After practicing small animal medicine and surgery for 42 years, Doug Kenney, DVM, turned his attention to pet owners and a topic he knew was confusing to most of them—pet insurance.
Dr. Kenney grew up on a farm, graduated from the Auburn University College of Veterinary Medicine, and then spent decades caring for animals. Now he is the author of Pet Health Insurance: A Veterinarian’s Perspective, host of the Pet Insurance Guide Podcast, and moderator of the Your Pet Insurance Guide blog. We sat down with Dr. Kenney to talk about what types of pet insurance to skip, how to prepare for exclusion gotchas on your bill, and why you probably don't have enough saved to treat a pet for a health emergency.
Is Pet Insurance Health Insurance?
Investopedia: How does pet insurance work and how does it compare to human health insurance?
The current model is reimbursement insurance. You pay the veterinarian, file a claim and the insurance company will reimburse you an amount minus the deductible and copay and any uncovered expenses. In human medicine, the provider usually files the claim and is reimbursed directly by the insurance company. The patient usually just pays a deductible/copay and walks out the door. There are also networks (managed care) in human healthcare. So far, this is very limited in pet health insurance.
Most people's health insurance is provided by their employer in a group type policy. Pet insurance is rapidly becoming a popular employee benefit that companies are offering their employees. At this time, most if not all of the premium is paid by the employee but deducted from their paycheck.
Pet Health Insurance Coverage Types
Investopedia: What types of coverage are available? We see the terms "wellness, accident, and accident plus illness." What do those mean?
Kenney: While accident only policies are available from some companies, the coverage is limited. It covers things like fractures, lacerations, etc. It doesn't cover illnesses like infections, diabetes, allergies, etc. To get broad coverage of most things that could happen to a pet, choose a policy that covers both accidents and illnesses.
Wellness care coverage (wellness exam, vaccinations, tests to screen for parasites, heartworm preventative, flea/tick products, spay/neuter, teeth cleaning, etc.) is offered by many companies—usually as an add-on rider. However, most people buy pet insurance for unexpected things (accidents/illnesses) that can happen. You don't know when such an event will occur or how much it can cost. Wellness care, on the other hand, is predictable and easier to budget for. You know you're going to pay for at least some wellness care services every year and you usually know about how much it's going to cost and when it is due.
Investopedia: Does pet age or health affect the decision about the type of coverage (or availability to obtain coverage)?
Kenney: In my opinion, wellness care coverage rarely makes sense. Most people are already paying for this out-of-pocket. The exceptions are in a puppy/kitten where several wellness visits are going to be required, spay/neuter may be needed or in senior pets ( ≥ 7 years old) when semi-annual exams are recommended, teeth cleaning needed more often, and wellness lab testing is needed.
Some companies may not offer accident illness coverage to certain pets who already have certain chronic conditions like diabetes, feline leukemia, and so forth. Some companies won't insure a pet over a certain age or only offer either accident-only coverage or a downgraded accident/illness policy (higher deductible, lower reimbursement percentage, and lower annual maximum).
Investopedia: What doesn’t pet insurance cover that most people think it does? i.e., What are the most common exclusions?
Kenney: The biggest exclusion is pre-existing conditions. This is why the vast majority of claims that are denied for reimbursement, are denied for that reason. To provide transparency, I recommend pet owners ask the company to do a medical record review after they signup and the waiting period is over. The company will then let you know what conditions (if any) are considered pre-existing and won't be covered. Unfortunately, not all companies will do this, so be sure to ask a company if they do this before buying pet insurance. Exclusions vary from company to company and they are listed in a sample policy you can review on their website.
Cost of Pet Health Insurance
Investopedia: Talk about the cost of pet health insurance. How is it determined?
Kenney: Premiums are generally based on a pet's age (higher for older pets because they are more prone to chronic diseases), breed (some breeds have more problems than others), and zip code (where you live—veterinary care costs more in some locations than others).
Pet insurance premiums will increase over time. However, pet insurance companies allow people to customize their coverage to fit their budget. You can choose among several annual maximums, deductibles, copays, and optional add-ons. I recommend getting the best coverage you can afford at sign up knowing that you have the option to downgrade coverage as needed to lower premiums if they rise outside your comfort zone.
