Pet Insurance: What It Is and How It Works

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Everyone loves their pets and wants to treat them like family. But should you get them their own insurance policy?

Unexpected vet visits can be costly. Pet insurance helps pay for veterinary bills in the case of injury or illness in your pet. According to the North American Pet Health

Insurance Association, 68% of American households have pets, but only 1% of pet owners have pet insurance.

No one wants to put their pet down if they can’t afford the bills. Pet insurance can help you if you need to pay for an expensive surgery or mend a broken bone.

What Is Pet Insurance?

Pet insurance is a policy that reimburses you for certain vet expenses.

Pet insurance policies are similar to health insurance policies for humans. An unexpected vet visit can put you out hundreds or thousands of dollars.

If your pet becomes seriously ill or injured, pet insurance will cover some or all of the cost.

Cancer treatment is an example of how pet insurance can help ease your financial burden. Radiation therapy can cost as much as $10,000, whereas tumor removal can cost anywhere from $3,000 to $6,000. Pet insurance can make these expenses more manageable.

Types of Pet Insurance

There are several types of pet insurance policies that you can purchase:

  • Accident-Only: covers only accidents and injuries, like if your dog is hit by a car.
  • Accident and Illness Plans: the most common type of plan. Covers accidents and illness, like cancer or infections.
  • Insurance with Wellness Coverage: covers most everything; accidents, illness, routine visits, dental care, flea and tick medicine, and more.
  • Endorsements: additional coverages to add to your policy.

Most pet insurance policies have an annual premium of a few hundred dollars a year, with monthly payments of about $30-$40.

If you pay your premiums on time, you can get most vet bills reimbursed. However, there are some common pet ailments that pet insurance doesn’t cover.

What Does Pet Insurance Cover?

If you decide you would like to purchase pet insurance, it is important to understand what is and isn’t covered by many policies.

Pet insurance reimburses you for any veterinary expense that is covered by your policy. This typically involves:

  • Accidents
  • Injuries
  • Surgeries
  • Cancer Treatment
  • Other Costly Procedures

Pet insurance policies typically will not cover costs associated with any preexisting medical conditions.

They also omit reimbursement for costs associated with routine check-ups or preventative care or common dog ailments. These include:

  • Dental Disease
  • Hereditary Conditions
  • Behavior Issues
  • Elective Procedures (Ear Cropping or Tail Docking)
  • Hip Dysplasia
  • Grooming

How Does Pet Insurance Work?

Pet insurance differs from traditional health insurance in that it does not pay the vet directly. Unlike your health insurance, pet insurance requires you to foot the entire bill at the vet’s office.

Afterward, you can file a claim with your insurance company to have the expense reimbursed. Make sure you always hold onto vet bills or receipts so that you can present them to the insurance company when it comes time to file your claim.

Because pet insurance reimburses you after the fact, you don’t need to worry about if your vet is in-network like you do with health insurance. You can visit any vet you like, and your insurance company will reimburse you for what you paid.

Much like health insurance, pet insurance policies are structured based on three basic parts:

  • Deductible: The amount of money you need to pay towards vet costs before the insurer pays
  • Reimbursement Level: The percentage of a vet bill that an insurer will pay after you reach your deductible.
  • Annual Max: The maximum amount the insurer will pay in medical bills per year. Any charges above this come out of pocket.

Your policy is structured based on these parts. For instance, you may have a deductible of $100, a reimbursement level of 100%, and an annual maximum of $12,000.

This means that if your pet is in an accident and requires a $15,000 surgery, you would pay $100, the plan would pay $12,000 and you would be responsible for the remaining $2,900.

Pet Insurance Waiting Period

Pet insurance does not kick in as soon as you purchase your policy.

Many pet insurance companies have a waiting period between purchasing your policy and when coverage actually kicks in. This period is usually a few days for basic accident coverage. If an injury occurs during this waiting period, it would not be covered by your policy.

You will also need to take your pet to a vet to determine if there are any pre-existing conditions. Once established, the insurer will not cover costs associated with this condition.

What Affects Pet Insurance Premiums?

Several factors will affect your premium. Much like other insurance policies, a pet insurance policy will cost more if you opt for more coverage.

There is a relationship between your premium payments and how much you are willing to pay for your deductible. If you opt for a low deductible, you will end up paying more each month because you are fronting less of the risk.

You can also choose to purchase endorsements for your insurance policy. These are additional coverages that you can add to your overall policy for more protection.

These can include exam fees, routine check-ups, or prescription food. These will add to your monthly payment, but they also cover expenses that normally would not be covered under a typical pet insurance policy.

Pets that are considered to be at a higher risk for injury or illness by the insurance company will have higher premiums. Pet insurance for dogs generally costs more than for cats. We take them out into the world to go for walks and play catch at the park. Therefore, they are automatically riskier than cats, which spend most of their life inside.

These are some other factors that can affect your pet insurance premium:


Purebred dogs are generally more expensive to insure than mixed breeds. Certain breeds can carry specific genetic disorders that can pop up. This poses potentially expensive health risks that can crop up later in life.

Larger breeds are also more expensive than smaller breeds. They tend to have more health problems that can affect their lifespan.


Similar to life insurance, it will cost you less if you purchase a policy on a younger dog.

An older dog will have more problems related to age, and this will make the premium more expensive.

Where You Live

Like your car insurance, your pet insurance policy can be affected by where you live. You will likely pay more if you live in a big city versus a rural area.

Is Pet Insurance Worth It?

If you are still on the fence about whether to purchase pet insurance, consider the following questions:

  • How much am I willing to pay if my pet has an emergency?
  • How much can I actually pay?
  • How many emergencies can I tolerate?

Each of these questions may have a different answer. While the first question may elicit an emphatic ‘any amount!’ the second and third question may sober you to the realities of veterinary expenses.

The difference is between theoretical injury and actual expenses. You may be less willing to shell out as much as you think you would. As unfortunate as it is, economic euthanasia, putting down your pet due to expensive vet bills, exists for a reason.

Dogs are naturally riskier than cats. An indoor cat is obviously less likely to need coverage than a dog that goes everywhere with you. You should also consider your pet’s illness history and how accident prone they are. Are they likely to run out in the road and get hit by a car? If so, you may benefit from a pet insurance policy.

If you have a purebred dog or cat, talk to your vet about medical costs your pet may experience. Your pet’s breed may be prone to specific illnesses, the treatments for which could be covered by a pet insurance policy.

Pet insurance is about peace of mind in case the worst happens. If you do not want to spend the money each month on a pet insurance policy, consider starting an emergency fund that you can dip into should any unexpected vet visits happen.

However, even if you dutifully save money you would spend on a premium, you may not come close to covering more expensive vet bills like for cancer treatment.

So, Do You Need To Buy Pet Insurance?

The decision to purchase pet insurance is certainly emotional.

No one wants to be in a situation where they have to choose between saving their pet or keeping their savings.

However, it is also possible that your pet will never get seriously injured, and you will only need to pay for their annual check-ups. If you feel like you could front the money for an unexpected surgery, you may not need it.

Some people would rather be safe than sorry, and a pet insurance policy can keep you from having to make a tough decision down the line.

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