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Digging into the Fine Print of Pet Insurance

Risk Management: Understanding pet insurance plans.

by Rebecca Wallick
November 11, 2021
Dalmatian mix breed dog is playing with a dog toy on a soft surface
Rafael Forseck / Unsplash

Your pet wants you to read our newsletter. (Then give them a treat.)

If you’ve ever wondered if pet insurance is worth it, consider this: A trip to the emergency vet hospital, if your pet eats something they shouldn’t have, can easily bring a vet bill to $5,000. Pet insurance aims to protect you from anything that would cause you financial hardship and ask yourself if you can afford the care your pet needs. No one wants to be in the position of making an important decision about their pet’s care based solely on cost.

Some people are fortunate in that they have the resources, or the willingness, to go into debt for their pet’s care if necessary; they are, in effect, opting for self-insurance. Others, perhaps without extra financial resources (or who just want to sleep better at night), might consider paying a monthly pet insurance premium in the hope that it will cover expensive vet bills down the road. But, even if you know it’s something you want, there’s much to consider: cost, coverage, deductibles, and exclusions. Here’s a breakdown of everything you need to know about pet insurance.

Is pet insurance worth it?

According to the American Pet Products Association’s 2020 National Pet Owners Survey, in the U.S., 68% of households have some kind of pet — about 76.8 million cats and 83.7 million dogs. On average, dog parents spend $242 and cat parents spend $178 per year on routine vet visits.

But what about an unexpected illness or a puppy who swallows a sock? With specialty veterinary care available — ophthalmologists, oncologists, neurologists — the costs of pet care are steadily increasing. Even the average cost of a typical corrective surgical procedure, for dogs in this case, are enough to give one pause: gastric torsion, $1,955; foreign-body ingestion (remember that sock?), $1,629; pin in broken limb, $1,000; cataract treatments, $1,244.

You’d think that, faced with these numbers, everyone who has pets would also have pet insurance. Yet less than 1 percent do. Unfortunately, like many things in life, there’s no clear yes-or-no answer on if you should buy pet insurance, but hopefully, the information outlined here will help you determine if pet insurance is right for you.

How much does pet insurance cost?

The average cost for pet insurance varies depending on the age of the animal and the coverage provided. But you can expect that most dog insurance premiums will range between $20 and $70, with the average being $48.66/month for dogs and $28.57/month for cats. You pay the monthly premiums hoping you’ll never need to use the coverage. But, beyond the monthly premiums, there are more costs to consider, like deductibles and co-pays.

How does pet insurance work?

Many companies offer policies, which is good, but it also makes choosing the best pet insurance policy for you and your pet more complicated. Before you sign on the dotted line and write that first check, do your due diligence.

Read the policy very, very carefully.

Most complaints stem from the fact that the pet parent didn’t fully understand what was and wasn’t covered, and so was shocked when a claim was denied. Each insurance company offers a slightly different product, and you can’t assume that one policy is like another. Some claims have been denied because accidents happened while the dog was jumping, which was excluded in the fine print. So, be sure to read the full pet insurance policy. If you don’t understand the terms, it’s worth the cost of a half-hour consultation with an attorney to make sure you do.

What are deductibles, co-pays and caps?

Co-pays and deductibles are the amounts the pet insurance policy requires that you pay out-of-pocket for each claim. For example — keeping in mind that each pet insurance company has its own definitions for these terms — you submit a claim for a $500 ER visit that we’ll assume is covered. You have a per-incident deductible of $250. Your insurance covers 80 percent, so your co-pay is 20 percent. The insurance company will make the following calculation: (Claim x insurer’s co-pay) – deductible = insurance payment. So, altogether, you’ll pay $400 rather than $500 for that visit: ($500 x 80%) - $250 = $150; $250 + 150 = $400. Then, to complicate things, policies have caps.

According to Adam Karp, an attorney specializing in animal law who agreed to analyze three sample pet insurance policies, those purchasing pet insurance “must be aware of the multiple-benefit caps, as an animal may reach one cap before another and lose out on further payouts. Generally, there are three caps in play at any one time: lifetime, period and per incident.”

1. The lifetime cap is the maximum amount the insurer will pay for the life of the insured pet. “Once reached, you may as well scrap the policy,” says Karp.

2. The period cap is the limit the policy will pay for that animal within a specified time frame, such as a year. Karp warns, however, that “because insurers can decide not to renew the policy for any reason before the end of the policy term, this makes the lifetime cap illusory”; after hitting one or perhaps two period caps, the insurance company may simply decline to renew that pet’s policy.

