December 29, 2023

How Does Pet Insurance Work

What Is Pet Insurance?

Pet insurance is a type of healthcare plan for animals. It protects owners from financial stress should their pets need emergency vet care. It typically covers accidents and illnesses, but each company has its own set of inclusions.

Similar to subscription platforms, you must first choose a plan which will dictate your coverage, annual limit, deductible, and reimbursement level. Then, you will have to pay a monthly or annual premium to your insurer.

Is there pet insurance for exotic animals?
Yes, there is pet insurance for exotic animals. However, it's very rare to find as most providers cater to dogs and cats only. Nationwide and MetLife are two examples of companies that offer this unique feature.

Insurers won't really give you the money before you take your pet to the vet. So, here's how it works.

What is your primary reason for considering pet insurance?

How Does Pet Insurance Work?

Most pet insurance companies operate through a reimbursement system. If your dog or cat needs medical care, you would have to pay the vet directly and then file a claim to your insurer afterward.

Upon the approval of your claim, your provider will reimburse you for a part of the bill. The total amount that they will cover depends on the terms of your policy.

That said, some companies pay the vet directly, but they all have different ways of submitting and processing claims. Your pet insurance policy should contain everything you need to know.

Pet Insurance Policy Terms

If you are new to pet insurance, you are probably not familiar with the jargon. Below are common terms that you should know:

Annual Limit
The annual limit refers to the maximum amount that you can be reimbursed each policy year.

Companies typically offer multiple limit options starting from $1,000 to unlimited. If you choose a lower annual limit, your monthly premium will also be cheaper.
Reimbursement Level
The reimbursement level dictates how much the provider will cover for each claim in percentage form. The usual options are 70%, 80%, and 90%.

Keep in mind that a higher reimbursement level equates to a more expensive premium.
Deductibles
Deductibles refer to the amount you are obliged to pay the vet before your insurer can reimburse you for a claim.

Most companies have an annual deductible that covers your whole policy year. But others have a per-incident deductible which you'll have to pay every time you make a claim.

Choosing a high deductible means you'll shoulder a larger amount, but you'll also be subjected to lower premiums.
Waiting Period
The waiting period refers to the amount of time a policyholder must wait before the coverage begins. The standard duration is 14 days, which usually starts a day after your purchase.

Remember that any condition that manifests during the waiting period will not be covered by your insurance.

Let's take a look at an example to make things more clear.

Pet Insurance Sample Scenario

Let's say you're filing a claim for the first time. And the terms for the pet insurance policy you chose are:

Annual limit: $5,000
Deductible (Annual): $300
Reimbursement level: 70%

Scenario:
Your dog broke his leg, and surgery was required to repair the fracture. Your bill amounted to $1500, which you paid directly to your licensed vet.

According to your policy, you have a $300 annual deductible. You'll have to shoulder this on your first claim. So, your remaining balance is now $1200.

But you're also responsible for a 30% co-pay (since you chose a 70% reimbursement level). So, you'll be contributing $360 for this specific claim. The total amount you'll be reimbursed for is $840, which will reflect on your annual limit.

Now, to make a claim, there are steps to follow.

How To File A Claim?

Each pet insurance company has a different process on how to file claims. But some steps are the same for many providers.

Here's the usual procedure:

Get a copy of the claims form from your provider and fill it out with the necessary information.
Gather documents to support your claim, such as paid invoices, vet records, etc.
Submit the completed form and documents through mail, email, fax, website, etc.

The pet insurance company will then review your claim. Once it has been approved, they will deposit the reimbursement to your account or via other methods.

Can my pet insurance provider reject my claim?
Yes, pet insurance companies can deny claims due to various reasons. They do a thorough review of your pet's vet records and your policy information before making a decision. If your claim is rejected, some providers allow you to make an appeal, but there is no guarantee.

Denied a claim? Some pet insurance policies offer more coverage than others. Here are your options.

What Pet Insurance Covers

Most pet insurance providers offer two types of coverage: accident-only and accident and illness.

Accident-only
An accident-only plan partially covers the cost of emergency pet care related to physical injuries.

This typically includes getting hit by a car, broken bones, cuts and lacerations, burns, poisoning, ingestion of foreign objects, and the like.
Accident and Illness
An accident-and-illness policy reimburses the pet owner for vet services associated with injuries and ailments.

It is a comprehensive plan that covers accident-related impairments, chronic conditions, hereditary/congenital conditions, diagnostic exams, surgeries, cancer treatment, and the like.

