Pet Insurance Explained: How It Works & Do You Need It?

Written By
G. Dautovic
July 05,2023

Pet insurance is the only way to protect yourself from unexpected costs related to your furry companion. But despite the fact that more than 60% of American households have at least one pet, only  2.1% of all pets in the US are insured. Is this because pet insurance is too costly, and how does pet insurance work exactly? Keep reading to find out everything you need to know to provide your pet with a better quality of life. 

What Is Pet Insurance?

If you own a dog or a cat, you probably know all about why your pet’s health insurance is important. The main purpose of these health care policies is to cover the costs of veterinary treatment. Some of these can run into thousands of dollars, and some pet owners want to do everything they can to avoid footing these types of bills.  

The policy you choose depends on your needs or the level of coverage that your pet requires. It’s important to note that only the leading pet insurers offer pet health care plans that cover entire veterinary bills. That’s why you should know what to look for in a policy and spend some time searching for the right provider.  

How Pet Insurance Works and What You Need to Know

The cost of your pet’s healthcare insurance depends on a broad range of factors. You’ll pay premiums that are calculated based on the type of coverage you choose, your pet’s age and breed, as well as the area you live in. Premiums can be paid either monthly or yearly. You can cut some of the costs by paying higher excess, checking if your pet qualifies for free treatment, or simply by keeping your pets healthy.    

Aside from pet insurance premiums, there are also deductibles or the money you pay out of pocket for the pet care services covered by your policy. The amount you pay for deductibles varies but usually goes up to $1,000, which is determined by your pet insurance policy.

The type of policy will also determine additional costs or the percentage of the bill you have to pay. Different pet insurance companies have their own ways of regulating this type of expense, but in most cases, you’ll pay between 10% and 30% of the veterinary bill. 

The structure of pet insurance policies is straightforward, but you should inspect every facet of the contract before signing on the dotted line. 

What Does Pet Insurance Cover?

When you opt for a policy, pet insurance companies will offer you the reimbursement rate and calculate deductibles and the percentage of the copayment. The policy will also list the expenses that are covered, as well as the maximum payout for a year. 

Most policies will not cover your pet’s pre-existing conditions and other illnesses. The insurance company will review your pet’s medical records to ensure the policy doesn’t cover illnesses that the pet is already diagnosed with. 

There are different types of policies, but here’s what you need to know about pet insurance limitations. Aside from not covering veterinary treatment of pre-existing or congenital disorders, the basic policy doesn’t cover behavioral issues either. 

So does pet insurance cover dental? Most providers don’t include dental in their standard pet insurance policies, but it’s often available as an optional extra. Hip dysplasia is also not covered by standard insurance policies. Perhaps more importantly, the basic coverage doesn’t include standard checkups, preventive care, pregnancy, or whelping support. 

This can make the process of finding the right insurance policy a bit more challenging, especially for those that have older cats and dogs. Nevertheless, recent statistics tell us that Americans love their dogs, with these furry creatures accounting for almost 90% of all pet insurance policies. So, what does dog insurance cover? Most policies for dogs, cats, and other pets include the following:

  • treatment for accidents and injuries, including ingestion of foreign objects and broken bones 
  • treatments for illnesses, including infections, digestive illnesses, cancer, and allergies  
  • hospitalization and surgery expenses 
  • tests and diagnostic procedures (blood tests, X-rays, MRIs)

What Else Do You Need to Know About Pet Insurance? 

Although most pet insurance providers don’t cover pre-existing conditions, there are some exceptions. Some cover conditions that can be treated. Unfortunately, if your pet is suffering from an incurable illness, don’t expect much from pet insurance providers. They’ll limit the coverage or won’t provide any. 

After purchasing a policy, you’ll have to wait for a certain period of time before the coverage comes into effect. This pet insurance waiting period is designed to prevent owners from claiming benefits for any pre-existing conditions that weren’t disclosed prior to enrolling in the program. The waiting period is typically two days for accidents and two weeks for illnesses. Certain diseases have waiting periods of up to one year, depending on the area you live in.

It’s also important to mention that most pet insurance policies tailor to dogs and cats. If you have an exotic animal, a spider, snake, or a bird as a pet, you’ll need to find a provider that offers this sort of coverage. 

