In my experience, pet owners come in one of two groups. The first group loves their pet like it is their child, and they know it. The pet owners pick their housing based off of the proximity to a dog park or pet day-care location. They buy only the finest pet foods. These pet owners will do anything, including draining their bank account, for the well-being of their fur babies.
The second group has a more rational approach towards pet ownership. They buy mid-priced food for their pets, and try DIY methods for teeth cleaning to keep costs low. They say things like, “When Fido’s time comes, I’ll take her for a long walk, feed her a steak, and bring her in to the vet.” That is, they say those things until Fido’s time comes. Then, they will do anything, including draining their bank accounts, for the well-being of their fur baby.
For pet owners who really will do anything to keep their pets healthy, vet bills can add up. Treatments for bone fractures, cancer, and genetic conditions can cost hundreds or even thousands of dollars out of pocket.
With such high costs, pet owners may want to consider pet health insurance (PHI) to cover unexpected expenses. But like many types of insurance, PHI can be confusing. This guide covers the ins and outs of pet health insurance, so you can make an informed decision about whether to buy it yourself.
What Is Pet Health Insurance?
Pet insurance is a type of property insurance that protects the financial well-being of pet owners.
When a domestic pet (such as a dog or a cat) becomes sick or injured, the owner of the pet must pay a vet for the pet’s care. If the owner is unable to cover the cost of the pet’s healthcare, the pet may end up in pain or dying due to lack of care.
Much like human health insurance, pet health insurance covers some or all of the costs of pet health needs. Generally, pet health insurance comes with an annual deductible (the amount that an owner is 100% responsible for) and a co-insurance requirement.
The co-insurance requirement means that the owner must pay for at least a percentage of the vet’s bills. Usually the insurer pays for 80% of expenses, and owners have a 20% co-insurance requirement.
In the United States, only about 2% of dog owners and 0.5% of cat owners carry pet health insurance today.
What Does It Usually Cover?
Normally, pet health insurance falls into one of three buckets. It can be wellness care which covers the cost of pet wellness (for example, flea treatments and annual vet visits). It can be accident and illness coverage which covers some or all of the cost of emergency vet visits. Or it can be comprehensive coverage which covers wellness, accidents, and illnesses.
What Is A Normal Deductible?
In insurance, a deductible is the amount a person must pay before the insurance coverage kicks in. Most insurance types, including homeowners, auto, and health insurance, have deductibles. Most PHI plans have a deductible.
A deductible under a pet health insurance plan can take two forms: annual or per-incident. An annual deductible is a set amount (say $500) that the pet owner must pay before the insurance kicks in. You only have to meet the annual deductible once per year. That means if Spot ends up at the vet four times, you pay the first $500 of costs for the year. Once the deductible is paid, you split the cost of the care with the insurance. Generally, the insurance company pays 80% of the rest of the cost, and the pet owner pays 20%.
Per-incident deductibles are a bit more complicated. You pay the deductible each time your pet visits the vet. Consider a plan with a $150-per-incident deductible. If your pet visits the vet four times, you will pay the $150 deductible four times, plus your share of the remaining cost.
What Is the Co-Insurance Part of Pet Health Insurance?
In general, insurers only cover part of a pet’s medical expenses, even after the deductible is met. Typically, the insurer pays 80% of costs, and the pet owner has to pay 20% of costs. This is called the co-insurance component.
What Companies Offer Pet Health Insurance?
The three largest companies that offer pet health insurance in the United States are Nationwide, Trupanion, and Healthy Paws. However, the pet insurance marketplace is rapidly growing, with lots of start-up companies offering competitive pricing on their insurance products.
How Much Does It Cost?
The cost of pet health insurance depends on a number of factors. The biggest factors are the species of pet (dogs cost more than cats) and the age of your pet. Smaller factors include the breed (certain breeds are more prone to illness than others) and where you live. The amount of your deductible, and the co-insurance you choose, will also affect the rates.
The average premium for accident and illness coverage is $516 per year, but costs can be as high as $150 per month for comprehensive coverage for a large dog, or as low as $25 per month for dogs or $10 per month for cats.
Things to Look for When Buying Pet Health Insurance
When you’re thinking about buying pet health insurance, you need to consider a large number of factors. You’ll need to balance the coverage rules with the costs and benefits of the insurance.
- Does this cover the right things? In the United States, 98% of pet health insurance policyholders have accident and illness coverage. This protects the owner financially no matter what goes wrong for their pet.
- Will rates change in the future? Rates on pet health insurance may increase if your pet makes a claim in a given year. You can ask a company rep to explain how your pet’s health insurance rate may change if you make a claim. Additionally, you should ask whether an annual rate increase is expected (due to your pet aging a year).
- How does the coverage treat chronic conditions? Not every PHI policy covers chronic conditions. And some policies have a waiting period for chronic condition coverage. Read the policy details or speak with a rep if this is a concern for you.
- What is the monthly premium cost? Monthly premium costs can range from a few dollars to more than a hundred dollars. Generally, the higher the premium you pay, the lower the co-insurance you’ll have. However, premiums for pet insurance are all over the map — be sure to shop around to find the best rate on the best coverage.
- Is there a cap on insurance payouts? Most pet health insurance policies come with an annual cap on payouts. A common cap on payouts is between $5,000 and $10,000 although there are options for no caps.
- What is the pet owner’s share of co-insurance? Generally, a pet owner is responsible for 20% of a pet’s medical bills after the deductible is met. However, a pet owner may be responsible for anywhere from 0% to 35% of the costs.
- How is the deductible set? It is important to clarify whether the deductible is set on a per-incident basis or on an annual basis.
- Is there an age cutoff for pets? Many pet health insurance policies exclude coverage for pet babies up to 8 weeks of age and for aged pets over 12 years of age. If you have an older pet, this is an important question to consider.
Is Pet Insurance Right for You?
I am surprised by how few pet owners have pet insurance. Most people cannot afford a $1,000 pet-related emergency without going into credit card debt. Unless you have substantial savings, a pet insurance policy seems like a great deal. Even if you have a few thousand dollars in the bank, a policy with a high deductible can make the prospect of an expensive surgery easier to swallow.
As long as you shop around for the best deal, pet health insurance can be a cost-effective way to protect your bank account while you protect your pet’s health. It’s not necessary in the same way that human health insurance is, but for pet lovers, it could be the best few hundred dollars you spend each year.