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What is Pet Insurance & How Does It Work

Rita Oguntuase
Rita Oguntuase
Rita Oguntuase is an experienced content developer with a particular interest in the finance space. Over the course of her career, she has focused on multiple aspects of finance, ranging from insurance and investments to cryptocurrencies and corporate accounting. With a significant wealth of experience under her belt, Rita has helped to cover some of the most pivotal events in finance across this decade. Rita’s expertise has led to her work being featured in several reputable publications - Forbes, Seeking Alpha, Cointelegraph, and much more.

DollarGeek's goal is to help you make the best financial decisions. To help us do this, many or all of the products featured here are from our partners. However, this doesn’t influence our evaluations or ratings.

Table of Contents

Pet insurance is a form of insurance policy that caters to your reimbursement costs whenever you have an emergency health issue with your pet. Just like health insurance for humans, this is a great way for you to cater to emergencies and safeguard your money.

Key Takeaway Points

  • Pet insurance is a great way for you to handle expensive veterinary care costs when they come up.
  • Most pet insurance companies will reimburse you for 70% to 100% of your veterinary care expenses after your deductible has been met.
  • With pet insurance, you get to cover several costs. These include accidents, ailments, medication, emergency examinations, and more.
  • Most pet insurance companies won’t cover pre-existing conditions that occurred before the start of your insurance cover.
  • The cost of your pet insurance will usually depend on factors such as the pet’s breed, size, and age. You also need to consider factors such as the deductible and the type of plan you’re on.


Insurance is easily one of the best money- and life-saving hacks you can ever employ in today’s world. In a society where uncertainty is the only constant, the assurance that your health needs can be taken care of when an emergency happens can’t possibly be overstated.

As a pet owner, the need for insurance is also quite critical. Pet illnesses, injuries, and diseases can happen at any time, and you need to ensure that their needs are covered just as well.

The National Pet Owners Survey from the American Pet Products Association (APPA) shows that 70% of households in the United States alone have one pet or the other.

In raw numbers, this is about 90.5 million households. These pet owners spent about $124 billion in 2021 on their pets, with veterinary care alone making about $34.3 billion of that.

There is no doubt that veterinary care is getting more expensive by the year. And for most people who are unable to keep up with these payments, finding a policy that provides adequate protection is important. This is where pet insurance comes in.

With this article, we’ll provide a clear overview of pet insurance, as well as how it works and what you need to know about it.

What is Pet Insurance?

As its name suggests, pet insurance is a form of health insurance that helps you to cover a portion—or the totality—of your pet’s medical bills. Just as no one ever plans to get injured or suffer an ailment, we also want our pets to be in top health at all times. With pet insurance, you can be better prepared for those periods when health issues creep up on your pet.

We all share a priceless love for our pets. The problem, however, is that veterinary care does have a price. Pet insurance helps you to manage that financial burden.

How Does Pet Insurance Work?

Generally, a pet insurance policy works on a reimbursement basis. When you take your pet to a vet, you make a direct payment to them. Then, you submit the bill to your insurance company for them to reimburse you for the costs incurred.

Once the insurance company reviews your bill and approves the reimbursement, the funds will be processed and released to you.

For most pet insurance policies, you will be reimbursed between 70% and 100% of your veterinary care costs—after the deductible has been met.

Understanding Some Key Terms

For most insurance companies, fund reimbursements tend to work based on the options you selected for your pet insurance policy. The most popular options available to most pet owners include:


The deductible is the amount of money you will be responsible for paying before the insurance company begins reimbursing you for costs.

Most pet insurance companies operate based on a fixed annual deductible. However, some also provide a per-incident deductible, meaning that the deductible won’t apply for conditions that occur more than once within a policy year.

Maximum Annual Payout:

This term refers to the total amount of money that your insurance company will pay for all claims you submit within a policy year.

Reimbursement Percentage:

This refers to the percentage of your veterinary care bill that the insurance company will pay after the deductible has been met. Of course, you should know that most insurance companies have a maximum amount for this.

The most comprehensive insurance policy will pay between 80% and 100% of your total bill after you’ve met your deductible.


It is also important for you to consider limits when selecting an insurance policy—especially if you can get an estimate of the cost of care needed by your pet—based on its conditions and age. Limits are usually broken into:

Per-incident limits: This puts a cap on how much you can get for a single injury or illness. So, if you need to pay $5,000 to cover a vet care bill and your per-incident limit is $3,000, you can’t get more than that.

Annual limits: This places a limit on how much you can get within the policy year. Once you hit the annual limit, you will be responsible for paying your vet care costs for the rest of the policy year.


The premium is the fee you need to pay—either monthly or annually—to maintain your insurance policy. A higher premium allows you to access more coverage, so remember not to always go for the plan that offers the lowest premium. However, if you have a tight budget, then you might be best served by a plan with a low premium.

What Does Pet Insurance Cover?

The most ideal pet insurance plans will provide coverage for health diagnostics and treatments concerning a broad range of conditions. However, based on your insurance plan, the policy might not cover every single condition your pet has to deal with. This is why you need to be careful when selecting pet insurance companies and plans.

Generally, pet insurance plans cover some of the following:

  • Emergency accidents and injuries (broken bones, ingesting a dangerous object that needs to be removed, etc.)
  • Unexpected ailments (glaucoma, cancer, parvoviruses, etc.)
  • Surgery (cataracts, ligament tears, etc.)
  • Medication costs
  • Emergency examinations
  • Diagnostics and tests (MRIs, blood tests, x-ray procedures, etc.)

Pet insurance plans will easily cover most of the expenses in the above categories, as long as they aren’t related to a pre-existing condition. However, the details will also depend on the type of coverage you choose.

Some insurance plans could also cover some of the following:

  • Chiropractic procedures
  • Alternative therapy
  • Acupuncture
  • Hydrotherapy
  • Ads and rewards for missing pets
  • Behavioral modification procedures and more

That said, some situations aren’t covered by pet insurance. Some of them include:

  • Wellness exams
  • Preventative care
  • Routine care
  • Vaccinations
  • Exclusions
  • Neutering procedures

Pre-existing conditions

While most pet insurance providers won’t cover pre-existing conditions, it is worth noting that some providers offer waiting periods, after which they cover curable conditions.

Price of Pet Insurance

Generally, pet insurance isn’t so costly. According to some sources, the average monthly premium is about $29 for a cat and $47 for a dog. Of course, you should keep in mind that there is a broad range when it comes to pricing that you need to keep in mind.

Some of the primary factors that will determine the premiums on your pet insurance policy include:

  • The pet’s size (especially its weight)
  • The pet’s breed
  • Your insurance company/policy provider
  • The pet’s age (especially compared to the average life expectancy of the breed)
  • Your location
  • Possible hazards in your area
  • The deductible
  • Your plan type

You can save money on pet insurance by enrolling your pet while it’s young. Also, some insurance companies can provide discounts if you choose to make an annual payment instead of breaking things down every month. Other providers will give you discounts if you have multiple pets.

Another possible way to keep costs down is to choose a higher deductible. But, you should remember that you’d need to reach that deductible by making out-of-pocket costs before the insurance plan will begin reimbursing you for your costs.

Similarly, your costs could be reduced if you choose a lower coverage limit or reimbursement rate. However, this will place a cap on the amount you get from your insurer when the payment time comes.

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