What is Pet Insurance and How Does it Work?

pet insurance

It seems like every odd year or so, new polls come out showing that Americans, especially younger Americans, are leaning more towards investing their time and money in pets rather than children.

According to a poll conducted last year by Harris Poll and Volvo, 69% of Americans see their pets as family members, and 23% view their pets as their children. And U.S. spending in the pet industry has nearly doubled since 2010, from $48.35 billion to an estimated $75.38 billion this year. A 2017 survey found that Americans spend an average of $1560 per year on routine care for their pets—which sounds low for any pet owners who send their pets to day spas or pet daycare. And that does not take into account those who run into medical problems.

Considering that many Americans are just one missed paycheck away from financial emergency, pet expenditures can add up quickly. With advances in veterinary technology and an increasing willingness by pet owners to pay for expensive medical treatments for their pets, the costs are even higher.

Are you prepared for a medical emergency for your pet? Pet insurance may something to consider.

What is pet insurance?

Pet insurance is similar to health insurance for humans in that it can help you cover big medical expenses. Fortunately, there are an increasing number of employers that have pet insurance as an optional employee benefit. If your head is spinning with plan options, an insurance broker can help you find the best plan for your pet.

Even though it seems to resemble health insurance for humans, pet insurance is actually a kind of property insurance. So unlike health insurance for humans, that often has a co-payment or bills that come to you after your insurance has been billed, with pet insurance, you pay your bills upfront and your pet insurance provider will reimburse you afterward.

There are some differences between pet insurance policies with what amounts are covered and how, even for covered injuries or illnesses. Some policies have per-incident deductibles and others have an annual deductible. Some plans may have limits or caps on what is paid, which could be an amount per incident, per year, or over a pet’s lifetime.

Coverage may be cheaper depending on the kind of animal (cats are cheaper than dogs), breed, and age, and based on where you live.

What does pet insurance cover?

Most pet insurance covers injury or illness to your pet, and not preventative care, like vaccines and routine checkups. Every plan covers different kinds of medical expenses and different kinds of animals. Cats and dogs are the most commonly insurable animals, but there are policies that will cover birds, horses, and more exotic pets.

You can find plans that cover costs related to only to accidents, like injuries from being hit by a vehicle, or only for illness, or both. There are some plans that do cover preventative care, or “wellness” care, or you may be able to add a wellness rider to your preferred plan.

For some plans, certain hereditary or congenital conditions are not covered, such as hip dysplasia, cataracts, or heart defects. Some plans do not pay for elective procedures, such as spaying or neutering, and others do. Make sure you know what exceptions a policy may have before taking the plunge.

Other options

Whether or not pet insurance is worth it may depend on the type of pet you have, how old they are, and any known issues they have or any known predispositions for health issues for their breed. For some, having an extra preventative care rider is worth it, and for others there may not be much in cost savings.

Pet insurance may not be an ideal fit for all pet owners, but it is likely that you are faced with a $2,000-4,000 veterinary bill at some point in your pet’s life. If pet insurance does not meet your needs, you may consider slowly setting aside money for an emergency fund for your pet—just make sure you are prepared for your own emergencies as well.