How Does Pet Insurance Work?

Know these important pet insurance terms and your costs

Kitten sitting on dog
•••

Burak Kilic / Getty Images

As pet owners, we want to make sure our companions receive the care they need to have long, happy lives. While veterinary expenses can be hard to predict, pet insurance is an option that can help pay for sudden costs. We’ll review how policies work, how to choose one, and what to consider when deciding what’s best for your pet.

What Pet Health Insurance Covers

There’s no standard coverage among insurers, and options vary depending on the type of plan you choose. You may see coverage offered for:

  • Unexpected injuries or mishaps
  • Treatment of illnesses
  • Testing and diagnostics
  • Prescription drugs, foods, and supplements
  • Surgical and other medical procedures
  • Preventive care, such as annual exams and medicines for flea, tick, and heartworm prevention
  • Behavioral or alternative therapies

You often have the choice between accident-only and accident-and-illness policies.

Wellness coverage is usually offered as an add-on to an accident-and-illness plan, but is sometimes sold by itself.

How a Pet Insurance Policy Works

Pet health insurance policies share many similarities. In general, here’s what you can expect.

The Costs

Annual average premiums for dogs are about $585 for an accident-and-illness policy and $194 for an accident-only one. For cats, those numbers average about $350 and $126, respectively. Wellness or preventive coverage is typically offered at additional cost with an accident-and-illness policy.

Your pricing may vary based on your:

  • Location
  • Plan selections for deductibles, limits, reimbursements, and other details
  • Pet’s age, breed, and gender
  • Discounts applied to the policy

Typically, you pay all veterinary costs upfront, then file a claim for covered items to be reimbursed.

How Premiums Are Paid

Most pet insurers accept debit or credit cards from major card issuers, and some also accept electronic bank payments. Premiums are usually automatically charged to a stored payment method either monthly or annually. Some insurers also charge a one-time administration fee when you enroll.

How To File Claims

With most insurers, you need to pay your veterinarian at the time of service and ask for an itemized invoice. Then you fill out a claim form and send it to the insurer with the invoice and proof of payment. You can often submit claims by email, postal mail, and fax, or through your online account or the insurer’s mobile app.

Some insurers pay the vet directly if the veterinary office is set up to accept payments that way, but you most likely still need to submit a claim form.

How You’re Reimbursed

Providers vary with how long they take to review and process your claim. Some take as few as five days, others as long as 30. Once processing is complete, your insurer may send a check in the mail or direct-deposit the sum into your account.

Policy Components

You may recognize several terms on your pet’s policy from your own health insurance policy:

  • Deductible: What you must pay before the insurer begins covering any bills
  • Reimbursement percentage: How much the insurer pays you back for a covered claim after the deductible is met
  • Co-insurance (Co-pay): The percentage you pay on bills after you meet the deductible
  • Limit: The maximum the provider pays for claims; there may be per-incident, annual, and lifetime limits.

Here’s an example of how these components might play out in your pet’s policy:

Say your cat has a gash on its leg and needs emergency care. After exams, bloodwork, and wound treatments, the bill comes to $1,500. Your policy has an annual $500 deductible and an 80% reimbursement percentage. Since this is your first claim for the policy year, you’re responsible for the first $500 to meet the deductible.

Of the remaining $1,000 left, the insurer pays you $800 (80% reimbursement level). You already paid the remaining $200 (20% co-insurance) at the time of the visit. Your total out-of-pocket expense for this claim is $700.

Where To Get Pet Insurance

There are several companies offering pet health insurance, including:

Nationwide and Lemonade are two of the few major insurers offering their own pet insurance. Many others, such as GEICO and USAA, partner with a pet-focused insurance company to provide plans to policyholders. You may get discounts by signing up for pet insurance through your existing insurance provider. For example, if you enroll in an Embrace plan through USAA, you could get up to 25% off your policy.

While researching pet insurance providers, consider what coverage you want for your pet and talk to your vet about any conditions your furry friend is predisposed to. Compare plan coverages and exclusions. Also determine how much you want to spend on premiums, and your comfort level for deductibles and limits.

Be sure to review a company’s claim approval and reimbursement times and methods, as large vet bills can stress finances.

Deciding What’s Best for Your Pet

Many owners want to know if pet insurance pays off. Like any type of insurance, the answer depends on your circumstances and how often your pet will need the insurance. Regardless, both insurance and vet costs can be hard to afford. Keeping an eye on your pet's health and safety is always the most important step.

Premiums can add up to thousands of dollars over the lifespan of your pet, and you still have to deal with annual deductibles, limits, and exclusions. But it’s major illnesses that would otherwise break the bank that can make pet insurance an excellent buy. For instance, treatments for cancer can cost up to or even more than $7,500.

Pet parents spend an annual average of $426 and $214 on surgical vet visits for dogs and cats, respectively.

As you weigh what’s best for your pet, consider your budget, savings, and other resources available to you. For some, the peace of mind pet insurance brings makes it invaluable. After all, you don’t want to be in a position where you can’t afford to care for your pet. But others may decide that alternatives like credit cards or vet-offered payment plans make costly pet bills affordable enough that insurance isn’t needed.