What Is Pet Insurance and How Does It Work?

How Does Pet Insurance Work?

There are a few aspects to familiarize yourself with when researching pet insurance. First, pet insurance doesn’t work the same as human health insurance. When you receive a vet bill, you pay in full and submit it along with a claim to your pet insurance company. Once approved, the insurance company reimburses a percentage of the cost.

An injury or illness can occur anytime, and pet insurance provides protection in multiple ways. You get the assurance that your pet will always receive the necessary treatment for health problems, and you’ll never pay hefty vet bills without the help of insurance.

Some pet parents decline to get a pet insurance policy, assuming that the monthly premium costs over their pet’s lifetime will outweigh the costs of a few medical bills. Read on to learn about pet insurance costs and commonly covered conditions for cats and dogs.

How Does Pet Insurance Pricing Work?

Your monthly pet insurance premiums are based on three major factors: annual limits, deductibles and reimbursement rates. Let’s take a closer look at each one.

Annual Coverage Limit

Your annual coverage limit is the maximum amount you can be reimbursed for pet care by your provider each year. These limits can range from $2,500 to unlimited. The lower the annual limit, the lower your monthly payments will be.

If your pet’s breed is predisposed to certain genetic conditions, you may want to consider a higher coverage limit, as its veterinary costs will likely be higher. If your pet is still a puppy or kitten, a lower level of coverage might be more appropriate, as they are less likely to face severe health conditions.

Deductible

Your deductible is the set amount you need to pay before your pet insurance provider begins reimbursing you for claims. Pet insurance deductibles can range anywhere from $100 to $1,000. Opposite from the coverage limit, the higher the deductible, the lower your monthly costs.

Deductibles are typically annual, meaning you must meet that amount each year before receiving payouts. However, a handful of providers use a per-condition deductible, meaning you’ll need to pay a new deductible anytime your pet is diagnosed with a new condition. For example, if your dog has been diagnosed with skin allergies and needs lifetime medication, you’ll only pay a deductible for that condition once.

Reimbursement Rate

Pet insurance works differently than the health insurance we use for ourselves. Pet owners pay vet bills up-front when their dog or cat receives any care (veterinary, emergency, hospitalization, etc.). Afterward, they submit a claim to their pet provider. If approved, the pet insurance company will reimburse the cost, typically through a check or direct deposit (once the deductible has been met).

Many providers offer a reimbursement percentage ranging from 70% to 90%. The lower your reimbursement rate, the lower your monthly payment, but the more you’ll pay out of pocket for care. For example, if you select a 90% reimbursement rate and your pet’s treatment is $500, your provider will reimburse you $450 minus your deductible. However, if you select a 70% reimbursement rate and your first vet bill is $500, your provider will reimburse you $350 minus your deductible.

Cost Factors To Keep in Mind

Remember that a low coverage limit, low reimbursement rate and high deductible will substantially lower the cost of your monthly premiums. The downside is there will be more out-of-pocket expenses to shoulder when you submit a claim.

Many providers offer discounts that can help with monthly costs. For example, Lemonade provides a 10% discount for customers who bundle their pet insurance with a homeowners or renters policy. In comparison, fetch gives a 10% discount to pet parents who have rescued or adopted their pet from a shelter.

What’s Usually Covered Under Pet Insurance?

There are two types of pet insurance coverage: accident-only and accident-and-illness. Some providers also offer preventive or wellness care add-ons. Coverage varies across providers, so be sure to narrow down your choices to those that meet your pet’s needs.

Accident-only coverage is the most basic and cost-effective option. These plans only cover accidents, injuries or emergencies and typically include the following:

  • animal bite wounds
  • broken bones
  • Cuts
  • Swallowed objects
  • Toxic ingestions

Accident-and-illness coverage is the most common and comprehensive plan. These policies encompass everything in the accident-only plan plus illnesses and conditions, including the following:

  • allergies
  • arthritis
  • Bladder infections
  • Cancer
  • Chronic conditions
  • Congenital conditions
  • Diabetes
  • Gastrointestinal issues
  • Heart disease
  • Hereditary conditions
  • Hip dysplasia

Accident-only and accident-and-illness plans both cover the following treatments and procedures:

  • Diagnostic testing (MRIs, X-rays, ultrasounds)
  • Hospitalization
  • Prescription medications
  • Surgery

Some providers cover alternative therapies, dental care, behavioral disorders, microchipping, exam fees, prescription food and dietary supplements, but these aren’t offered across the board.

Several providers have optional preventive care add-ons for routine care. They cover specific services up to a certain monetary limit and can be tacked on to your base policy for a monthly fee. Routine care packages typically cover the following treatments:

  • Blood tests
  • dental cleaning
  • Deworming
  • Flea and tick prevention
  • Spaying/neutering
  • Vaccinations
  • Wellness check-ups

You may want to add more extras, such as lost pet advertising, end-of-life coverage or reimbursement for canceled vacation plans due to a sick pet. Trupanion and Figo offer optional extra care packages for circumstances like these that stretch beyond the vet’s office.

To learn more: Pet Insurance Facts and Statistics

What Is Not Covered Under Pet Insurance?

All pet insurance providers have exclusions. Below are a few standard exclusions from almost all policies:

  • Breeding
  • Boarding costs
  • Cosmetic or elective procedures
  • Grooming
  • Pre-existing conditions

What Are Preexisting Conditions?

Preexisting conditions are those for which your pet either showed symptoms, was diagnosed or received treatment before your pet insurance policy started. They include any illnesses or injuries that may occur during your policy’s waiting period, or the time frame between your enrollment in a plan and when you can begin filing claims.

No pet insurance providers cover pre-existing conditions. However, some companies distinguish between curable and incurable conditions, opting to cover curable conditions with specific requirements. Embrace, Spot and ASPCA all make these distinctions.


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