3. The per-incident cap limits how much the policy will pay for each “incident.” When reviewing policy terms, pay close attention to how this term is defined. As Karp notes, insurers tend to pool or stack conditions into one incident, which limits their exposure. Make sure your vet’s billing statements are very clear regarding what the various tests and procedures are for when you submit claims.

Know the policy’s exclusions.

The list of conditions and treatments not covered by individual policies is specific to each policy and each company, and too varied to consider in this article. Again, another reason to read policies carefully, with your pet’s particular needs in mind. Be aware that some pet insurance policies have breed-specific exclusions, and according to Karp’s analysis, few, if any, cover dysplasia and ligament-tear repairs. In some cases, you must purchase additional pet insurance coverage for cancer and other conditions.

Following are some of the terms included in policy exclusions that you should understand thoroughly before you purchase.

Congenital condition:

A congenital condition is a discoverable condition that the pet was born with. These occur in every breed, often from inbreeding, or can be caused by mutation. Examples include limb deformity, cleft palate and deafness.

Hereditary condition:

A hereditary condition is an inherited condition that may or may not be obvious at birth. In some cases, a hereditary condition may not manifest itself until the pet is elderly. Common examples include hip or elbow dysplasia, certain eye conditions, and OCD (osteochondritis dissecans), an abnormality in bone development often seen in large dogs.

Developmental condition:

A developmental condition is one resulting from a failure to develop normally in some way early in life. These are usually structural — for example, a kinked tail, cleft palate or a heart anomaly — caused by trauma, malpositioning, infectious agents (virus, bacteria, parasite) or reaction to drugs or toxins while developing in the womb.

(Note that some conditions fall into two categories. For example, cleft palate can be congenital or developmental. Deafness can be considered a hereditary congenital condition.)

According to Karp, in most pet insurance policies, unless an additional rider is purchased, “congenital conditions are deemed preexisting and not covered. Some policies bar hereditary and developmental conditions as well, unless additional coverage is purchased.” Karp notes that he reviewed a policy that defined a “chronic condition” to mean “not curable.” Meaning, that even if the condition went into remission for a year, if it initially preceded the policy’s effective date, it will be deemed an incurable and preexisting condition.

Make sure your vet qualifies under the plan you choose.

Some pet insurers define a primary vet as one who is licensed and is also a member of the American Veterinary Medical Association (AVMA). As an aside, vets don’t have to join the AVMA in order to practice; it’s voluntary. Some choose to join the Humane Society Veterinary Medical Association instead (HSVMA), yet under such a policy, if your vet chose HSVMA over AVMA, their services wouldn’t be covered.

“Another concern,” says Karp, “is that [few] policies cover experimental, investigative or non-generally accepted procedures, as determined by the veterinary medical community.” That is the sort of language lawyers love. Does it mean the AVMA? The HSVMA? Or some other more vague, local medical community?

Have a headache yet? Believe me, this is just the tip of the dog insurance-lingo iceberg. It’s complicated, confusing and a little terrifying, because the financial investment you make when you buy pet insurance is significant and you want to be sure it pays what you hope and need it to pay. Each company’s policy includes numerous terms, conditions and exclusions, as well as dispute-resolution provisions. You need to understand them all.

DIYing It: Self Insuring

There are at least two other options to consider.

The first is self-insuring.

Set up a savings account for your pet and deposit in it the amount equal to what you would pay as a premium, then use it only for extraordinary care. This works best if you’re disciplined and if your pet doesn’t require expensive care early in their life. Better yet, start out with a large initial deposit and add to it each month.

The second is CareCredit.

This is a line of credit specifically for use at participating veterinary clinics. Stacy Steele, DVM, of Ocean Shores, Wash. recommends this to her clients, almost none of whom have dog insurance. Like a credit card, CareCredit can be used for routine care and/or extraordinary care. There are no up-front costs and you select the monthly payment option you can handle. Depending on the amount put on the card, you can take from six to 60 months to pay off the balance (check the annual percentage rate before you sign up).

The bottom line: when it comes to whether or not to buy pet insurance, choose the option that will allow you to sleep well, knowing that if your beloved companion requires expensive diagnostics, treatment and care, you have the resources available to pay for them. If you choose to buy pet insurance, read every word of the policy very carefully and understand what the terms mean before you purchase. Then, go have fun with your pup!

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Rebecca Wallick

Rebecca Wallick, was long-time contributing editor for The Bark magazine and retired family law attorney, she lives with two dogs and runs mountain trails at every opportunity.