What is Pet Insurance, How Does It Work?

How Does Pet Insurance Work?

Pet insurance covers part of the often expensive veterinary bills in the event your pet suffers an illness or injury. The growing prevalence of pet-related diseases has seen an increase in demand for pet insurance of up to 18% per year, with over a million pets now covered in the United States alone.

By shifting the financial burden, pet insurance gives pet parents peace of mind, knowing that they will be able to care for their pets when they need medical attention.

How Does Pet Insurance Work?

Pet insurance is based on reimbursements.  This means you pay for the veterinary costs directly at the time of treatment, and submit a reimbursement claim to recover the cost of treatment from your insurance provider.

This reimbursement model works in favor of pet owners, by giving them the freedom to choose any licensed veterinarian, clinic, or specialist.

The following simple steps show how pet insurance works in practice;

  • Select your insurance provider
  • Choose your deductible, co-pay percentage, and premium plan
  • Pay for coverage on a monthly/ annual basis
  • Wait for the waiting period to the end
  • Take your pet to your preferred veterinarian/clinic
  • Directly pay the veterinary bill
  • Send in your claim accompanied by invoice and vet notes to your insurance provider
  • Insurance company evaluates your claim
  • Receive your money back from the insurance company

How Does Pet Insurance Work?

Pet Health Insurance Basics:

Like human health insurance, pet insurance has; monthly/annual premiums, waiting periods, deductibles, co-payments, maximum payouts, and exclusions.


This is the amount to be paid on a monthly or annual schedule to secure your coverage if an illness or accident occurs with your pet

Waiting Period

This is the minimum period you have to wait for before your coverage takes effect. The waiting period is put in place to prevent policyholders from getting insurance while their pet is already sick and can range from 30-90 days.


This is the amount you have to pay before your insurer reimburses you for your veterinary costs. You must reach your deductible by paying out of your pocket, for your claim to be paid.  Typically, the higher your deductible, the lower your premiums.


Some policies will require you to pay a percentage of the vet fees with the rest being paid by the insurer, this plan is commonly known as co-payments or co-share. For example, if your veterinarian bill was $1000 and your co-payment percentage is 20%, you would pay $200 for the bill, while your insurer would cover $800.

Maximum Payouts

This is the maximum amount of money the insurer will reimburse. There are over five types of maximum payouts and some companies will use more than one in their pet insurance plans.

1. Maximum Annual Payout

This is the largest sum you are entitled to receive from the insurance provider for your pet’s treatment within one year. The limit resets at the start of each new policy year.

2. Maximum Payout per Incident

Pet insurance companies limit the maximum amount they can reimburse for each illness, injury, or accident. Once you reach this limit the particular illness injury or accident will not be covered anymore.

3. Maximum Lifetime Payout

Pet insurance policies reimburse up to a certain dollar amount during the lifetime of a pet. This is known as the maximum lifetime payout. Once you hit this limit, you will no longer be eligible to receive reimbursements for your pet’s medical bills, and your policy is discontinued.

Some insurance companies offer lifetime pet insurance, which is comprehensive protection that covers a wide range of illnesses and injuries throughout your pet’s life.

4. Maximum Payout Per Body System

  Insurance providers will only reimburse up to a certain amount for one body system, such as the respiratory, digestive, musculoskeletal, and nervous systems, etc.

5. Maximum Payout Based on a Predetermined Benefit Schedule

Insurance companies will use a predetermined list to tell you ahead of time the maximum amount they will pay for certain pet diseases or injuries.

How Does Pet Insurance Work?


1. Pre-existing Conditions

Pre-existing medical conditions or injuries are often excluded from pet insurance covers.

2. Routine Treatments

Basic pet insurance policies do not cover routine and preventive treatments such as vaccinations and flea or tick treatments. Some insurance companies have policies with wellness plans (also known as preventative care plans) to provide for routine vet checkups.

3. Giving Birth

Pet insurance policies usually exclude expenses arising due to pregnancy, giving birth, and treatment of offspring.

Final thoughts

The main reason that so few pet owners have pet insurance is that they do not know how it works. Simply put, pet insurance works like human health insurance with the key distinction being that pet insurance is based on reimbursements and with most pet insurance providers, you are free to choose any licensed veterinarian/ clinic you like.

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