How does pet insurance work?

It's unnerving when your pet sustains an injury or suddenly becomes ill, and the feeling can worsen when you see the vet bill. That's where pet insurance can help by offsetting the cost of your pet's care or even covering them completely.

Pet insurance works similarly to human health insurance, whereby you pay a monthly premium and receive coverage for medical care, prescriptions and, in some cases, wellness and preventative care.

Americans appear to be catching on to the benefits of pet insurance for their furry friends. The pet insurance industry eclipsed $2.83 billion last year, and growth more than doubled from 2018 to 2021, according to the North American Pet Health Insurance Association (NAPHIA).

If you're contemplating signing up for a pet insurance policy, it's wise to understand how it works. Not sure what to expect? You can get a free pet insurance quote in 30 seconds here.

How does pet insurance work?

With pet insurance, you'll pay a monthly premium for coverage or annually if you want a cheaper rate. Most pet insurance policies operate on a reimbursement model. In other words, you pay your veterinarian, and your pet insurer pays you back.

If you need to file a claim, you'll typically give the insurance company the vet's invoice and your pet's health records, and you'll receive your reimbursement reasonably quickly. For example, Fetch by The Dodo states that claims are usually processed within 15 days via direct deposit.

Nearly all pet insurance companies provide coverage for dogs and cats. Nationwide is the only widely known carrier to cover animals that fall under the "exotic animal" category, which includes:

• Amphibians
• Birds
• Ferrets
• Guinea pigs
• Rabbits
• Reptiles

The different types of policies available and what they cover

Generally, providers offer three types of pet insurance to select from:

• Accident-only coverage: This plan strictly covers veterinary bills for treating injuries stemming from accidents, like broken bones or accidental poisoning. Accident-only pet insurance is typically the most affordable coverage option.
• Comprehensive pet insurance: Accident and illness pet insurance plans provide broader protection, albeit at a higher price. In addition to covering injuries from accidents, these plans usually cover treatments for allergies, cancer, diabetes, hereditary conditions and other illnesses and diseases.
• Preventative care plans: Some pet insurers offer wellness or preventative care packages as add-ons or as separate plans. For example, Spot offers two additional healthcare packages: The Gold package provides dental cleanings, heartworm tests and other services for $9.95 per month. For $24.95, the Platinum package adds on blood tests, deworming, urinalysis and other services to help keep your best pal healthy.

Explore your policy options with top pet insurance provider Lemonade now or use the table below to compare providers. 

How pre-existing conditions factor in

Regardless of which provider or plan you select, pre-existing conditions usually are not covered. In some cases, companies have a waiting period for specific pre-existing conditions your pet shows signs of or has been diagnosed with. Some companies will extend coverage if your pet shows no symptoms for a defined period, such as one year.

For instance, Spot states they can provide coverage "in the future if the condition is curable. An injury or illness that is curable, cured, and free of treatment and symptoms for 180 days will no longer be regarded as pre-existing, with the exception of knee and ligament conditions."

How filing a claim and reimbursement works

Pet insurance works on a reimbursement model, which means you won't be able to factor in your insurance the same day your pet receives care. Instead, you'll pay your coverage up front and file a claim by submitting your veterinary bill and pet health records to your insurer.

Generally, you'll receive reimbursement at a later date for a percentage of the bill. The reimbursement amount you'll receive depends on the option you choose when you sign up for a policy, typically between 70% and 90%, minus your deductible.

For example, let's say a veterinarian performs surgery on your pet, leaving you with a $5,000 bill, and you have a policy with a 90% reimbursement rate and a $250 deductible. In this case, your policy would cover up to $4,500 (90%), which would kick in after you paid your $250 deductible. In all, your coverage would pay $4,250 ($4,500 minus $250), and you would be responsible for paying $750.

The bottom line

Consider your budget when signing up for pet insurance. Do you have enough savings to cover veterinary services if your pet unexpectedly sustains an injury or illness? Also, how much can your monthly budget afford to pay for premiums? Enrolling in a pet insurance policy with a low deductible may be worth it for peace of mind.

Start with a free price quote now so you know exactly what to expect.