Pet Insurance Part Two: Not All Plans are Created Equally

There's no doubt that pet insurance is growing in popularity. As the market for pet insurance grows, the increase in the number of companies offering insurance is actually working to the benefit of the consumer, leading companies to design plans that are more likely to benefit their customers in order to avoid being edged out of the market by their competition. Still, because pet insurance does not cover pre-existing conditions, pet owners really only have one chance to get it right. If your dog or cat develops a chronic condition and you're unhappy with the way your insurance provider handles your claims, you cannot switch companies unless you're willing to accept that the condition that made you choose to switch will no longer be covered. While there's no way to know for certain until you sign up for a policy and experience a company's claims process for yourself, there are many aspects of pet insurance plans that can help shed light on how happy you'll ultimately be with that company. The more you know about these plans and the industry in general, the more likely you are to choose a company that you're ultimately satisfied with. 

As you begin your research, keep in mind that this can be an overwhelming thing to consider, especially for first time pet parents or for those choosing to use pet insurance for the first time! If you're new to pet insurance and looking for the basics, check out part one of our pet insurance series for some of the highlights. In today's post, we’ll get into some of the specifics of pet insurance plans and explore how the fine print in your policy can affect your wallet.


Issue 1: How much will I be reimbursed, and do I have options?


Most plans offer between 70-90% reimbursement. This means that when you submit a claim, all the charges that fall within the coverage limitations will be paid back to you at whichever percentage you chose when you enrolled your pet. Generally, the less reimbursement you choose to receive, the lower your monthly premium will be, and vice versa. This is important to think about when choosing a plan, because it will affect not only how much you pay for your insurance plan every month, but also how much money you can expect to be reimbursed for your veterinary expenses. Do you want to pay a little bit more each month, but have the security of being reimbursed for a larger percentage of your incurred costs for veterinary care, or would you rather pay a bit less each month, but be reimbursed for a lesser percentage of your incurred costs when a medical issue arises?

For example:

My dog became ill and I needed to bring him to my local veterinary hospital for care. Because of his illness, he was hospitalized, spent the day receiving IV fluids, had x-rays and blood work to determine the cause of his illness, and went home with medication to help him feel better.

After meeting my deductible, the portion of the bill that was covered by my insurance plan came to $450. If I chose a plan that reimbursed 90% of expenses paid, that would mean I would receive $405 back from my pet insurance company. If I chose a plan that reimbursed 70% of expenses paid, the monthly premium I pay for my dog's insurance plan would be less, but I would only receive $315 back from that same vet bill. 


Issue 2: Deductibles: Low vs. High and Annual vs. Lifetime per Problem?


Most companies offer you a range of deductibles to choose from when selecting your plan, from as low as $0 to up to $1000. Generally, the lower the deductible, the higher your monthly premium will be since you're paying less out of pocket before your insurance company starts reimbursing you for your pet's medical expenses. Most companies offer an annual deductible with their plans, but there are some who offer a "lifetime per problem" deductible. Both are good options, but one may be a better than the other depending on what you’re looking for.

If you choose a plan with an annual deductible, you will not be reimbursed for any of your costs until you have reached that deductible for the current year. Any new illnesses or accidents that your pet visits the vet for will contribute to that single deductible for the year.

If you choose a plan with a lifetime per problem deductible, it means that you will have to pay your deductible for each separate problem your pet has, but you only have to pay that deductible once in your pet's whole life. This benefits the owners of pets with ongoing or chronic issues, because you don’t have to reach your deductible every year. Once you reach your deductible for an issue once, your costs related to that problem will be reimbursed (at whatever percentage of reimbursement your plan includes) for the rest of your pet's life.

For example:

My cat was diagnosed with a chronic medical problem that can’t be cured and will require ongoing, long-term treatment (for example: diabetes, chronic kidney failure, or arthritis). Let’s say that the average yearly cost of his care (that falls with the coverage umbrella) comes to $3,000.

