How Does Pet Insurance Work?

By Katie Grzyb, DVM on May 9, 2022

The rising cost of pet care is a mounting worry for pet parents and veterinary hospitals alike.

Pet payment plans are moving out of favor, and although medical credit cards are becoming more widely available, only people with good credit can qualify.

A third option—pet insurance—allows pet parents from all income brackets to provide reasonably priced medical care for their pets. Having pet insurance in place can mean the difference between being able to treat and save your pet’s life after an emergency or having to discuss humane euthanasia due to the financial demands of treatment.

Here’s everything you need to know about how pet insurance works and how it can help you pay for vet bills.

What Is Pet Insurance?

Pet insurance is similar to human insurance. In exchange for a fee, a pet insurance plan covers a percentage of medical care for your pet. Pet insurance plans are available that cover both wellness/preventive care and emergencies or illness. One big difference is that the wellness plans are usually separate plans or add-ons to the accident-only or accident and illness plans.

The type of plan that’s best for you depends on your needs. Some plans cover only accidents or accidents and illness. These tend to be more affordable. More comprehensive plans also include wellness and preventive care. You can also usually get a separate wellness plan as part of your whole insurance package. Wellness plans typically cover yearly exams, bloodwork, vaccines, and fecal and heartworm testing.

Another major difference between human and pet insurance is that pet insurance usually uses a third-party billing system. This means that you pay your vet bill at the time of care at the vet’s office, then submit a reimbursement claim for the bill. Unlike human health insurance plans, the cost of treatment is not immediately paid by the insurance company. There are some plans, however, that do pay your vet directly.

Many insurance companies also have a waiting period between purchasing the policy and the coverage going into effect. These periods can range from 1 week to 30 days.

Types of Pet Insurance and What They Cover

Pet insurance plans can range substantially in coverage, so it is very important to explore many options when looking for insurance for your pet. Whatever type of policy you are considering, carefully read all of the details so you understand what you’re buying, and compare each pet insurance policy to other plans. Types of pet insurance include:

Accident and Illness Coverage (A&I)

This is the most common type of pet insurance plan. These plans partly cover unexpected surgeries; imaging testing, such as abdominal ultrasound and x-rays; hospitalization; treatment for urinary tract, respiratory, gastrointestinal, and other infections; cancer therapy; and emergency care.

This type of coverage can help with conditions like broken bones, urinary tract infections, bloat, urinary blockage in male cats, acute cancer diagnosis and therapy, foreign body ingestion (eating something like a squeaker from a toy), and many other issues.

Accident-Only (AO)

Some insurance companies offer more affordable accident-only plans. These plans help cover unexpected surgeries such as a gastrointestinal blockage or a broken bone, but they will not cover illnesses like infections; cancer; diabetes; immune-mediated diseases such as immune-mediated hemolytic anemia, immune-mediated thrombocytopenia, systemic lupus; and others.

Wellness Plans

These plans cover preventive medicine and routine healthcare. They typically include annual or biannual wellness checks, based on age and breed, covering things like examinations, wellness bloodwork and urine testing, vaccinations, fecal testing, heartworm and tick-borne-illness testing, and deworming treatments.

Most pet wellness plans do not cover dental cleanings or dental problems. Some wellness programs offer yearly dental cleanings but will not cover any dental extractions or root canals.

Many wellness plans cover spaying and neutering, but they may have limitations on the age of your pet and when the surgery is performed. In addition to spreading the cost of routine medical care out, wellness plans also enable you to make more frequent preventive visits to the veterinarian without worrying about the cost.

Dental Insurance

Most pet insurance plans do not cover dental checkups, x-rays, dental emergencies, and even routine cleanings. Some companies may cover routine cleanings but require additional fees for any accidents or injuries such as a broken/fractured tooth or a tooth root abscess. A dental insurance plan can help you with unexpected, costly dental issues, which can be painful for your pet, and can help you keep up with your pet’s routine dental care.

Extra Coverages to Look For

Some other types of therapy that should be considered when shopping for pet insurance include the following:

Behavioral therapy, including compulsion or aggression therapy
Training
Rehabilitative treatment
Alternative therapies (e.g., laser therapy, acupuncture, chiropractic)
Prescription diets for chronic diseases
Supplements, including those recommended for treating chronic disease
End-of-life expenses, including humane euthanasia, cremation, and/or burial

Certain cosmetic or elective procedures such as tail- and ear-docking or declawing of cats are not covered by most pet insurance companies. Breeding and interventional birthing procedures such as pre-planned, or often even unplanned, caesarian sections are also rarely covered.

Are Pre-Existing Conditions and Hereditary Issues Covered?

Many insurance companies will not cover hereditary issues or pre-existing conditions.

