What Is Pet Insurance, How Does It Work & What Is Covered? A Pet Parent’s Guide (2024)

What is pet insurance?

Pet insurance is a type of insurance policy that can help pet owners pay for the cost of veterinary care if their pet becomes sick or injured. Also known as pet health insurance or pet medical insurance, these policies provide financial security and peace of mind by limiting pet owners' financial risk caused by unexpected vet bills.

Since 2018, the total number of insured pets in the United States has grown at an average rate of 22.5% year-over-year as more and more pet owners seek solutions to manage the rising cost of vet care.¹ Prices in the veterinary service sector have outpaced inflation over the past decade, spiking by as much as 11.4% between June 2022 and June 2023, according to the Consumer Price Index.²

Pet insurance can provide valuable financial security for future visits to the emergency vet — which costs between $800 and $1,500 on average but can easily add up to $5,000 or more. Such an expensive and unexpected bill can present a significant financial burden for many pet parents, forcing them to question whether they can afford their pet's critical care.

While it's difficult to imagine your four-legged family member in such a scenario, the unfortunate reality is that one-in-three pets will need emergency medical treatment throughout their lifetime.

Even regular vet visits can be difficult to afford given the recent economic inflation, with the U.S. Bureau of Labor Statistics reporting a 10% spike in price from 2022 to 2023.

Pet insurance can provide valuable peace of mind by knowing if your beloved companion ever gets sick or injured, the cost of treatment will never stand in the way of their access to care.

How does pet insurance work?

Pet insurance can help save pet owners money on veterinary care by reimbursing a portion of their eligible expenses. While every policy is different, this is how pet insurance works in most cases:

1. Go to any licensed vet or animal hospital whenever your pet is sick or injured, knowing your out-of-pocket costs will be limited with insurance coverage. Pay the vet bill during your visit at the time of service.
2. Submit a claim to your insurance company by mail, app, or online internet browser. Some pet insurance companies may require paperwork or a medical history review to process your claim, so be sure to save all receipts and documentation you receive from your vet appointment.
3. Get reimbursed for 70% to 100% of covered expenses (after your deductible is met). On average, policyholders get reimbursed within 5 to 9 days after submitting a claim.

Most pet health insurance plans will reimburse you, the policyholder, rather than pay the vet directly. This means you don't have to worry about finding an "in-network" vet and can benefit from your coverage at any licensed vet clinic or animal hospital in the U.S.

💡 NOTE: Some providers, like Pets Best, offer the ability to pay the vet directly.

What does pet insurance cover?

Your policy will outline which conditions/expenses are covered, your reimbursment rate, your deductible, and the maximum payout (or annual limit).

No pet insurance company will cover a pre-existing condition, so it's important to enroll before any issues arise.

What Does "Deductible", "Reimbursem*nt Rate", and "Limits" Mean?

Insurance terms can be confusing, but they're important to understand so that you can compare coverage and costs properly.

The deductible is the portion of the veterinary bill you’re responsible for before your plan’s reimbursem*nt kicks in. Most pet insurance companies use an annual deductible. Some insurance companies offer a per-incident deductible, meaning if the same injury occurs more than once in future years, the deductible will no longer apply.

Reimbursem*nt Rate is the amount a pet insurance company pays you back for the cost of care. The most comprehensive pet health coverage will reimburse 80% to 100% of your total vet bill (after your deductible is met).

Limits are something you should consider when choosing a plan, especially as you anticipate how much and what type of care your pets might need for their ages and conditions:

• Per-incident limits cap how much you can be reimbursed for a single illness or accident. If exam fees, surgery, lab tests, medications, and follow-up care total $5,000 and your limit is $2,000, you are responsible for over half of the bill.
• Annual limits cap how much you can reimbursed within a 12-month period. Once you hit your plan’s annual reimbursem*nt limit, you are responsible for paying until your coverage resets for the year.

Finally, your premium is the fee you must pay each month (or year) to keep your insurance policy active. A higher monthly premium typically means you’re paying for more coverage, so you shouldn’t always go for the plan that has the lowest premium. Still, a plan with a low premium might be your best option if you’re on a tight budget.

💡 PRO TIP: If you need to save on monthly costs (your premium), you customize your plan and lower the reimbursem*nt rate, lower the limit, or raise the deductible.

🧡 RESOURCE:

• The Pet Insurance Terms Dictionary

What Does Pet Insurance Actually Cover?

The best pet insurance plans can provide substantial coverage for the most expensive health treatment and diagnostics.

However, depending on your insurance plan, your policy may not cover every condition/expense your pet has. This is why it's so important to find a plan that covers your pet's breed-specific health risks.

