Guide to Pet Insurance: How it Works, What it Covers, and How Much it Costs [2021]

Pet insurance includes basic vet visits and emergency situations so your pet’s health is covered at a reasonable cost.
Last updated Jun 19, 2021 | By Lee Huffman
Family with dog

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According to the American Pet Products Association, about 85 million American families own at least one animal. Pets provide entertainment and companionship, but they also add an extra line item to your household budget. In 2019, Americans spent almost $96 billion collectively on pet food, vet bills, and other pet products. One way to potentially reduce the cost of pet ownership is to purchase pet insurance. But how does pet insurance work?

In this article, we'll share how it works, what is covered, and how much it costs. We'll also discuss what pet insurance doesn't cover so you're not hit with a surprise bill when you thought you were covered.

In this article

How does pet insurance work?

Pet insurance is very similar to other types of insurance. You pay a monthly (or annual) premium to receive a specific list of benefits and negotiated discounts on services from your veterinarian.

Policies vary by company. In some cases, your vet will bill the insurance and you'll pay what's not covered. Other policies require you to pay the vet upfront, then submit receipts to the pet insurance company for reimbursement. For our dog and cat, the vet bills the pet insurance provider and we pay the rest.

When the vet bills get too expensive, it's possible to get into debt. A recent FinanceBuzz survey found that 47% of respondents would use a credit card to pay for a $1,000 bill, and 42% indicated they wouldn't be able to pay off the balance immediately.

Whether the procedure is 100% covered or at a discount, having pet insurance could help to offset the cost of care. With the right insurance coverage, you could avoid going into debt to take care of your pet.

What does pet insurance cover?

Pet insurance benefits vary by company, so make sure you find a policy that matches your needs. Some companies offer a variety of coverage options, from basic to comprehensive, and add-ons to personalize what's covered.

How does pet insurance work for your pet? Here's a general idea of the types of coverage you'll find.

Wellness coverage

Wellness care or preventative care includes routine vet visits that keep your pet happy and healthy. These routine care expenses are a regular occurrence when you have a pet. And if your pet insurance covers them on your behalf, it helps to offset the cost of your monthly premiums.

Here are a few of the common wellness procedures your pet may need:

Wellness procedure Average cost
Physical exam $45
Vaccination $70
Heartworm test $25
Fecal test $25
Nail trim $20

Spay and neuter

The overpopulation of pets is a big problem in the U.S. The American Society for the Prevention of Cruelty to Animals estimates that approximately 1.5 million cats and dogs are euthanized in shelters each year. One way to reduce unwanted pets is to spay or neuter your dog or cat to prevent unwanted pregnancies.

Not only does this procedure prevent unwanted pregnancies, but a University of Georgia study also found that the average life expectancy of neutered male dogs was 13.8% longer, and spayed female dogs typically lived 26.3% longer. The average age of intact dogs was 7.9 years versus 9.4 years for spayed or neutered dogs.

Pet insurance wellness policies often include reimbursement for a spay or neuter procedure, which can cost up to $300 without insurance. The good news is that this procedure needs to be done only once in your pet's life.

Accident and illness coverage

Pets can be like humans and suffer from illnesses and accidental injuries. Emergency trips to the vet to take care of unexpected injuries or unexplained illnesses can substantially increase the cost of pet ownership. These costly expenses are where pet insurance really comes in handy.

Your pet insurance accident and illness coverage may cover:

  • Illness
  • Injuries and accidents
  • Hospitalization
  • Surgery
  • Diagnostics
  • Prescription medications
  • Alternative therapies
  • Behavioral therapies

When I was in my 20s, my bulldog became ill with lymphoma. Treatment was thousands of dollars and the doctor was unsure if he would survive. Because I didn't have the money to cover the treatment, I had to make the painful decision to put him down when his cancer progressed too far.

Now that I'm older and more financially stable, I cover my pets with insurance so I don't have to make those same decisions. Luckily, my pets haven't had major illnesses, but there have still been unexpected scenarios. For example, my Weimaraner Stella suffered a ruptured blood vessel in her ear from shaking her head too much. The poor girl's ear blew up to the size of an avocado. With pet insurance, the cost of the procedure to fix the blood vessel and drain her ear was mostly covered.

Dental illness and teeth cleaning

Because your pets don't brush their teeth regularly as humans do, dental care is important. Similarly, pets can experience dental illness and injury as well. Maybe they get into a fight or break a tooth biting into the wrong thing. I had a dog growing up that chewed through a chicken wire fence. Those sharp wires did a number on his gums.

Depending on the policy, annual teeth cleaning may be included or available as an add-on, and some policies might also offer coverage for dental illness or injury. Other policies may not offer this coverage at all. In my experience, paying for teeth cleaning out of pocket can be expensive, so I factored in that cost when I was deciding whether it made financial sense to purchase pet insurance.

Congenital conditions

Congenital conditions are illnesses, diseases, and injuries that are common within specific breeds. Bulldogs, for example, are notorious for hip dysplasia, a painful and debilitating condition. These conditions happen so frequently in certain breeds and can be so expensive, that many policies will not cover the costs associated with them.