If I have a plan with an annual deductible of $500 and 90% reimbursement, I will be reimbursed $2,250 each year.

If I have a plan with a lifetime per problem deductible of $500 and 90% reimbursement, I will be reimbursed $2,250 the first year he is diagnosed, then $2,700 every year thereafter. 

As a result, if my pet develops numerous different problems that are curable, not chronic, an annual deductible may have been the better option. However, if my pet develops any chronic, lifelong issues, the lifetime per problem deductible will likely have been the better choice.

It’s impossible to know what medical issues your pet will develop, so you just have to decide which type of deductible you are most comfortable with and plan accordingly. It's important to note that whether your deductible is low or high, annual or lifetime per problem, it's essential to submit claims from all of your vet visits even when you haven’t reached your deductible yet. Your insurance company will keep track of how much you've paid toward your deductible and when you reach it, they'll start reimbursing you from that point forward. If you've chosen an annual deductible, you'll be reimbursed for all elligible expenses for the rest of the year. If you've chosen a lifetime per problem deductible, you'll be reimbursed for all elligible expenses for that condition for the rest of your pet's life. Either way, it's well worth the time and effort to make sure your pet insurance company knows what you've spent on your pet's medical care!


Issue 3: Annual Payout Limit vs. No Payout Limit


Many plans have an annual payout limit, meaning that once you are reimbursed up to that limit, your pet insurance company will not cover any more costs for your pet until the next year.  Some companies, however, offer unlimited plans, which means there is no annual limit to how much you can be reimbursed.

For example:

My dog developed a serious skin condition that requires daily medication to control. She'll be on this medication for the rest of her life, and it's not cheap! I pay $150 per month for her medication alone, and on top of that, she sometimes has trouble with her skin despite the daily medication, which requires additional visits to the vet for treatment and often short courses of additional medications. If I chose a pet insurance plan with an annual payout limit of $2,000, but I spent $3,000 on my dog's skin condition last year, that means a full $1,000 of my veterinary bills for the year aren't even elligible for reimbursement by my insurance company. The monthly premium I pay is less than it would be if I had no annual payout limit, but depending how much I spend each year on veterinary care, it might have been worth it to pay more for my policy each month in order to have a plan with no payout limit.

In addition, even if there is no annual limit on your plan, it's still wise to ask if your pet insurance company has any lifetime payout limits. If your pet has a major accident or illness that costs you $30,000 to treat (it can happen—cancer, catastrophic accidents, etc), an unlimited plan can make the difference between deciding if you can afford to treat your pet or have to consider euthanizing them. It’s not easy to think about these situations, but it’s important to think about the “what-if’s” when deciding what kind of insurance plan to choose.


Issue 4: Wellness Coverage- Is it worth it?


There are only a few companies that offer plans with wellness coverage. The monthly premium is generally much higher for plans that cover wellness care, but the idea is that this type of plan helps to break up the cost of your pet’s yearly visit to the vet over the 12 months of the year rather than paying it all at once. For some people, paying a small amount more on their monthly premium every month may be easier to fit into their budget than paying all at once. If this sounds like you, then a pet insurance plan with wellness coverage may be right for you. 

For example:

My dog's annual exam comes due in April and I've just paid my taxes, so my budget is a little bit tight. The bill for my dog's wellness exam, heartworm and tickborne disease testing, and vaccines came to $285 this year, and my pet insurance has an annual maximum of $300 for wellness coverage, so they reimbursed me for my entire vet bill. I still have to buy the monthly medications my dog takes to prevent heartworm, fleas, and ticks, so I will still pay for some wellness expenses out of pocket this year, but having wellness coverage allowed me to take my dog to the vet during a month when I normally wouldn't be able to afford it.

If you do choose a pet insurance plan that offers wellness coverage, be aware of what they cover and how much money your insurance company will reimburse you every year for wellness care. These plans are designed to distribute the cost of wellness care over the course of the year, not to give you something for nothing, so be aware of how much you're paying each month for your coverage and know what benefits you get out of it.


