What is pet insurance?
Key takeaways
- Both pet and human health insurance provide peace of mind when covering the high cost of medical bills.
- Pet insurance and human health insurance have monthly premiums and annual deductibles.
- Human health insurance offers free preventive coverage, whereas pet insurance charges for wellness plans or add-ons.
- Pet insurance often requires full payment upfront, with reimbursement later, unlike human insurance, where you usually just pay a copay.
Pet insurance is like human insurance in many ways. It helps you pay for unexpected vet bills when your dog, cat or other pet gets sick or injured.
This coverage is particularly valuable because vet care can quickly add up (especially in emergencies), leaving pet owners with difficult decisions about affording treatment.
While both types of insurance provide a cushion between high medical bills and your wallet, there are important differences. Let’s look at what pet insurance does and doesn’t do and how to decide if it’s a good choice for you.
What pet insurance does
It’s no secret that vet care can be costly. Pet owners shelled out $38.3 billion in vet care and products in 2023. Pet insurance helped defray some of these costs. Moreover, owners with pet insurance are also more likely to take their pets to the vet knowing there was some financial assistance.
As a specialized type of insurance policy, pet insurance covers veterinary costs for unexpected injuries, illness or wellness visits. This could be anything from bee stings and broken bones to chronic conditions (like diabetes) and even cancer.
- Accident-only plans: Covers injuries from accidents, such as broken bones or ingesting foreign objects.
- Comprehensive plans: These plans combine accident and illness coverage, often including treatment for common illnesses, cancer or chronic conditions and prescriptions.
- Wellness plans: Covers routine and preventive care, such as vaccinations, flea/tick treatments and annual exams. Some pet wellness plans are prepaid veterinary care plans. Many veterinarians and animal hospitals offer prepaid plans that focus on preventive care services, such as vaccinations and routine checkups, and provide discounts on other services.
What pet insurance doesn’t do
Pet insurance offers protection against unexpected medical expenses from accidents, illnesses and emergencies. However, pet owners often have to pay the bill up front and submit a claim for reimbursement.
There are limitations. For example, pet insurance does not cover pre-existing conditions. There is also a waiting period. If something happens during that waiting period, your furbaby may not be covered, depending on your plan.
Unless specified in higher-tier plans or included as add-ons, pet insurance doesn’t cover routine wellness, preventative care or alternative therapies. Coverage costs also go up as your pet ages.
Keep in mind: Many veterinarians and animal hospitals offer their version of prepaid wellness plans that focus on preventive care services, such as vaccinations and routine checkups, and provide discounts on other services.
What to expect with pet insurance
Here’s a quick breakdown of how pet insurance works:
- When you enroll your pet in a pet insurance plan, you typically pay a monthly premium. This can range from $17 a month to as much as $56 a month depending on your pet’s age, breed, location (where you live) and choice of coverage.
- In return, the insurance company agrees to reimburse you for a portion of eligible veterinary expenses, such as surgeries, medications and hospitalizations. Some insurance companies will even pay the vet’s office directly.
Similar to human health insurance, there are often deductibles (a fixed amount you have to reach out of pocket before the insurance kicks in), co-pays (your share of the service fee after the deductible is met) and caps on how much can be reimbursed in a year.
Pet insurance vs. human health insurance
You can tell human health insurance has been around for a while. It is well-integrated with health care providers, making the process smooth and direct. Human health insurance requires copays, deductibles and monthly premiums, but it’s designed to keep medical care affordable.
Pet insurance is a relatively new industry, and it’s evolving as it grows. A 2023 North American Pet Health Insurance Association (NAPHIA) state of the industry report showed that more than 5.5 million pets are insured in the U.S. with $3.9 billion in total premium volume.
While pet insurance does help with unexpected high vet bills through copays, deductibles and coverage plans, the out-of-pocket costs can be much higher. The following table breaks down several key differences.
The following table breaks down several differences.
| Feature | Human health insurance | Pet insurance |
|---|---|---|
| Doctor visits | Patients pay a copay for most visits and insurance kicks in after deductibles are met. | In most cases, you pay the full vet bill at the time of service and are reimbursed based on deductibles and your coverage plan. |
| Cost structure | Premiums average around $477 per month and can be subsidized by an employer or the government. | Premiums average around $49 a month for dogs and $28 a month for cats. But also vary based on age, breed and location. |
| Coverage limits | Cannot impose lifetime limits on coverage. | Most pet insurers require you to submit a claim, rather than dealing with the vet office. |
| Enrollment period | Unless starting a new job or having a family change, most patients have to wait for open enrollment periods. | You can enroll your pet at any time. |
| Preventive care coverage | These services are typically free of charge for most medical plans. | Most standard plans do not cover routine or preventive care, though some offer wellness add-ons for an extra cost. |
| Prescription coverage | Prescriptions and medications are included in most plans. | Pet owners usually pay extra for prescription coverage or have discounts offered within their plan. |
Keep in mind: Pet insurance is very different from human health insurance, but knowing the differences can help pet owners better navigate the specifics of pet insurance and how it might best serve their needs.
Pros and cons of pet insurance
The biggest reason pet owners choose pet insurance is that it can significantly alleviate the financial impact of unforeseen vet care. As with all financial products, though, there are pros and cons to weigh out before purchasing a pet insurance policy.
Pros
- Lower premium cost: The monthly premiums are hundreds of dollars cheaper than human health insurance.
- Customizable plans: With three main types of coverage plans and add-ons available, pet owners can tailor a policy that fits their pet’s needs within a fixed budget.
- Flexible network: While human health insurance mandates which doctors you can see, pet insurance allows pet owners to seek treatment from any licensed veterinarian or specialist.
- Comprehensive pet care: Knowing there is financial protection and assistance, pet owners aren’t forced to make difficult decisions or skip expensive treatments based on cost alone.
Cons
- Exclusions and limitations: Pet insurance policies often come with exclusions and limitations, particularly regarding pre-existing conditions, routine wellness care and specific treatments unless add-on coverage is acquired.
- Out-of-pocket payments: Because pet insurance has a reimbursement model, pet owners have to pay the veterinarian or ER for services rendered and then navigate the process of getting their money back.
- Premiums increase with age: Young, healthy pets require lower premiums. But as pets age, the price can go up. Over time, this could outweigh the financial benefits if the pet remains healthy.
- Underutilized benefits: Some pet owners may see a lower return on investment if their pet remains healthy and doesn’t require a majority of the veterinarian care provided by the pet insurance.
Do you need pet insurance?
When deciding whether to invest in pet insurance, here are several factors to consider:
- Your pet’s age
- Your pet’s breed
- Potential breed-specific health conditions
- Activity level for your pet
- Vet care prices in your area
- Your financial situation
An accident-only policy might be a cost-effective option if your pet is not as active or stays indoors. Some breeds are prone to chronic conditions, so you may save money with an illness plan in the long run.
If you’re not in a position to handle a sudden, high vet bill, insurance could be a prudent choice. However, pet owners need to be prepared to pay upfront and out-of-pocket costs. This is when setting up a savings account or applying for medical credit cards can help.
Earn money while saving! High-yield savings accounts earn eight times more interest than traditional savings accounts, which can help with premium payments.
The bottom line
Compared to human health insurance, pet insurance has a different structure but ultimately gives pet owners access to affordable treatment options. Knowing the differences can help you navigate the specifics as you research your options.
The next step is to find the best pet insurance company that offers what your pet needs within your budget.
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