What Is Pet Insurance, and How Does It Work?

Look beyond the cute puppy and kitten photos on pet insurance websites and learn how the plans truly work.
It’s a pet parent’s worst nightmare. Bella digs a hole under the fence and escapes onto a busy road, where she’s hit by a car. Fortunately, the accident isn’t fatal, but it results in an eye-popping emergency vet bill that could take months to pay off. Could pet insurance have prevented this?

While having insurance won’t keep furry pals in the yard where they belong, it can help cover those unexpected medical expenses that sometimes come with owning a pet.

What is pet insurance?
Like human health insurance, pet insurance covers the cost of medical care. If your furry friend gets seriously sick or injured, the vet bills for treatment can add up fast. A pet insurance policy can help you pay them.

Pet insurance is designed to cover unexpected costs, so it may not pay for routine care or conditions your pet had before you bought the policy. Because it’s not a policy you’re required to buy, some people may decide to cover all of their pet’s medical expenses themselves instead of buying insurance they’re not sure they’ll use.

There are three main types of pet insurance plans:

Accident and illness. The most common type of pet insurance, these plans cover treatment for illnesses and accidental injuries.

Accident-only. These plans tend to be more affordable. They’ll pay if your pet swallows a toy or is hit by a car, but not for any illnesses such as diabetes or arthritis.

Wellness or preventive care. This type of coverage is usually an add-on to one of the policies above. It’ll pay for well visits, vaccines and other routine care.

» MORE: What does pet insurance cover?

How does pet insurance work?
After you buy your pet insurance plan, you’ll usually have a short waiting period before the coverage takes effect. Waiting periods are typically a few days to a couple of weeks, but some companies impose longer ones for certain problems such as cruciate ligament injuries or hip dysplasia.

Once the waiting period is over, your pet’s vet expenses will be eligible for coverage as long as you continue to pay your premiums. Depending on your insurer, you may be able to pay on a monthly or annual basis.

» MORE: Pet insurance waiting periods: What you need to know

Most pet insurance plans allow you to bring your furry friend to any licensed vet for treatment, so you don’t need to worry about whether a given clinic is “in network.”

In most cases, you’ll pay the vet bill upfront, then submit your receipt to the insurance company for reimbursement. However, some pet insurers may be able to pay your vet directly so you don’t have to put out as much of your own money.

Below are a few factors that could affect how much of your vet bill your insurer will cover.

» MORE: Does pet insurance cover spaying or neutering?

Payout limits
Some plans don’t cap how much they’ll pay for covered treatments, but many insurers have maximum payouts. (In many cases you can choose either an annual limit or an unlimited option.) Here’s where you need to read the policy language carefully. There may be a payout limit for the year or for a certain incident or condition.

The higher your payout limit, the more your plan will cost.

Deductibles
A deductible is the amount you pay out of pocket before the insurance company starts paying. Under many pet insurance plans, the deductible is applied annually. Once you’ve paid the deductible toward covered treatment, the plan starts reimbursing you. The deductible is reset when you renew the policy each year.

Under some other plans, the deductible is applied per incident. Once you pay the deductible for a particular injury or illness, the plan reimburses you up to the policy’s limits, even in subsequent plan years. This can save you money if your pet develops a chronic, lifelong condition. But if your pet develops a few different medical problems in one year, you have to pay the deductibles for each one.

Raising your deductible is one way to save money on your pet insurance premiums. Just make sure you’ll feel comfortable covering the higher amount if your pet gets sick.

Learn more about pet insurance deductibles.

Reimbursement levels
Pet insurance plans generally reimburse you a percentage of the treatment costs. You choose the reimbursement level when you buy the policy, such as 70%, 80% or 90%.

Read the details of how reimbursement works. Most plans reimburse you a percentage of the vet’s bill. Others reimburse you based on a benefit schedule they’ve established for each condition; if the vet charges more than the amount on the benefit schedule, you’re responsible for the difference.

Choosing a higher reimbursement amount generally means you’ll pay more for your plan.

» MORE: The best pet insurance companies

Who can get pet insurance?
Most pet insurance companies insure only dogs and cats. ASPCA insures horses, too, while Nationwide sells plans for birds, snakes, rabbits and other “exotic” pets.

Some insurers accept new pets only within certain age limits. Often, puppies and kittens must be at least 6 to 10 weeks old.

Although some plans have no maximum age limits, others restrict coverage for older pets or cut off first-time enrollment at ages 8 to 14. Once you’re enrolled, though, most plans will offer pet insurance coverage for life as long as you continue paying the premiums.

Some plans also require your pet to have seen a vet recently, or ask that your pet undergo an exam before they’ll sell you a policy.

» MORE: How much does pet insurance cost?

Do you need pet insurance?
There’s no law requiring you to buy insurance for your pet. Most people pay their vet bills themselves instead of getting pet insurance. For animals who stay relatively healthy, this may be cheaper than buying insurance.

However, having pet insurance can save you money if your pet develops a severe illness or an injury requiring expensive surgery. In some cases, it could even spare you a difficult decision between euthanasia and going into debt to pay for treatment you can’t afford.

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