When a company files its rates with the state, they have to show premium factors for every age, breed, and zip code that also corresponds with each possible combination of policy maximum, deductible, and copay options they offer. That's mind-boggling to me.
$25 to $200 per month
Range of costs for pet insurance for dogs. Premiums for cats are half that.
Investopedia: In terms of specifics, what are some average costs pet owners pay for pet health insurance?
Kenney: I do get quotes in my location for 2 or 3 breeds of dogs and cats periodically for research. Generally, puppy premiums for most companies are $25 to $60 per month without wellness coverage. A policy with a $100 annual deductible and $0 copay will trend toward the higher number. Whereas a policy with a $500 annual deductible, 20% copay will trend toward the lower number. For older dogs, the range would be $60 to $200 per month.
Premiums for cats are roughly half the premiums for dogs. Statistics show that of all the pet's insured in the U.S., about 80 to 85% are dogs and only 15 to 20% are cats. So, cat owners need to know that it is very affordable to insure their cat—even older cats. I think that most cat owners think that if they have an indoor cat, they don't need pet insurance. However, if you look at the top 10 conditions for which cat owners file claims, the vast majority are for chronic or recurring conditions that are just as likely to occur in indoor cats as outdoor cats if not even more so. From my perspective as a veterinarian, there are way too few cats insured.
When getting a quote on a young pet, get a quote for the same coverage as if the pet were 8 to 10 years older. This can be a real eye opener.
When people are getting a quote on a young pet, they should also get a quote for the same coverage as if their pet were 8 to 10 years old. This will reveal the premiums a company charges for older pets and can be a real eye opener.
There is a wide variation in premiums for older pets between companies. I've gotten quotes for the same maximum, deductible, and copay options on a 10-year-old dog and the premium range was $65 - $175 depending on the company.
Cost of Pet Insurance Versus Value
Investopedia: Is pet insurance worth the cost for the average pet owner in your opinion?
Kenney: In my experience in practice, many pet owners don't have a plan to pay for unexpected accidents/illnesses when they occur. Part of the problem is they simply aren't aware of how much it can cost to treat a serious acute illness or a chronic illness over the lifetime of their pet which can easily be thousands of dollars.
I recommend pet insurance as part of an overall plan to pay for such events. I also recommend savings accounts earmarked for veterinary expenses. The purpose of pet insurance is to help bridge the gap between the costs of the healthcare a pet needs today until savings can be gradually built up over time.
Finally, I recommend a line of credit (credit card) dedicated to pet healthcare because you have to pay out of pocket before getting reimbursed and most people don't have the ability to pay large vet bills out-of-pocket.
Investopedia: Overall, should people expect to get more out of pet insurance than they put in?
Kenney: People who look at pet insurance as an investment miss the point. You cannot buy insurance of any kind thinking you're going to get more out of it than you put into it. You buy it to protect your assets so that if something unexpected happens, you'll have peace of mind that your ability to pay for it doesn't depend on the size of your bank account.
Now, if you are a person who has the funds to pay any vet bill no matter how expensive, you don't need pet insurance. If you are the type of person who's not going to spend over a certain amount of money on your pet (e.g. $500), you don't need pet insurance either. The vast majority of pet owners don't fall into either of these camps.
Where Pet Insurance Can Be Used
Investopedia: Do most vets accept pet insurance? If so, from all companies?
Kenney: Unlike human healthcare, at this time there aren't any networks where vets accept only certain insurer's policy. You can generally use your pet insurance at any licensed veterinarian including university, emergency, or specialty hospitals.
Investopedia: Are pet insurance premiums deductible under any circumstance?
Kenney: Right now I don't know of any scenario where that is possible.
Investopedia: Can any “pet” be insured? Who insures pets other than dogs and cats? Is that insurance more expensive?
Kenney: As I said (earlier) some companies have age restrictions on which pets can be insured and some won't offer illness coverage on pets with certain chronic conditions.
Nationwide insures exotic pets like pocket pets, reptiles, birds, and so forth. Other companies may eventually do so, but most pet insurance offerings are limited to dogs and cats. I'm not sure about the costs to insure an exotic pet because when I checked you had to call Nationwide to get a quote.
Regulation of Pet Insurance and Complaints
Investopedia: Who regulates pet insurance? Where do consumers go with problems?
