly costs based by city. Better access to more expensive care, higher likelihood to seek treatment for pet health issues and more exposure to elements that can cause accidents are all factors in premium differences based on your location.

Age

While you may pay more over the life of your pet for a pet policy you don’t use very often (which is a good thing, right?), puppies who have not experienced any health events are still cheaper to insure on a monthly basis than an older dog (same with cats). As pets age, their bodies deteriorate, and this can be more costly to a pet insurance company.

The Verdict

Pet health insurance is a great asset for a pet parent who wants to be protected in the just-in-case scenarios that can occur in your pet’s life. No one can predict what health issues your pet will have, if they will experience an accident or get an extended illness, but pet insurance is a way to get peace of mind that you can at least have some control over the expense should the worst happen.

To make pet insurance make sense for you financially, you should look at the max amount per month you can afford, combined with the maximum amount you’d be comfortable spending out of pocket should something happen. Then, get some quotes from pet insurance companies to ensure you are getting the best value for your money.