Pet Care Insurance Plans 

Pet insurance companies offer different coverage options for your furry friends. For example, there are basic plans that come with the essential protection from accidents, but if you’re looking for more comprehensive coverage, there are also plans that include surgeries and alternative therapy. 

Pet insurance coverage plans vary from provider to provider, but most come with the following components:

  • Accident-only coverage: These plans only cover accidental injuries and come with a fixed sum for treatment costs. There are some expectations where the plans may also include emergency treatment for certain illnesses.   
  • Illness and accident coverage: When purchasing a veterinary pet insurance plan, most people choose comprehensive plans that cover both accidents and illnesses such as infections, allergies, and cancer. 
  • A comprehensive plan with wellness coverage: This plan includes accident and illness coverage, but pet owners can also add additional insurance services, like blood work, heartworm tests, dental care, and fecal screens. This is also the type of pet insurance that covers vaccinations. Wellness coverage usually works with add-ons, but there are plans that come with embedded wellness coverage. 

How Does Pet Insurance Work?

While offering various pet insurance plans, providers impose certain requirements you need to meet in order to be eligible. 

Age Limits

The providers impose age limits on pet insurance policies. In most cases, your pet has to be at least six weeks old to get the policy. In addition, most providers don’t offer policies for pets that are older than six years. Of course, rates are lower for younger pets, which are less likely to get sick or injured. 

Pre-Existing Conditions

We’ve already mentioned that pre-existing conditions aren’t covered by most providers. But your pet health insurance cost can also be affected by minor health issues that drive up your premiums. 

Pet Species

Pet insurance companies calculate the potential costs of treatment based on the pet type. The most expensive policies are for dogs, and the prices vary depending on the breed. This is because some dog breeds are more prone to certain health problems. 

Pet Insurance Waiting Periods

As mentioned, every pet insurance company has a  waiting period before you can claim any benefits. You won’t be able to claim any benefits if your pet requires immediate treatment for a pre-existing condition that you failed to disclose during the application process. 

Place of Residence

Your place of residence also impacts the cost of your pet insurance. Premiums in the most expensive states can be really high. This is because the costs for veterinary services are much higher in big cities like New York than in smaller towns. 

Pet Insurance Deductible

Deductibles are paid monthly or annually. These can also influence your premiums. The higher the deductible amount you choose, the lower your premiums. 

Pet Insurance Payments

Most insurance providers either handle the vet bill directly or reimburse you after you’ve made the payment. The method generally depends on whether the vet is willing to wait for the insurance company to cover the bill. One of the advantages of pet insurance is that you can go to any licensed vet. 

Most providers make payouts in the following way: 

  • You go to the vet and pay for the treatment/procedure.
  • The insurance company asks you to send the claim so they can reimburse you.
  • You’ll need to provide the necessary medical documentation which explains the vet’s costs.
  • The insurance company will calculate your deductible and pay the rest. 

Is Pet Insurance Worth It?

This is one of the most common questions pet owners ask, and it’s definitely not easy to answer. Your pet insurance reimbursement depends on numerous factors, including the insurance plan you choose, your deductibles, and of course, your pet’s age and condition. One thing is for sure; you shouldn’t be looking to save money on a pet insurance policy. Instead, look at pet insurance as protection from unexpected costs that may arise if your pet suffers from an accidental injury or is suddenly diagnosed with a serious health condition. 


Do you have to pay vet bills upfront?


Pet insurance companies can either make direct payments to the vet or reimburse you for the bill. Some vets may not accept direct payments from an insurance company that they haven’t worked with in the past. A veterinary clinic may also insist that you make the payment if they’ve had a bad claims experience.   

What does pet insurance cover?


Most common pet insurance policies cover medical costs for accidents and injuries, as well as for some illnesses like infections, digestive diseases, and cancer. With more comprehensive policies, you can also get coverage for rare diseases, vaccines, and dental protection. 

What is not covered by pet insurance?


Most pet insurance policies don’t provide coverage for pre-existing conditions, as well as routine exams. Some pet owners feel that insurance is an unnecessary expense, or they cannot answer that fundamental question: how does pet insurance work? But these policies can save you a lot of money in case of unforeseen accidents and health problems related to your pet. Check out our article to learn more. 

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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