Having said all these, there are situations where your bills won't be covered by your insurer.

What Pet Insurance Doesn't Cover

Even though accident and illness policies are often referred to as comprehensive plans, there is a limit to their scope.

Most of the time, pet insurance coverage does not include:

Pre-existing conditions
Preventive care
Neutering/Spaying
Cloning
Breeding
Pregnancy
Cosmetic surgeries
Injuries caused by abuse

However, it is common to find companies that offer supplementary wellness packages with preventive care.

What is a pet wellness plan?
A pet wellness plan is an add-on to a pet insurance policy. It covers preventive and routine care procedures for the maintenance of your pet's overall health. But because it is an add-on, you will be charged extra.

But before you consider add-on packages, take note of your monthly budget. Here's how much you may end up shelling out.

How Much Is Pet Insurance?

One of the lowest premiums in the market starts at around $10/mo, but it can go up to over $100/mo, depending on your insurer. The estimated average price, however, ranges from around $30/mo to $50/mo for standard plans.

The cost is based on many factors, like the breed of your pet, the age of your pet, your location, provider, and coverage.

Note that it's best not to wait too long to get pet insurance, considering there are affordable options.

When Should You Buy Pet Insurance?

The general consensus is that you should get pet insurance as soon as possible. The longer you wait, the higher the chances of your pet developing a condition that won't be covered by a policy.

Also, enrolling your pet when they're young and healthy means you'll be paying cheaper premiums. So, while it is never too late to get insurance, don't wait for an emergency to happen before getting one.

That said, there are situations where you're better off without one since it may not be worth it.

Is Pet Insurance Really Worth It?

If you're financially stable with a healthy animal, getting insurance is definitely a good option. It gives you peace of mind as a pet parent and allows you to be financially ready for emergencies.

Pet insurance allows you the luxury of having various medical options (such as surgery, treatment, etc.) should your animal get sick or injured.

On the other hand, if your pet already has a lot of pre-existing conditions, paying a monthly premium for minimal coverage is not worth it. It's best to look for alternatives to pet insurance that would better suit your circumstance.

Remember that pets can be denied coverage. This usually happens when your dog/cat has a pre-existing condition that developed prior to the effective date of your policy. In that situation, the insurer will reject your claim and not reimburse you for the medical bill.

If you're ready to find an insurer for your pet, take note of the following criteria.

What would prevent you from getting pet insurance?

How to Choose the Right Pet Insurance

With so many pet insurance companies out there, choosing the best one for you can be overwhelming and difficult.

Here are some things to do before you decide:

Check for Eligibility
Ensure that your animal is eligible for the pet insurance policy you're eyeing. Some providers have an upper age limit of 12 years for enrollment, while others have a lower age restriction of at least 8 weeks.
Know the Coverage
Thoroughly research to identify which plans are best suited for your pet's situation. Comprehensive coverage can ensure maximum protection for your beloved animal.
Compare Costs
Some companies may offer super-cheap policies but have a lot of limitations. Don't be swayed by extreme prices, as they may cost you more in the end!
Check the Waiting Period
Look for a company with a short waiting period, especially if you have a healthy pet. You'll maximize your insurance this way since conditions that develop before and during the waiting period will not be covered.
Research the Claims Process
Even though most pet insurance companies follow the same claims system, they have different ways of executing it. Some insurers advertise a processing period of 7 to 30 days, but others can have shorter or longer times.

Make sure to read reviews to know more about the provider's customer service and firsthand experiences of fellow pet parents.
Check for Add-Ons
Pet insurance has limitations, which is why many companies offer add-ons. If you want preventive/wellness care coverage, look for a provider with supplementary packages to go with your policy.
Consider Accessibility
Go for a provider with services that are easily accessible. Check if they operate in all 50 states so you won't have to worry if you ever decide to move.

Pro tip: Your address plays a significant role in the pricing of your premium. So also consider your location when comparing costs.
Take note of Vet Network Restrictions
Check if the pet insurance company partners with a veterinary network. Some insurers work exclusively with affiliated vet clinics, which can limit your options when you need a visit.

But most providers cover any licensed vet in the U.S.

Knowing this list, you can now start reviewing the most popular pet insurance companies.

Bottom Line

Pet insurance isn't as intimidating as it seems. It is a good way to lessen financial risks in case your beloved animals get sick or injured.

The great thing about it is that you can easily customize a plan to suit your pet's needs. This lets you have a peace of mind with a policy that won't break the bank!

Write to Darlene Santos at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.