Pet Insurance Can Cover:

• Unexpected injuries/accidents (like foreign object injestion, broken bones, and more)
• Unexpected illnesses (like cancer, gluacoma, hip dysplasia, parvovirus, and more)
• Surgery (like cruciate ligament tears, cataracts, and more)
• Medication
• Tests/diagnostics (like x-rays, blood tests, MRIs, and more)
• Emergency exam fees

In general, most pet insurance plans will cover expenses in the above categories as long as they are not related to a pre-existing condition. The details will depend on the type of coverage (see the chart below) and the provider you choose.

Some Pet Insurance Plans Also Cover:

• Alternative therapies
• Behavioral modification
• Hospital boarding
• Lost pet advertising/reward
• Nursing/Whelping
• Chiropractic
• Acupuncture
• Hydrotherapy

Pet Insurance Does Not Cover:

• Pre-existing conditions
• Routine care/Wellness exams
• Preventative care
• Spay/Neuter
• Vaccinations
• Exclusions

💡 NOTE: Although no pet insurance providers cover pre-existing conditions, some providers will cover curable conditions after a certain waiting period with no recurring symptoms. Also, pets with a pre-existing condition are still eligible for insurance, their coverage would only exclude the specific condition that already exists.

Types of Coverage [Chart]

Generally, there are three types of coverage: accident-only plans, accident-illness plans, and accident-illness plans with wellness coverage:

The terms “accident” and “illness” might seem a bit vague, but there’s a difference between the two. An accident occurs when a pet is physically injured in an incident, which may result in fractures (broken bones), burns, cuts, or other physical injuries. Insurance that covers illnesses will cover treatments for viral infections, parasites, hip dysplasia, and even tooth extraction in the event of dental diseases, in some cases.

Accident-only plans will only provide reimbursem*nt for emergency care related to accidents, like if your pet is hurt by a car or injures themselves by falling down the stairs. This type of coverage does not cover illnesses or breed-specific issues

Accident-illness plans provide coverage for both accidents and unexpected illnesses. It is the most common, as it represents about 98% of plans issued by the pet insurance industry. This type of plan won’t cover preventive care or pre-existing conditions, but you can expect reimbursem*nt for almost everything else.

Finally, you can purchase an accident-illness plan with a wellness add-on. This is the most expensive type of plan on the market, but it provides the most comprehensive level of coverage. The only health issues that aren’t covered pre-existing conditions.

💡 NOTE: A Wellness Plan is not actually considered pet insurance. They help with costs around routine care, preventative care, checkups, and yearly vaccines, but not much else. These are usually sold as add-on features to other health insurance plans. This type of plan does not cover accidents, common injuries, or emergency treatments for illnesses.

🧡 RESOURCES:

• How to Compare Plans, Evaluate Top Providers, and Find The Best Policy
• Are Wellness Plans Worth It?
• Pet Insurance Options For Pre-Existing Conditions

How Much Does Pet Insurance Cost?

Pet insurance is generally affordable. The average monthly premium is $29 for a cat and $47 for a dog, but it’s important to recognize that there's a wide range in pricing (many see rates as low as $12/mo, others might see rates as high as $100/mo) depending on a few key factors.

Key Factors That Determine Rates

• Size (height, weight)
• Breed
• Age (compared to its typical life expectancy)
• Location
• Common indoor and outdoor risks in area
• Term and length of insurance policy
• Reimbursment Rate
• Deductible
• Payout Limit
• Plan type
• Policy provider

You can save on pet insurance by enrolling when your pets are still young, as your monthly premiums are guaranteed to be lower. Some pet insurance providers will also give you a discount on your bill if you agree to make annual payments instead of monthly payments. Others offer discounts if you insure multiple pets under the same provider.

Another way to keep your premiums low is to select a higher deductible, but keep in mind that you’ll have to reach that deductible by paying out-of-pocket before your insurance plan begins to reimburse your veterinary costs.

Similarly, you can keep costs down if select a lower reimbursem*nt rate or a lower coverage limit, but this will limit the amount you receive from your insurer if your pet gets seriously ill or injured.

💡 NOTE: You can use Pawlicy Advisor's free analysis tool to see the Lifetime Pricing Score for each plan, customized to you.

So, Is It Worth The Cost?

Dr. William Hodges, DVM, Dr. Ricky Walther, DVM, Aliyah Diamond, Surgery Technician, and thousands of other veterinary professionals say "yes, it is worth it." Now, if your pet and older and already diagnosed with several conditions it is likely not the right tool, but for many (especially new puppy/kitten parents) it can be a literal lifesaver.

Many pet parents agree: