What Is Pet Insurance and How Does It Work?

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What Is Pet Insurance and How Does It Work?​

Main Points
- In 2022, pet insurance covered 5.36 million pets in the United States, with the majority of owners selecting accident and illness plans for extensive protection.
- While many pet insurance policies involve reimbursement after paying vet bills, certain plans, such as Trupanion, collaborate with veterinarians to directly settle bills on behalf of the pet owner.
- The scope of your pet insurance coverage can include routine care, accidents, breed-specific conditions, and various illnesses such as allergies, cancer, and arthritis.

As per the North American Pet Health Insurance Association (NAPHIA), the count of insured pets in the United States increased to 5.36 million in 2022, a rise from 4.4 million in the previous year. Among the insured pets, 80.1% were dogs, and 19.9% were cats. The majority of pet owners opted for comprehensive insurance, with 92.8% of pets covered by accident and illness plans or integrated wellness plans.

Despite being a relatively new sector, pet insurance can be advantageous for families by easing the financial burden of veterinary expenses linked to pet ownership. What exactly does pet insurance encompass, and what is the functioning mechanism of pet insurance? Explore further details about pet health insurance below to assess its value for your beloved furry companions.

Pet insurance is a healthcare arrangement wherein owners make monthly or annual payments in return for reimbursement of qualifying veterinary costs. In cases where a pet receives treatment for a covered condition, the owner pays the veterinarian upfront and subsequently submits a claim to their insurance provider for reimbursement, following the terms specified in the policy. Although the majority of pet insurance plans cater to dogs and cats, some insurers extend coverage to other animals. For instance, Nationwide provides policies for birds, reptiles, and exotic pets, and ASPCA Pet Health Insurance includes plans that encompass horses.

Usually, there are three categories of pet insurance plans available for selection.

1. An accident-only plan covers eligible veterinary expenses linked to accidents, such as broken bones or ingestion of foreign objects.

2. An accident and illness plan encompass both types of veterinary care, providing more comprehensive protection to the owner but at a higher cost. It covers illnesses like infections, cancer, arthritis, diabetes, and allergies.

3. Routine wellness or preventative care plans, offered as an optional add-on or standalone plan by some providers, offer reimbursement for services such as immunizations, flea treatments, and spaying/neutering.

How Pet Insurance Operates:
Pet insurance primarily operates through a reimbursement system. In simple terms, you initially cover the veterinary expenses and then submit a claim to recover eligible costs. Certain companies, such as Trupanion, collaborate with specific veterinarians, directly settling bills with them, leaving you responsible only for ineligible expenses.

When obtaining a pet insurance policy, you make choices regarding a deductible, reimbursement percentage, and an annual limit, all of which influence your Prémíùm and the maximum amount you can be reimbursed. Your deductible must be met before the insurance company processes any reimbursement. The eligible costs are then repaid based on the percentage you've selected, typically ranging from 70% to 90% of the expenses. The policy's annual limit establishes the highest dollar amount you can claim each year, with some insurers providing an option for an unlimited annual limit.

Though the procedures for filing claims and receiving reimbursement can differ, the general process is as follows:

1. Schedule a vet appointment.
2. Take your pet to the veterinarian.
3. Pay the full veterinarian bills.
4. File a claim online or via the pet insurer's mobile app, attaching a copy of the bill.
5. Upon approval of the claim by the pet insurance company, receive the eligible reimbursement through direct deposit or a mailed paper check.

The duration of the review and approval process varies, spanning from a few days to a couple of weeks or even a month, depending on the insurance company, policy terms, and the nature of the accident or illness.

Where Pet Insurance Can Be Utilized:
Most pet insurance plans operate on a reimbursement model, allowing you to utilize your coverage at any licensed veterinarian, specialist, or emergency clinic of your preference. Unlike human health insurance, pet health insurance lacks provider networks. Nevertheless, some companies may impose specific requirements for veterinarian bills to qualify for reimbursement.

Coverage Provided by Pet Insurance:
The extent of coverage provided by pet insurance is contingent upon the selected plan:

1. Accident-only: Encompasses veterinary expenses related to accidents, such as ingesting foreign objects, injuries from other animals, broken bones, and lacerations.
2. Comprehensive plan: Includes coverage for accidents and illnesses, potentially addressing allergies, cancer, hereditary conditions, surgery, hospitalization, breed-specific conditions, and arthritis.
3. Routine care: Addresses preventive expenses like dental cleaning, vaccines, annual checkup exam fees, blood work, and spaying or neutering; also referred to as a pet wellness plan.

Regardless of the chosen pet insurance plan, pre-existing conditions are typically excluded from coverage. Some companies institute a waiting period for certain pre-existing conditions, offering coverage only if your pet remains symptom-free for a specified duration, such as six or 12 months. Other companies may provide no coverage for pre-existing conditions.