Issue 5: What about Coverage Exclusions?


Does your plan cover examination fees? Prescription medication? Prescription diets? Congenital diseases? Are certain illnesses or injuries not covered for your dog’s particular breed? Are there waiting periods that you must go through before your coverage begins? Are those waiting periods different for accidents vs illnesses vs orthopedic issues? Does your pet have any pre-existing conditions that won't be covered by your plan?

Coverage exclusions like these are very common, and not necessarily a deal-breaker when it comes to choosing a pet insurance plan, but it's important to be aware of them before signing up for an insurance policy. If you're considering pet insurance but your dog is five years old and has already been diagnosed with chronic ear infections, you'll need to take into account that your pet insurance will not cover any expenses related to that condition and decide if it's worth paying the monthly premium in order to get coverage for any other conditions he might develop. The answer may very well be yes, but don't sign up for a plan before taking this into consideration! Even better, if you have the option to enroll in a plan when your pet is young and healthy, do it! 


Overall Example: Major Medical vs Everyday Issues


As with human health insurance, you have the option to choose a pet insurance plan that is high deductible but carries a lower monthly premium. These types of plans are especially useful if you’re looking for a plan that will cover your costs in the event of a major unexpected issue (for example: cancer, catastrophic accidents, emergency surgery, etc), but are able to pay on your own for smaller, more routine issues. However, you also have the option to choose a pet insurance plan that carries a very low deductible and a much higher monthly premium. If you’re looking for a plan that will cover almost everything, including minor or everyday issues, then this type of plan might be right for you. In the end, choosing a plan that is right for you comes down to evaluating your budget and determining what you want out of a pet insurance plan.

For example:

I expect to pay for my pet’s annual wellness care and have worked it into my monthly budget, so I already know that I'm not interested in paying an additional monthly premium to have my insurance company cover my dog's wellness expenses. In addition, if any small health issues come up throughout the year, I have a rainy day fund that allows me to pay for veterinary care without cutting into my monthly budget too severely. However, if my dog came down with a serious illness or had an unexpected accident and needed treatment that exceeded $5,000, it would be difficult for me to financially recover from that kind of expense.

With all this in mind, I decided that the plan that was right for me would be one with no wellness coverage, a $1000 lifetime per problem deductible, and 90% reimbursement. With my dog’s breed and age at enrollment factored in, I ended up with a monthly premium of $26, which means I pay a total of $312 annually for my dog's policy. By the time he’s 10 years old, I’ll have paid a total of $3,120 in monthly premiums. In addition to my monthly premium, if that $5,000 accident or illness arises, I will need to pay toward my $1000 deductible before being reimbursed for any of my expenses, but after I hit my deductible, 90% of all the covered costs that follow will be reimbursed. This means that with the policy I've chosen, I would end up being responsible for $1,400 instead of the full $5,000 I would have had to come up with if I didn’t have pet insurance. In addition, if my dog has small problems that pop up over the course of the year, I can still submit my claims and they are applied toward his deductible for that problem. If he has a problem that reoccurs throughout his life, I may eventually reach that $1,000 deductible, and then for the rest of his life I'll be reimbursed for 90% of the covered costs for that issue. This plan keeps my monthly premiums low while giving me the peace of mind that comes with knowing I'm able to pay for any major accidents or chronic issues my dog may have without going bankrupt myself!


In the end, there is a very real possibility that you could sign your pet up for insurance but rarely use it. No matter what deductible, reimbursement level, or payout limit you choose, if your pet is relatively healthy and stays injury free, there's a chance that you will pay more in monthly premiums than you will ever be reimbursed by your insurance company. Still, pet insurance can be hugely benefitial in the event of an illness or emergency and can make veterinary care financially accessible at a critical moment in your pet's life. It's not an easy choice to make, but we hope this information helps those of you who are considering which pet insurance policy is right for your pet, or even considering whether or not to take out a pet insurance policy in the first place!

Here's to a healthy winter ahead for you and your pets!

The CVH Team