Some policies may cover congenital conditions if you purchase an add-on, whereas others automatically include it or potentially not offer coverage at all. Do research into your pet's breed to see whether you need to worry about this coverage. If you own a "mutt" or your breed doesn't have any common congenital conditions, then you don't need to worry about this coverage.

What isn’t covered by pet insurance?

Pet insurance myths may have you convinced that it covers all your pet's needs, but that is not the case. You’ll likely have to pay for certain costs out of pocket whether you have pet insurance or not. Additionally, what is and is not covered depends on the company, policy you choose, and add-ons selected.

Co-pays and deductibles

As with any insurance policy, you should expect to pay something beyond your insurance premiums. Copays are the amounts you pay for each procedure performed by your vet. Some copays are zero, and others are much more. A deductible is the amount of money you pay before the pet insurance starts covering veterinary expenses.

Both copay and deductible amounts will vary based on your policy, so pay special attention to these numbers when comparing policies.

Pet food and treats

Feeding and rewarding your pet is not something pet insurance will cover. It is considered an expected cost of pet ownership, so be sure to factor pet food and treats into your budget.

Pre-existing conditions

Once your pet has been diagnosed with an illness, injury, or condition, your pet insurance will not cover those treatments. However, some pet insurance plans will cover future treatments if your pet has fully recovered from a curable pre-existing condition, such as a urinary tract infection. For example, ASPCA's pet insurance will cover your pet after 180 days without treatment or symptoms.

Cosmetic procedures

Elective procedures such as tail docking, ear cropping, and claw removal are not covered by pet insurance.

Breeding costs

The costs associated with breeding your pet are not covered by pet insurance. This includes natural pregnancies and breeding for profit.

Behavioral training

Many dog owners enroll their pets in classes to learn basic commands, fun tricks, and good behavior. This training is not covered by pet insurance.

Boarding fees while on vacation

Boarding fees to have your pet watched by someone else overnight are typically not included in your pet insurance benefits. However, some pet insurance plans do include this benefit should your pet become hospitalized.

How much does pet insurance cost?

The cost of pet insurance varies based on several factors. These factors could include:

  • Your pet’s age: The older a pet is, the more likely they are to need more expensive medical care. Buying a policy when they are younger can lock in lower rates.
  • Your pet’s breed: Certain breeds have more medical problems than others.
  • The type of policy: If budget is a concern, you can focus on wellness or illness/injury coverage instead of a comprehensive policy. Different insurers will offer different coverage options.
  • Add-ons or policy riders: Each add-on you select will increase your premiums.
  • Deductible amount: By agreeing to pay more before the insurance benefits kick in, you can reduce the premiums you pay.

The best way to find a policy that offers the coverage you need at a price you can afford is to shop around and compare options from different pet insurance companies. If you're interested in comparison shopping among top providers, check out our piece on whether pet insurance is worth it to get started.

FAQs about pet insurance

Is pet insurance worth it?

If you're wondering, is pet insurance worth it, the decision is personal. As with most insurance policies, you pay the premiums hoping something catastrophic doesn't happen. If your pet just needs routine health care checkups, you may pay more for insurance than the services the insurance provides. That difference is the peace of mind knowing your pet is covered in case of emergency, injury, or a major illness.

Does pet insurance pay the vet directly?

It depends on the pet insurance policy you've purchased. Some insurance carriers pay the vet directly. Others require policyholders to pay and submit receipts for reimbursement.

Does pet insurance pay for copays?

No, the copay (or co-insurance amount) is typically your responsibility. This cost-sharing arrangement means you'll pay a portion of the procedure, and the insurance company covers its share. Copays and annual deductibles are in addition to your insurance premiums.

Is there a waiting period with pet insurance?

Pet insurance agencies typically have enrollment waiting periods, which prevent someone from buying a policy immediately before a costly veterinary bill. Although you can shop around for shorter waiting periods, you're better off focusing your search on a policy that meets all of your pet's needs.

The bottom line

You love your pet, but you may not love the cost of veterinary care. Now that you know how pet health insurance works, what it covers, and what it doesn't, you can determine whether it is right for your pet.

Still unsure if pet insurance is right for you? Consider following these steps. Start by adding up and categorizing all of the money you've spent on your pet in the last year. Then compare that to the pet insurance premiums, coverages, and copays or deductibles you'd pay for a policy. If the numbers are close, purchasing a pet insurance policy is an easy decision. You may also be willing to pay a little extra for peace of mind in case your pet is injured or becomes sick unexpectedly.

Pet insurance has worked well for our family, and I hope it does for yours as well.

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Author Details

Lee Huffman Lee Huffman is a former financial planner and corporate finance manager who now writes about early retirement, credit cards, travel, insurance, and other personal finance topics. He enjoys showing people how to travel more, spend less, and live better. When Lee is not getting his passport stamped around the world, he's researching methods to earn more miles and points toward his next vacation.