Kenney: Pet insurance is generally regulated by each state's department of insurance. If a problem occurs, you can seek help there or the BBB (if a company is a member).
However, always try to resolve any issue with the pet insurance company first. Pet insurance companies have an appeals process to evaluate your complaint. This process is spelled out in your pet insurance policy. For example, if a claim is denied, it can be reviewed again by a different claims adjuster or sometimes by a veterinarian independent of the insurance company who can rule in your favor and overturn the denial by the pet insurance company.
That said, not a high percentage of denied claims are overturned, but it's worth a shot and should be the first course of action if you have a complaint.
The Consumer Financial Protection Bureau was designed to assist consumers with complaints related to financial products and services. If you suspect a law has been broken by your pet insurance company, you can file a complaint.
Alternatives to Pet Health Insurance
Investopedia: What alternatives to pet insurance exist and how do they work?
Kenney: I think there are several viable alternatives to pet insurance. Eusoh is a community sharing platform similar to Medishare in human healthcare. It looks the most like pet insurance, but has a monthly cap on contributions by members. Pre-existing conditions aren't covered.
Pet Assure is a discount club where members get 25% off of most veterinary services performed at hospitals in their network. Generally, it doesn't cover things like lab testing referred outside the hospital or take-home medications/prescriptions. Pre-existing conditions aren't excluded. In some areas of the country (smaller markets, rural areas), the number of veterinarians in their network is limited. They provide a search tool to find any veterinarians in your area.
Pawp is a 24/7 telemedicine service that also makes available an emergency fund of up to $3000 (one time access per year). You have to be referred to a vet for a true emergency situation by one of their veterinarians to gain access to the emergency fund. Up to 6 pets in a household are eligible for access to the fund. Pre-existing conditions are covered.
So, Pet Assure and Pawp can be an alternative in pets with pre-existing conditions or older pets where pet insurance premiums are unaffordable for some pet owners. Eusoh is a nice alternative that offers a pet insurance-like product generally at a reduced costs.
Questions to Ask Before Buying Pet Insurance
Investopedia: What are things people should ask or consider before purchasing pet insurance?
Kenney: I have designed a Pet Insurance Toolkit that includes most of the factors to consider and questions to ask from my perspective as a veterinarian along with worksheets to help pet owners narrow down their choice of companies to insure their pet.
I recently had a user of the Toolkit contact me and she had just lost a couple of older cats and was getting a couple of kittens. She wanted to get pet insurance for the kittens (she didn't have her previous cats insured). The one coverage that she was particularly interested in was prescription diets. Only about half the companies cover this. So, this is one of the coverages included on the Toolkit worksheet to inquire about.
Another big factor from my perspective as a veterinarian is dental coverage. Generally, there are two categories, dental accidents (broken teeth) and dental illnesses (periodontal disease, feline tooth resorption or gingivitis stomatitis, etc.). Considering that periodontal disease is the most frequent disease diagnosed by veterinarians in pets (especially dogs), it should be covered. Feline tooth resorption and gingivitis/stomatitis can be very expensive to treat. So, I recommend buying insurance from a company that covers both dental accidents and illness.
This is why the perspective of a veterinarian is so important when it comes to evaluating pet insurance. We see day in and day out all the problems that pet owners will be filing claims for. The reason I developed the Toolkit is that I've found that pet owners "don't know what they don't know."
Investopedia: What's the main thing pet owners should understand about pet health insurance?
Kenney: The main thing for pet owners to understand is that it is important that they do their own research. Pet insurance is a complex insurance to understand. They must understand what they are buying or they are setting themselves up for disappointment down the road.
Pet insurance isn't a one-size-fits-all type of product. A pet insurance company and policy needs to be chosen around the needs of the pet, the wants of the pet owner, and the budget available for the pet's healthcare expenses.
Don't buy pet insurance from a particular company based simply on the recommendation of a friend or even a veterinarian. Do your due diligence. Always read a sample policy before buying pet insurance from a company. You'll find a lot of information that you won't find on a company's website and if you don't understand something, call the company for clarification.
Feedback from users of the Toolkit tells me that talking to a representative of a company gave them an idea of the company's customer service and sometimes was the deciding factor on which company they chose to insure their pet.