Guide to Pet Insurance

What is pet insurance?

Pet insurance is like health insurance for your pet: most policies cover unexpected and expensive medical costs like accidents, emergency care, and surgery, though some also cover routine vet visits and prescriptions. Medical expenses for pets can be costly, and many pet owners do not have money set aside for a serious accident.

Many people find themselves in the worst-case scenario; having to euthanize a pet because they can't pay for expensive treatments. Pet insurance gives you peace of mind and will help cover your pet's major medical expenses.

Pets are family. If you have health insurance for yourself, you should think about getting it for your pet.

What types of pet insurance are available?

There are two main types of pet insurance policies: comprehensive and accident only.

Accident only

These plans include being the pet being hit by a vehicle, toxic ingestions, and broken bones. These are the least expensive plans, and won't cover expenses related to illness.

Comprehensive

These plans cover accidental injuries as well as illnesses like cancer, arthritis, and diabetes. Not all illnesses are covered, and few plans offer 100% coverage for those medical conditions.

Keep in mind that some pets are more prone to illness than others, which affects rates and eligibility.

What does pet insurance cover?

While exact coverage varies from one insurer to another, common issues covered by pet insurance companies include:

• Unexpected incidents and emergencies

• Hereditary conditions

• Congenital conditions

• Chronic illnesses

• Cancer

• Treatments for injuries and illnesses

• Diagnostic testing

• Surgery

• Hospitalization

• Prescription medications

• Specialist care

• Alternative therapies

How does pet insurance work?

Unlike health insurance, which pays medical bills directly to the healthcare provider, pet insurance companies require you to pay the medical bill out-of-pocket and then apply for a reimbursement. This makes pet insurance a bit harder to use - you need to be proactive about filing claims and getting reimbursement to get the full value from your policy.

Deductibles

The deductible is the amount you are required to pay towards a bill before the insurer pays for any type of insurance. There are two types of deductibles with pet insurance policies; your policy may use just one or both of these deductibles in calculating coverage.

This type of deductible applies to every individual veterinary visit. Per-Incident deductibles can be costly if your pet goes in multiple times, like if they have several follow-up appointments from one accident.

Every veterinary cost in a policy year counts towards your annual deductible. This type of deductible can be easier to budget for since it's one set amount. 

If you have a choice between an annual deductible and a per-incident deductible, consider this:

• If your pet requires veterinary attention frequently, then the annual deductible will be more cost-effective.

• If your pet only goes to the vet one to two times a year, a per-incident deductible will save you money overall.

The amount of your deductible depends on the cost of your premiums. If your deductibles are high, then your premiums will be low and vice versa. So, how do you decide what option will benefit you more?

• If you prefer lower out-of-pocket payments whenever you go to the vet, high premiums with a low deductible will work for you. Moreover, low deductibles are a good option if you foresee your pet having ongoing health problems.

• If you prefer a lower monthly fixed amount and are comfortable paying more out-of-pocket for the vet, higher deductibles may fit better. Young pets with a low probability of illness fit under this option.

Reimbursement Rate

The reimbursement rate is the percentage of the vet bill that the insurance company will cover. Most companies cover 70%-90%. The higher the reimbursement rate, the higher price you will pay for premiums. The reimbursement will either be a pre-deductible or a post-deductible rate, depending on the policy.

Pet Insurance Formula

Two main formulas are used to determine the amount of money you will be reimbursed by your insurance company. It is important to know which method your plan uses, as one gives back more than the other. You have to know if the insurer takes your deductible out at the beginning or end.

Formula 1: (Vet bill - deductible) x reimbursement rate = insurance coverage amount

Example: ($1000 - $100) x 80% = $720

Formula 2: (Vet bill x reimbursement rate) - deductible = insurance coverage amount

Example: ($1000 x 80%) - $100 = $700

Payout policies

Most pet insurance policies have a benefit limit on medical expenses for your pet, although you can find some without a limit. If you reach your limit, then the remaining amount must be paid out-of-pocket. There are 5 main types of pet insurance payout limits:

Many policies have a maximum on how much they reimburse for each individual case illness and accident,

This is the amount the insurance company will reimburse for a "body system." Once you reach the limit, you will no longer receive reimbursements for that body system. Body system examples include; digestive, cardiovascular, respiratory, and musculoskeletal systems.

This is the maximum amount the insurance company will cover during the twelve-month policy period.

Most policies have a maximum amount on how they will reimburse during your pet's lifespan.

Pet insurance plans have a list of diagnoses, called a benefit schedule, and a set maximum amount they would pay for treatment if your pet required it.

What affects pet insurance premiums?

Monthly premiums vary from one insurance company to the next. Several factors play a role in determining what you pay:

For dogs especially, larger pets have higher insurance costs because they tend to have shorter life spans and more health issues. Very large breeds like Leonbergers, Bernese Mountain Dogs, and Great Danes are more expensive to insure and may be denied certain coverage.

Active pet species have higher insurance costs because they have a higher probability of accidents. Cats are generally less expensive to insure than dogs, for example.

Younger animals have lower premiums because they typically have minimal health issues during their younger years.