Pet insurance plans commonly impose waiting periods for accidents and illnesses, indicating the time between activating the policy and the commencement of coverage. For instance, if a policy stipulates a 14-day waiting period for illnesses and becomes effective on the first of the month, reimbursement for illness-related visits is only possible after the 15th.

Waiting periods for accidents and illnesses are relatively brief in comparison to those for pre-existing conditions. While waiting periods cannot be circumvented, obtaining coverage for your pet at an earlier stage reduces the likelihood of claim denial due to waiting periods and accelerates the potential coverage for pre-existing conditions.

What Pet Insurance Excludes:
Pet insurance does not cover certain veterinary expenses, including pre-existing conditions, non-vet related costs, and regular care unless a routine or wellness plan is purchased. Notable examples encompass:

1. Breeding
2. Pregnancy
3. Cosmetic procedures like ear cropping, dew claw removal, and tail docking
4. DNA testing
5. Injuries or illnesses resulting from fighting, racing, cruelty, or neglect
6. Elective procedures
7. Preventative treatments
8. Experimental therapies

Day-to-day expenses associated with pet ownership, such as pet food, toys, vitamins, grooming, and boarding fees, are also not covered. However, some insurers, like Embrace, may cover prescription food with a wellness plan. Additionally, certain carriers, like Fetch, might cover boarding fees in cases where the policyholder requires an extended hospital stay, typically lasting four or more days.

How Pet Insurance Deductibles Function:
Similar to most insurance policies, pet insurance includes a deductible, and the choice of deductible can influence the Prémíùm. Opting for higher deductibles generally results in lower premiums, while lower deductibles lead to higher Prémíùm costs.

There are typically two deductible options. Annual deductibles, like those offered by Embrace, resemble those found in human medical insurance policies. Once the deductible is met, no additional deductible applies to subsequent claims within the policy term.

Alternatively, some carriers may provide a per-incident (per-condition) deductible. In this scenario, the deductible is applied each time your pet visits the veterinarian for a new condition. This type of deductible may result in lower reimbursement for each individual claim.

It's crucial to inquire about how the deductible will be applied in the policy you are contemplating purchasing.

Cost of Pet Insurance:
As of 2021, the average monthly premiums for accident and illness policies for dogs and cats were around $49 and $29, respectively, according to the North American Pet Health Insurance Association (NAPHIA). However, more budget-friendly pet insurance plans may be available to suit your specific needs.

As per our 2024 rating of the Best Pet Insurance Companies, Lemonade stands out as the most economical option for dogs, with a sample monthly cost of $19.44, and for cats, with a monthly cost of $11.00. On the opposite end of the spectrum, the priciest companies include Nationwide for dogs at $56.74 per month and Trupanion for cats at $30.88 per month.

Various factors contribute to the cost of pet insurance, including:

1. Your ZIP code
2. The type of pet you own
3. Your pet's age
4. Your pet's breed
5. Your pet's size
6. The chosen pet insurance deductible
7. The reimbursement percentage
8. The type of coverage plan selected
9. The annual limit
10. Optional add-ons you may choose
11. The insurance company you select

For more details on the factors influencing pet insurance costs, you can explore additional information about the subject.


Is Pet Insurance Necessary?
The decision of whether pet insurance is necessary ultimately rests with you. When evaluating the expenses associated with veterinary care versus the average premiums of pet insurance, its value for your pet, family, and financial circumstances becomes a personal consideration.

For instance, if your pet requires hospitalization, the cost could exceed $3,000. If you are paying $30 per month or $360 annually for pet insurance, it might be a worthwhile investment. In this scenario, you would need to maintain your pet insurance Prémíùm for slightly over eight years to make a $3,000 hospitalization claim not financially beneficial.

Furthermore, owning a breed predisposed to specific health conditions, like hip dysplasia, may lead to more visits to the vet or specialists, resulting in additional expenses that could be covered by a pet insurance plan.

If you already have a trusted veterinarian, it might be worthwhile to inquire about anticipated costs for various procedures related to accidents or illnesses. Comparing these costs with quotes and reimbursement percentages from different pet insurers can assist you in determining the necessity of pet insurance.

Does Pet Insurance Extend to Pets Besides Cats and Dogs?
While most pet insurance providers primarily cover cats and dogs, some companies offer coverage for various types of pets. Nationwide, for instance, provides avian and exotic pet insurance, encompassing small mammals, birds, reptiles, and amphibians. ASPCA offers pet health insurance specifically designed for horses.

Is Dental Care Covered by Pet Insurance?
Dental care is generally deemed routine and, as a result, is typically excluded from coverage under most pet insurance plans. However, certain plans may cover dental extractions or surgery if it stems from a covered accident, such as a dog breaking a tooth while playing with a toy and needing surgical removal. Additionally, some pet insurance companies with wellness plans may include coverage for dental cleanings.

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