What Is Pet Insurance?

Pet health insurance is property and casualty (P&C) insurance. It’s not technically in the health insurance category. Despite this, it is health insurance.

The current model of pet insurance is reimbursement insurance. You pay the veterinarian, then file a claim, and the insurance company reimburses you an amount that’s had the deductible and copay, plus any uncovered expenses, deducted.

In human medicine, the healthcare provider usually files the claim and is reimbursed directly by the insurance company. The patient typically pays just a deductible and/or copay and walks out the door.

There are also networks (managed care) in human healthcare. So far, this is very limited in pet health insurance.

Most people’s health insurance is provided by their employer in a group type policy. Pet insurance is rapidly becoming a popular employee benefit that companies are offering their employees. At this time, most if not all of the premium is paid by the employee through a deduction from their paycheck.

Types of Pet Insurance Coverage

Accident-Only

Though accident-only pet health insurance policies are available from some companies, the coverage is limited. It covers things like fractures and lacerations. It doesn’t cover illnesses such as infections, diabetes, allergies, and more.

To get broad coverage for most of the things that could happen to a pet, choose a policy that covers both accidents and illnesses.

Wellness Care

Wellness care coverage is offered by many companies, usually as an add-on rider. This type of coverage helps pay for wellness exams, vaccinations, tests to screen for parasites, heartworm preventative, flea/tick products, spay/neuter, and teeth cleaning.

Wellness care costs are predictable and easier to budget for. You know you’re going to pay for at least some wellness care services every year. What’s more, you usually know about how much it’s going to cost and when it is due.

Some pet owners and vets may feel that wellness care coverage doesn’t make sense. Most people are already paying for the services out of pocket. Exceptions to that view involve puppies and kittens. With very young animals, several wellness visits will be required. Spay or neuter may be needed.

Furthermore, senior pets (those age 7 and older) typically need semiannual exams, more frequent teeth cleaning, and wellness lab testing more often.

Accident and Illness

Accidents and illnesses are unexpected events. You don’t know when such an event will occur or how much it will cost. Not uncommonly, medical care for these events is expensive, sometimes costing pet owners thousands of dollars. 

Therefore, it’s probably a good idea for pet owners to select a company that offers the best accident and illness coverage for their pet. The main focus should be on coverage for those things the pet owner cannot afford to pay out of pocket. 

Factors That Affect Coverage

Some insurance companies may not offer accident/illness coverage for pets who already have certain chronic conditions such as diabetes and feline leukemia. Instead, pets with these conditions are offered accident-only policies.

Some companies may offer people with older pets either accident-only coverage or downgraded accident/illness coverage (higher deductible, lower reimbursement percentage, and lower annual maximum).

Also, certain insurance companies don’t offer accident/illness coverage to pets over a certain age.

Some insurance companies, such as Nationwide, insure exotic pets like pocket pets, reptiles, and birds, but most pet insurance offerings are limited to dogs and cats.

What’s Not Covered By Pet Insurance?

Exclusions vary from company to company. They’re usually listed in a sample policy available on company websites. The big one, pre-existing conditions, is the reason the vast majority of claims are denied. 

Pet owners should ask whether a pet insurance company will review their pet’s medical record and let them know up front if there are any conditions that they consider pre-existing and won’t be covered.

Unfortunately, not all companies do this automatically. So be sure to ask a company for a review before you choose it to insure your pet.

The Cost of Pet Insurance

Pet health insurance premiums are generally based on a pet’s age, breed, and zip code. Premiums are higher for older pets because they are more prone to chronic diseases. The breed matters because some have more problems than others. Zip codes are important because veterinary care costs more in some locations than others.

Pet insurance premiums will increase over time. However, pet insurance companies allow people to customize the coverage to fit their budget.

You can choose among several annual maximums, deductibles, copays, and optional add-ons. Consider getting the best coverage you can afford at sign-up. You can always downgrade coverage to get lower premiums if the amount you’re paying rises above your comfort zone.

When a company files its rates with the state, they have to show premium factors for every age, breed, and zip code that also correspond with each possible combination of policy maximum, deductible, and copay options they offer.

Examples of Premiums

Generally, puppy premiums for most companies are $25–$60 per month without wellness coverage.

A policy with a $100 annual deductible and $0 copay will trend toward the higher number, whereas a policy with a $500 annual deductible, 20% copay will trend toward the lower number. For older dogs, the range could be $60–$200 per month.

Premiums for cats can be roughly half the premiums for dogs. Statistics show that of all the pets insured in the U.S., about 80–85% are dogs and only 15–20% are cats. So, cat owners should know that it is very affordable to insure their cat—even if they’re older.

