How does pet insurance work?

 

 

According to the North American Pet Health Insurance Association, there are 179 million pets in North America, causing an estimated $58. 5 billion in annual expenditures. Vet care is the third largest expense in the category and costs pet owners about $15. 25 billion per year.

Americans have taken note of the rising cost of veterinary care. More than one million pets are now covered by pet insurance, at a collective cost of $595 million. It's a relatively new industry: it wasn't until that famous dog, Lassie, got pet insurance in 1982 that pet insurance became a formalized option. Since 2009, the industry has grown an average of 13.2% annually; From 2012 to 2013, there was a 14.6% increase in active policies.

Despite its growing popularity, it's not easy to find information about pet insurance, as only a handful of companies hold nearly 90% of the market share. Here's what you need to know.

It's not human health insurance

You love your pet like a member of the family, but the insurance industry views Fido or Fluffy more as property. That's why home insurance works more like property insurance than health insurance. But before you remind anyone that your pet is not a piece of property, this designation works in your favor. Reading and understanding the policy is a breeze compared to health insurance written for people. Consider these benefits:

1. You can choose your veterinarian. As long as the vet is licensed, pet insurers won't tell you who you can and can't see. There are no in-network or out-of-network doctors, as your own health insurance likely dictates.

2. Simple policies Most companies have a small number of levels to choose from. One may only cover accidents, another may cover accidents and illnesses, and a third covers more conditions.

3. Premiums are relatively inexpensive. The average monthly cost for a dog with the lowest tier was less than $14 per month. The top plan averages $98 per month. Of course, the cost depends on a variety of variables, including the breed and age of the pet you live with and the options you choose as part of your policy. Cats are even cheaper.

If you understand insurance speak, you can come up with a pet insurance plan. You pay a monthly or annual premium, you must pay a deductible (a set amount before the policy starts), and you may have a co-pay. Annual deductibles are generally low – between $100 and $250 – and expect your worst-case co-pay to be no more than 30% of the cost.

There is a big difference compared to many human health policies. The first person to pony up the money is you – not the insurance company.In other words, as the sign in some doctors' offices says, “Payment is due at the time of service. “After you pay, file a claim with your pet insurer and wait for a check to arrive.

Some veterinarians may allow you to waive payment until the insurance company pays its share. But before you say yes to that high-dollar policy, make sure you're clear on your payment method.

What if my pet is not a dog or cat?

Your choice of insurers may only be one or two. In fact, dogs alone accounted for 90% of all policies in the continental U.S. in 2013 – the most recent data available. Cats accounted for most of the remaining 10%.

If you have a bird, iguana or other pet, check out Veterinarian Pet Insurance (VPI), a division of popular insurer Nationwide. It's probably the largest and best-known exotic pet insurance provider.

What you need to pay attention to

First, if your pet has pre-existing conditions, your policy probably won't cover them. If your pet is bspw. Has abdominal pain, some companies may try to limit coverage to any condition that lists abdominal pain as one of its symptoms. Before committing to a pet insurance policy, talk to the company and have them clarify how they decide what constitutes a pre-existing condition. Something in your pet's medical records that is harmless may become a big deal if you later file a claim.

On a related note, you may need to have your pet examined by a veterinarian before getting coverage if it hasn't seen a vet in more than a year.

Next up, waiting times. You can't buy pet insurance if you learn your pet requires a costly procedure. Insurers know this trick. That's why they've instituted waiting periods. Waiting time varies by condition, but is typically 24 to 48 hours for accidents and from 14 days for an illness to a year for certain conditions, depending on the type.

Ask for maximum payouts. These may include maximums per incident, per year, or over the life of the policy. Generally, the highest level policies have the highest payouts.

Finally, most policies will increase your premium to account for rising costs and your pet's condition and age. However, some companies do not. Ask about price increases before you sign the policy.

Is it really worth the cost?

According to a respected consumer magazine, probably not. Consumer Reports examined the policies of the three insurers that hold a combined 90% market share in pet insurance and compared them to lifetime vet bills for a 10-year-old beagle living in relatively good health in New York.

The magazine found that none of the nine policies would have paid out more money than the total amount of premiums the owner would have spent.

But when Consumer Reports added some hypothetical and costly health conditions into the mix, they reported that “some policies” Responded to a positive payout.

In the case of cats, CR looked at a kitten with a heart condition that cost about $7, 100 and a 10-year-old cat that required $9,000 for cancer treatment.In both cases, pet insurance would have saved owners money.

The report also found that pet insurance for health care is not worth the cost. According to the report, it's probably better to pay out of pocket for routine veterinary care.

But remember that pet insurance, or any insurance for that matter, is not designed to make a profit (except for the insurer). You buy insurance to protect yourself from catastrophes, and shouldn't expect to make money.

The Bottom Line

The verdict, as with most types of policies: if something really bad happens, the insurance is worth the premium years you paid. For routine or relatively minor issues, it's probably better to put the monthly premium into a cat or dog emergency fund to pay for those unexpected bills. If you choose to buy pet insurance for catastrophic care, you'll get the highest deductible you can comfortably afford. For more information, see Top tips for cutting pet care costs and What you need to know about pet wellness plans .