What is Pet Insurance, How Does it Work, and Is it Right for You?

Vets hands holding cat and dog.
Vets hands holding cat and dog.

Table of Contents:

  1. What is Pet Insurance?
  2. How Long Has Pet Insurance Been Around?
  3. What Does Pet Insurance Cover?
  4. What are the Components of a Pet Insurance Policy?
  5. How Does Pet Insurance Work?
  6. How Much Does Pet Insurance Cost?
  7. Do I Need Pet Insurance?
  8. Is Pet Insurance Right For You and Your Pet?

We are surrounded by insurance. We see constant commercials on television, hear radio ads, and receive offers in the mail. So… what is insurance?

Insurance is an arrangement (policy) between a person and a company that provides a guarantee of compensation for a specific loss. The loss can be death (life insurance), disability (disability insurance), damage to an automobile (automotive insurance), damage to a home (house insurance), or costs related to healthcare (health insurance). The “guarantee of compensation” is based on a policy for which the owner makes a payment.

What is Pet Insurance?

Pet insurance helps pet parents avoid a financial crisis due to unexpected veterinary expenses from accidents and illness. This enables pet owners to make decisions based on what is best for their pet and avoid difficult decisions dictated by financial limitations.

How Long Has Pet Insurance Been Around?

The first pet insurance policy was written in 1890, and was focused on horses and livestock. Around 1947, what we think of as pet insurance came to fruition. The country’s first dog insurance policy was created in 1982, and belonged to television superstar Lassie.

What Does Pet Insurance Cover?

Pet insurance pays for veterinary care as covered by the specific policy’s limits. Both coverage and cost will depend on your policy.

Some key points about pet insurance coverage include:

  • There is no pet insurance on the market that will cover chronic pre-existing conditions. For example, if your pet has a thyroid condition, your insurance coverage will not pay for any diagnostic test or treatment related to this condition. Some companies, however, will cover certain conditions after a specific time frame. If, for instance, your young puppy had a urinary tract infection that was treated successfully, the insurance provider may consider this a “cure” and cover other urinary problems in the future.
  • Payments depend on the insurance company and specific policy. You can choose to be reimbursed for 100% of the costs or a much smaller amount. As with other types of insurance, you can choose a high deductible or no deductible. The more coverage you have, the more expensive the premium (payment). A number of variables could impact your premium.
  • Coverage also depends on the company. For example, some pet insurance companies will cover genetic and congenital conditions while others won’t. If you have a purebred dog and have specific concerns, it is important to understand any exclusions.
  • Most policies for accidents and illness only go into effect after a waiting period. This can vary from a week to a month.
  • Basic pet insurance policies cover treatment for accidents, injuries, and illnesses. Beyond that, policies will vary. Some companies offer “wellness” policies, but this is typically an optional or additional policy that brings with it an additional premium. Wellness coverage depends on the company, but can include spay and neuter procedures, vaccinations, heartworm testing, feline leukemia virus and feline AIDS testing, deworming medications, heartworm prevention, flea and tick control medications, dental cleanings, prescription diets, and even alternative therapies such as acupuncture. Wellness coverage can be ideal for new puppies that require a series of vaccines as well as spay/neuter procedures. There is generally no waiting period to begin using your wellness benefits.

As in the human healthcare market, the cost of providing quality care for dogs, cats, and other pets has gone up. In many ways, this is a positive development. Veterinary medicine has become more sophisticated and doctors routinely employ advanced diagnostic techniques, such as magnetic resonance imaging (MRI) and computerized tomography (CT), as well as innovative treatment options like arthroscopic surgery and a full range of radiation, chemotherapy, and alternative cancer care options. While these modern techniques keep the standard of living and quality of care high for our pets, they can get quite expensive. Bills sometimes run into the thousands or even tens of thousands of dollars.

Pet insurance covers a range of veterinary healthcare costs. For most pet owners with pet insurance, it makes it easy to follow a veterinarian’s recommended course of treatment knowing that your coverage will provide financial peace of mind.

What are the Components of a Pet Insurance Policy?

Pet health insurance providers offer several basic types of policies and upgrades. The main components of a pet insurance policy include:

  • Deductible: This is the amount of the veterinary bill that you are responsible for before your pet insurance benefits take effect. It is important to understand that companies differ in how they define “deductible.” Some companies have an annual deductible, while others offer a per-incident deductible. This difference can make a big impact on what you pay over the course of a year. The lower the deductible, the higher the premium and vice versa.
  • Maximum coverage limit: This is the amount of money an insurance company will pay out per claim. Some companies have a per-year limit and others a lifetime limit.
  • Reimbursement: The reimbursement, also referred to as “copay,” is the amount of a bill that is paid by an insurance company. You can often choose the amount (percentage) the insurance company pays when selecting your policy. They can cover 100%, 90%, 80%, or 70%, and so on. The more they cover, the more expensive your premium. The reimbursement kicks in after the deductible.
  • Premium: Premium is another word for payment. This is the amount you pay to the insurance company each month or year for coverage.

You can purchase your policy directly from a pet insurance company or an insurance agency representing several different companies.

How Does Pet Insurance Work?

Here is an example of how a pet insurance policy might work:

  • Let’s pretend you have a pet insurance policy with a $500 deductible and 90% reimbursement.
  • Now, pretend your dog ate a sock that became stuck in their intestines and removal of the object required surgery. The surgery to remove the sock with diagnostic x-rays, bloodwork, and supportive therapy, such as intravenous fluids, antibiotics, and pain medications, costs $3,000.
  • First, you pay the deductible of $500. After this is paid, the reimbursement kicks in. Your remaining bill totals $2500. The pet insurance company will pay 90% of that and you will pay 10%. You will, therefore, owe the $500 deductible plus $250 (which is 10% of the balance). Your total bill comes to $750. The pet insurance company will pay $2250.
  • Most pet insurance companies require that you pay your veterinarian and submit any invoices and paperwork. They will then pay you directly.

How Much Does Pet Insurance Cost?

As mentioned above, the cost to insure a dog or cat will depend on your coverage, the breed and age of your pet, and your location in the country. Pet insurance in New York City, for example, can cost more than coverage in a small, rural town. The average monthly cost of a pet insurance policy for a dog ranges from $28 to $75. Policies for cats range from $15 and $46. Again, the cost will vary depending on the deductible and reimbursement that you choose. Most companies make it easy to get a quote. You can usually get an estimate in just a few minutes on any provider’s website.

Do I Need Pet Insurance?

There are many factors to consider as you make plans for your own wellness, as well as possible emergency care for your dog or cat. Once they’ve learned about pet insurance, the most common question pet owners have is whether or not they need it. This is a highly personal question that has to do with your financial situation, your interest in advanced diagnostic and treatment options, and how you would handle a sudden expense for your dog, cat, or other pet.

Is Pet Insurance Right For You and Your Pet?

It is estimated that four out of five pets will have a medical emergency in their lifetime and that every six seconds a pet owner will face a veterinary bill of $1,000 or more.

Ask yourself, can you afford a $1,000 vet bill? How about a $5,000 vet bill? Medical care for pets, including emergency care, diagnostic tests, and treatment options, is becoming increasingly more sophisticated and more expensive. It is not uncommon for a sick pet to go to an emergency clinic for a routine problem and return with a $500 to $2000 bill for some simple diagnoses and treatments.

If it’s difficult for you to come up with $5,000 or even $1,000 to pay a vet bill, then pet insurance may be just what you need. Visit MyPetInsurance for a quote to see what works best for you.

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