Many cat owners may think that if they have an indoor cat, they don’t need pet insurance. However, the top 10 conditions for which cat owners file claims are chronic or recurring conditions. These are just as likely, if not more so, to occur in indoor cats as outdoor cats.

When people get a quote on insurance for a young pet, they should also find out what the same coverage will cost when the pet is 8–10 years old. This will reveal the premiums a company charges for older pets and can be a real eye-opener.

There is a wide variation in premiums for older pets between companies. Querying various companies, the same maximum coverage amount, deductible, and copay options on a 10-year-old dog resulted in a premium range of $65–$175.

The Value of Pet Insurance

Many pet owners have no idea of how much it can cost to treat a serious acute illness. Therefore, they don’t have a plan to pay for unexpected accidents or illnesses when they occur.

They also tend to underestimate the costs of monitoring and treating a chronic illness over the lifetime of a pet, which can easily be thousands of dollars.

Pet insurance can be part of an overall plan to pay for such events. Pet owners could also earmark savings accounts for veterinary expenses. The purpose of pet insurance is to help bridge the gap between the costs of the healthcare a pet needs right now while savings are being gradually built up over time.

Pet owners might also consider a line of credit (credit card) dedicated to pet healthcare because of the way pet insurance works. Remember, you have to pay the vet bill up front and then get reimbursed. Most people don’t have the ability to pay large vet bills out of pocket.

Bear in mind that we buy pet insurance to protect our assets and pay for medical care that’s needed. If something unexpected happens, you’ll have peace of mind knowing that your ability to pay doesn’t depend on the size of your bank account.

Now, if you have the funds to pay any vet bill no matter how expensive, you don’t need pet insurance. If you are someone who’s not going to spend over a certain amount of money on your pet (e.g., $500), then you don’t need pet insurance, either. However, the vast majority of pet owners don’t fall into either of these camps.

Regulation of Pet Insurance

Pet insurance is generally regulated by each state’s department of insurance. If a problem occurs, you can seek help there or at the Better Business Bureau (BBB) (if a company is a member).

However, always try to resolve an issue directly with the pet insurance company first. Pet insurance companies have an appeals process to evaluate your complaint. It’s spelled out in your pet insurance policy.

For example, if a claim is denied, it can be reviewed again by a different claims adjuster, a veterinarian on their staff, or sometimes by a veterinarian independent of the insurance company, who can rule in your favor and overturn the denial by the pet insurance company.

That said, not many denied claims are overturned. However, it’s worth a shot and should be the first course of action if you have a complaint.

Alternatives to Pet Insurance

Eusoh

Eusoh is a community sharing platform similar to Medishare in human healthcare. It looks the most like pet insurance and has a monthly cap on contributions by members.

Therefore, for a lot of pet owners, the costs can be significantly less than pet insurance premiums. Pre-existing conditions aren’t covered.

Pet Assure

Pet Assure is a discount club where members get 25% off of most veterinary services performed at hospitals in their network. Generally, it doesn’t cover things like lab testing referred to facilities outside the hospital, or take-home medications or prescriptions. However, pre-existing conditions aren’t excluded.

In some areas of the country (smaller markets, rural areas), the number of veterinarians in their network is limited. They provide a search tool to find any veterinarians in your area.

Pawp

Pawp is a 24/7 telemedicine service that also makes available an emergency fund of up to $3,000 (one-time access per year). You have to be referred by one of their veterinarians to a vet for a true emergency situation to gain access to the emergency fund.

Up to six pets in a household are eligible for access to the fund. Pre-existing conditions are covered.

Third-Party Financing and Payment Plans

Some veterinarians use third-party financing through, for example, CareCredit, Wells Fargo, and Scratchpay. Veterinarians also have the option to offer in-house payment plans through VetBilling and Veterinary Care Plans (VCP).

VetBilling offers payment plans for acute, unexpected accidents and illnesses as well as pet savings accounts and prepayment plans. VCP specializes in wellness care plans and payment plans for treatment of dental care and chronic diseases. 

The payment plan alternatives that VetBilling and VCP offer can actually complement a pet insurance policy when a pet owner with an insured pet can’t afford to pay a large bill up front.

If their veterinarian uses one of these services, a payment plan will allow them to pay a large bill in several installments. After filing a claim, the pet insurance reimbursements can help them pay off the bill.

The Bottom Line

Spending on insurance can feel like a waste of money to some. However, when you’re able to protect the well-being of the pets you love because you have pet insurance, the cost is worth it for most.

Be sure to carefully review the pet insurance coverage offered by various companies. Consider the reasons and times that your pet might need medical care.

Pet insurance can be a vital financial advantage that helps protect your assets when a health crisis occurs. It can mean that a very important member of your family gets the proper care they need, when they need it.