The number of pet insurance policies is ballooning in America today — the industry is growing at an eye-popping annual rate of 22.1% over the past 5 years.1
Insuring pets has gained new urgency for pet owners as they have begun conceiving of themselves as pet parents. But insuring your pet is not exactly the same as insuring yourself.
Pet parents often decide not to take action after they’ve been confronted with the numerous policy options from insurers — we know that more than half of pet parents are confused about whether or not the value justifies the premium.2 So what is the value, and how exactly does it work?
Is Pet Insurance Worth It?
The recommendations or tips you read before or after adopting a puppy or kitten often discuss preventative measures and supplies — vaccine boosters, a leash, a carrying crate, a bed. Framed as one-time expenses, budgeting for these is an entirely different exercise than budgeting out hundreds of dollars in premiums every year.
Whether you’re a first-time pet owner or not, it’s likely that you view your pet as a member of your family. And at least one benefit is clear from pet insurance — you won’t have to rework your finances to get your family member the care they need when the unexpected happens.
Veterinary medicine has progressed by leaps and bounds, especially over the last forty years. The average life expectancy of a dog has increased by 12.4% 3 — an extra year or more for most breeds — due in large part to advances in technology that enables better and more effective treatment for animals.
That improved care can be expensive. Data from one of our insurance partners show that the average claim amount has risen 6% 4 in the year 2020 alone and that the average annual cost of canine cancer care is $4,137 5, with some treatment plans surpassing $10,000.
How does it work?
With a few exceptions, pet insurance works with claims and reimbursements. Meaning you – the pet parent – must submit invoices for care received to the insurer, after you pay upfront. Your policy determines what is covered, and the amount you will be reimbursed.
Many pet owners are surprised that the majority of policies do not cover routine and preventative visits; vaccines, microchipping, and exam fees are typically not included in standard insurance policies.
This is why finding the right insurance policy can be so confusing: you want to make sure you’re protected and prepared financially, without overpaying. And with literally hundreds of permutations of policies available, it’s no wonder pet parents are overwhelmed. So let us help you!
Policy Elements — What Does It All Mean?
Coverage
Coverage is a broad term describing what items the policy will “cover,” and at what rate. The majority of pet insurance plans are targeting illnesses and accidents, though some offer standalone or add-on wellness packages for preventative care and office visit fees (more on this later).
Deductible
The deductible is the amount you pay before the insurer begins to contribute.
Here’s an example of how a deductible works: Let’s say your deductible is $400. If this is your first claim to which the deductible applies, the covered treatment is $3,000, and your reimbursement rate is 90%, then the insurer will reimburse you $2,340 [($3,000 – $400) x 0.9)].
Deductibles vary significantly and come either as annual deductibles (how much you’ve spent on covered services within a year) or per-issue (how much you’ve spent on an ongoing issue). Annual deductibles can be useful in the event of a flurry of illnesses or accidents; per-issue can be useful in the event of persistent, chronic problems.
When you look at a deductible, consider the starting amount of what you’d be able to pay if your pet has an illness or accident.
Reimbursement Rate
The reimbursement rate is how much of your veterinary bill will be paid for by the insurer after the deductible has been met. For example, if your policy has a deductible of $700 and a reimbursement rate of 90%, and the total cost of covered services was $2,000, then you have $1,300 remaining – 90% of $1,300 is $1,170, which is the total that the insurer will reimburse.
Premium
The premium, the dollar amount that you pay monthly to the insurer, is typically calculated based on the risk of your pet needing covered treatment. It incorporates elements like breed, age, and location. Some insurers allow you to use sliding scales on things like your deductible or coverage amount to achieve the premium most appropriate for your financial situation.
Wellness Insurance, or Not?
If your pet has been fortunate enough to avoid illness or accidents that required treatment by a veterinarian, the only costs you are familiar with are those not covered by insurance.
When pet owners want to spread the financial costs of services like yearly exams and vaccinations over time, they turn to wellness plans. Your veterinary provider may offer this option to you directly instead of through an insurance company.
Determining whether these plans are worth the monthly payment is easy: take the total cost you’d pay in a year (monthly payment X 12, plus any one-time costs that may be incurred) and compare this number to what you would typically pay for the services on their own. Pay attention to what is included and take advantage of what they offer — veterinarians often design these plans to optimize your pet’s health. For example, if dental care is included, take your pet in for that dental procedure every year.
Some insurers do offer wellness coverage, too, and provide reimbursements – just like they do for accident or illness coverage. They tend to be cheaper, however, most of them also have a fixed value. Fixed value means they will pay up to a limit for each service type. If your veterinarian charges more than the limit, you will be on the hook for the remainder.
Summary
When deciding whether an insurer’s plan is right for you, consider your projected pet care costs along with the actual value of the plan. If the value is there for you and your pet — either because the total dollar amount paid per year makes sense, or because paying overtime is better for you — then go for it.
There are also companies, such as CareCredit, that offer financing for care. Unlike insurance, the CareCredit credit card functions just like you’d expect a credit card to function: you can use the card to pay for care*, and you can pay in monthly installments. Many pet parents use a combination of financing and insurance to ensure their pet’s care is covered. Many pet parents use a combination of financing and insurance to ensure their pet’s care is covered.
If you’re interested in learning more about specific pet insurance companies, download the PetDesk App. The app makes it easy for you to review personalized insurance options to help your pet live a long, healthy life without breaking the bank.
Pet insurance coverage offered and administered by Pets Best Insurance Services, LLC is underwritten by American Pet Insurance Company, a New York insurance company. Please visit www.americanpetinsurance.com to review all available pet health insurance products.