Read more: Pet Insurance for Senior Animals

Areas with a high population density usually have higher insurance costs. 

Is pet insurance worth it?

The average dog owner spends $1,201 or more a year. The two questions you should ask yourself while considering pet insurance are: How much can you afford to pay in case of an emergency for your pet? And, what tolerance do you have for risk?

Although minor medical issues can be covered by most pet owners out-of-pocket, the yearly average spent on pet insurance costs less than a severe condition. Because dogs and cats are the most commonly insured, we will use these pets as examples.

Pet insurance costs on average $45 a month for dogs and $25 a month for cats. In this example, let’s assume you have a $300 deductible and a 90% reimbursement rate. 

The chart below shows some of the most common treatments for dogs and cats, along with worst-case scenarios. You can see how a severe condition skyrockets the price of medical bills. 

Benefits of a pet insurance policy

• You get to choose your vet. There are no in-network or out-of-network doctors like there are with human health insurance

• Monthly premiums are typically affordable

• Policies are simple with most companies having only a few tiers to select from

Where can I buy pet insurance?

You can apply for pet insurance through a pet insurance company or an online broker like PolicyScout. The most popular pet insurance companies are:

• Healthy Paws 

• Pet Plan

• Embrace

• Progressive 

• ASPCA

To save time and find the best policy fit, start shopping for a policy with PolicyScout. 

Which pets are covered?

When most people think of pet insurance, they typically think of dogs. While dogs do represent a significant portion of animals covered by pet insurance, policies can cover other animals as well.

You can find pet insurance coverage for most pets, including dogs, cats, rabbits, ferrets, exotic birds, reptiles, potbelly pigs, and domestic rodents.

However, many pet insurance companies only cover cats and dogs, as they are the most commonly insured animals worldwide. 

Different insurance options are available for animals that are a business asset, such as breeding animals and competition animals like racehorses.

Read more: Pet Insurance for Cats: Is It Worth It? and Read more: Pet Insurance for Dogs: Is it Worth It?

What if My Pet is Old?

A common belief is that older pets don’t qualify for insurance coverage. This simply isn’t the case. It is entirely possible to insure senior pets.

Some insurance companies have age restrictions and won’t accept new applicants over a certain age. Typically, the age cut-off for pet insurance is between 12 and 14. Plenty of companies have no age restrictions, so you can apply no matter how old your pet is.

Regardless of the age of your pet, keep in mind that no insurer covers pre-existing conditions. If your pet is older but still in relatively good health, you can still get a good price on insurance and get coverage for issues that might affect your pet as they age. 

Read more: Does Pet Insurance Cover Pre-Existing Conditions?

Read more: Pet Insurance for Senior Animals

What does pet insurance not cover?

The following are usually not covered in pet insurance policies. 

Pre-existing conditions include any health concerns your pet had before obtaining insurance. Any health problem documented in the past for your pet will be considered a pre-existing health condition and therefore, not covered by most insurance policies.

Because of this, it pays to have pet insurance for your pet while it's healthy and has no ongoing issues. The longer you wait, the higher the chances that your pet will suffer from an illness or accident that will no longer be covered by insurance.

Routine care and wellness refer to regular care that keeps your pet healthy. This includes vaccinations and annual check-ups. Pet insurance policies do not typically cover these because they are expected costs for any excellent pet owner, meaning they are predictable and easily budgeted for. Some companies offer you a wellness policy add-on for an additional cost.

Usually, these are not covered by insurance companies because vets typically have a flat fee for exams. This fee is an addition to any treatment or test that may occur. 

When to Apply for Pet Insurance

The ideal time to apply for pet insurance is as soon as possible. Whether you’ve just received your pet or you’ve had them for a few years, applying for insurance now, while they are still healthy, helps to ensure that you get the best rates possible and have the best coverage later. 

How Long Does It Take for the Policy to Take Effect?

Every insurance company that offers pet insurance has a waiting period in place to prevent fraud. Waiting periods vary from one insurer to the next and they may differ for various reasons including injuries and illnesses. Depending on the company and the specific issue, you may have a waiting period of a few days, a few weeks, or even a few months. Once the period is over, and your pet hasn’t shown any signs or symptoms of an illness or other condition, your coverage begins. 

Other insurance policies providing pet coverage

Some other types of insurance can provide benefits for pets, but only pet insurance protects their health.

Your homeowner’s insurance policy may have some coverage for damage caused by pets. Standard homeowner’s insurance provides liability and personal property protection. 

If your pet attacks someone and you get sued, your homeowner’s insurance provides liability protection to defend you in court.

Dogs with a history of attacking and breeds known as dangerous are usually excluded from homeowners insurance policies.

If you are someone who loves to buy accessories for your pets, then those things are covered by the private property sections of your homeowner’s insurance. 

Although these policies benefit pet owners, they do not cover your pet in case of an unforeseen accident or illness. Your pet’s health can only be covered through pet insurance. 

Where should you go from here?

You want to ensure the health of your pet. By purchasing a pet insurance policy, you can rest easy knowing they are taken care of. Go to PolicyScout to learn more about pet insurance, and find the right policy for you and your pet.