Hereditary Issues

Hereditary issues are medical problems that tend to occur in certain breeds, like brachycephalic syndrome in Bulldogs, portosystemic shunts in Yorkshire Terriers, and hip dysplasia in Labrador Retrievers.

Breed exclusions for pure-bred dogs are often listed in the insurance policy, but it is worth the time to compare policies and discuss these exclusions with an insurance representative before you buy the policy.

Pre-Existing Conditions

Pre-existing conditions include any illness or injury that happened before the effective coverage date of the insurance policy.

Most pet insurance plans require your vet to send over your pet’s medical records during the purchasing process. If the records mention diagnostics or therapy for a pre-existing condition, it will be seen as a pre-existing condition, and any claims having to do with that condition will not be approved.

Let’s say your pet was diagnosed with a heart murmur when they are 7 years old. Then you get pet insurance, and 6 months later, they are diagnosed with congestive heart failure. In this case, your pet would likely be denied coverage for the recurrent medical problem.

To avoid this, it’s a good idea to buy insurance when your pets are younger and healthy, if possible.

How Much Does Pet Insurance Cost?

Similar to human insurance, you pay a monthly premium to the insurance company. Also, there is often a deductible, or a certain amount of money that must be spent at the veterinarian before the policy will help pay.

Pet Insurance Premiums (Monthly Payments)

Pet insurance premium costs depend on several factors:

The company
Specific policy plan/tier
Species of pet
Pet’s age
Pet’s breed
Where you live
Illness/injury history of your pet

Here are the average premiums as of 2020 for cat/dog insurance from the North American Pet Health Insurance Association (NAPHIA):

Dog

A&I – Accident & Illness

Annual: $594.15
Monthly: $49.51

AO – Accident Only

Annual: $218.13
Monthly: $18.17

Cat

A&I – Accident & Illness

Annual: $341.81
Monthly: $28.48

AO – Accident Only

Annual: $133.61
Monthly: $11.13

Deductibles

Some insurance companies offer a fixed deductible, while others allow you to choose your deductible. Once you pay enough to the vet to reach the deductible, then your pet insurance kicks in.

When choosing a plan with a deductible, it can be helpful to figure out how much out-of-pocket cost you are comfortable paying in a medical emergency. For example, if you feel that you can put more money down for an unexpected emergency, you can choose a higher-deductible plan, which will lower your monthly premium.

Yearly pet insurance deductibles are most common, but some plans have per-incident deductibles.

With yearly deductibles, any injuries/illnesses count toward your one deductible throughout the year, and then the deductible resets for the next year.
With per-incident deductibles, each issue has their own deductible if it is something that needs ongoing treatment over your pet’s life, like diabetes. The benefit of insurance plans that allow a deductible per incident is that chronic conditions are covered under one initial deductible instead of multiple.

Co-Pays

Rarely, pet parents will have a co-pay. A co-pay means the pet parent is responsible for a percentage of the cost for the consultation, testing, or therapy. Co-pays are used less frequently in the pet world than in the human world.

How Do Claims Work?

A claim is a request that you send to the insurance company to pay you back for your expenses at the vet. You submit a claim using forms and/or through the insurance company website or app. Many vet offices will help submit claims forms. You will need to upload a detailed receipt/invoice from your vet showing that you paid for treatment.

Once the claim is approved, you will either get a check or direct deposit or fund transfer. Sometimes the insurance company will pay the vet’s office directly. There is usually a delay for claim approval and payment, and not all claims are approved, so if your vet offers to be reimbursed directly, it’s important everyone has agreed to the terms of the deal.

Claims may be denied if medical records are not complete or clear, if there is a pre-existing condition, or if you haven’t kept up with your monthly payments.

It’s important to note that the company may have a set reimbursement rate that can be anywhere from around 70% to 90% of the original bill that they will pay back. Or you may be able to choose your rate from a certain range.

Reimbursement caps, or limits to how much the insurance will cover for certain conditions, are possible and should also be considered when choosing an insurance plan. Reimbursement caps may be put in place for costly testing, therapy, and management of chronic conditions, including cancer, diabetes, and immune-mediated diseases.

This means that some pet parents will end up paying extra for care above the monthly premium, if their pet hits the reimbursement cap. Luckily, most pet insurance companies have moved to a structure that reduces the invoice total by the deductible amount and then reimburses 80-90% of the remaining balance.

Here’s an example of getting a claim paid:

Your dog breaks their front leg in the park. The average cost for a radius/ulna fracture repair is around $4,000. You would pay your vet to treat your dog, then you would send the receipt to your insurance company.

Let’s say the injury/accident deductible for your insurance plan is $800 per medical condition. The company will subtract your deductible, so the remaining amount is $3200. If the claim is approved, let’s say your reimbursement rate is 90% of the claim, or $2880 for this specific medical issue. It could take a few weeks to a few months to get reimbursed.

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