Pet Insurance Deductibles – Everything You Need to Know
28 June, 2018
By: Lisa Fimberg
When you enroll your dog or cat into a pet insurance policy, you might be surprised at how confusing it can be and all the variables in singing up. Of course you want your pet to have the best pet insurance at the most affordable rate. There are different deductibles amounts for each policy and different choices that affect your deductible. This article will walk you through everything you need to know about pet insurance deductibles to help make the best choice.
How much does it cost to enroll in a new pet insurance policy?
There are many factors that can affect the price of your new pet insurance policy. The breed of your pet, where you live, the age of your pet and the policy you choose. You will pay a monthly premium that can range anywhere from $10 to $100 a month. The average month premium for dogs is $50 and for cats is $25.
And then, the deductible you choose and the reimbursement percentage will also determine the price and rate of your premium.
Even NAPHIA suggest that all of the costs in your policy, including co-pays, deductibles, add-on charges, and other fees, should be clearly explained to you so you fully understand both the benefits (financial reimbursements) and limits of the policy. And we will try to help you to understand deductibles.
A deductible is essentially how much money you will have to pay out of pocket before the pet insurance company starts paying. Typically, a higher deductible will translate into a lower monthly premiums.
There are 3 different types of deductibles.
1. Annual Deductible – The annual deductible is the amount you pay (standard is around $250) before your pet insurance policy starts to pay. Once you’ve met your deductible, your pet insurance plan kicks in to reimburse you anywhere from 70 to 90% of all medical bills (depending on the reimbursement that you choose. When the policy year is over, the deductible resets. The annual deductible is usually broader in scope than the other types of deductibles. A deductible is not a co-payment.
What is a co-payment?
A co-payment (or co-pay), is the percentage of the total medical expenses you must pay once your deductible limit has been reached. For example, if your veterinary bill is $4,000 and you have a deductible of $500 and a co-pay of 20%, you would pay your $500 deductible and a co-pay of $700 (20 % off the $3,500 balance). Your insurer will then reimburse you $2,800 to cover the rest of the cost of treatment.
2. Per Condition Annual – Per condition annual is similar to per condition lifetime but separates coverage according to condition. The deductible resets each calendar year.
3. Per Condition Lifetime- The per-condition lifetime separates varying deductibles by condition. Once that deductible is met the company pays out for that condition according to the given reimbursement model for the rest of the pets life. This can be very beneficial with dogs or cats that have cancer and need on-going treatment for the rest of their lives.
Reimbursement is the percent of the vet bill that your insurance will pay you for each claim after your deductible and co-pay. Most plans will allow you to customize your reimbursement options.
Most pet insurance policies have three different reimbursement options:
1. Actual Cost
Actual cost is literally the actual cost that you will be paid back after you have satisfied your deductible and co-pay. It is typically a percentage (i.e. 80 – 90%) of your actual veterinarian bill. Most plans that use this model allow you to choose the percentage that suits your needs.
2. Benefit Schedules
Benefit schedules are usually not the preferred choice as they set a maximum limit that your pet can receive. So if your dog, for example, has two incidents in one year, you might end up paying the difference out of pocket. It is very important to read the fine print of the benefits schedule to make sure that you know exactly what is included.
3. Usual and customary reimbursement
Usual and customary reimbursement is only a little better but it also has a limit on payments. And it can be hard to gauge what is really defined as customary.
A lower deductible generally means:
A higher monthly premium, you reach your reimbursement level (say 90%) sooner and you pay more now, but could save more at a later time.
A higher deductibles mean:
A lower monthly premium but it could take longer to reach 90% coverage of eligible conditions. You save more now, but could pay more at a later time.
What deductible should you choose on your pet insurance policy?
The deductible you choose on your policy is really up to you and depends on your pet. There really is not a better or worse in choosing a per-incident deductible or an annual deductible and the outcome can change in any given year. Whatever you choose, in the end, you and your pet insurance will be sharing the cost for most of the year.
The important thing is to choose a deductible that you’re comfortable paying. And, with every pet insurance deductible, it can be a bit of a gamble to decide which the best is for you and your pet.
Some tips that could help in choosing:
If you think that your pet will have many incidents or vet visits within the policy year, than an annual deductible is probably better.
If you think your cat or dog will only have 1 or 2 incidents that require vet visits over the next 12 months, then a per-incident deductible is probably better.
Do you want to pay less out of pocket when you actually seek vet treatment for your pet? Then get a lower deductible.
Do you want a lower fixed amount that you pay monthly, and are comfortable with possible owing a larger amount when you go to the vet? Then get a higher deductible.
Some pet insurance policies will limit the amount paid in claims for your pet. (There are also policies with no limits).
Generally, there are four different types of limits on payouts:
1. Maximum payout per incident – This is the maximum amount the insurance company will pay out for each separate illness or injury. Once you hit that limit, the insurance company will not reimburse any additional expenses for that incident. For policies that have a maximum payout per incident, the limits can go up to $10,000.
Petplan’s annual limits can be set at $2,500, $5,000, $10,000, $15,000, $20,000, and $25,000 or unlimited
2. Maximum payout per year – This is the maximum amount the insurance company will pay for each twelve-month period on your policy. Once you hit that limit, you’re not eligible to receive any more money from the insurance company until the next year. For policies that have a maximum payout per year, the limits can go up to $20,000.
3. Maximum lifetime payout – This is the maximum amount the insurance company will pay during the lifetime of your pet. Once you hit that limit, you’re not eligible for any more reimbursement and your policy will be terminated. For policies that have a maximum lifetime payout, the limits can go up to $200,000.
4. Maximum payout based on a schedule of benefits – This is the maximum amount the insurance company will reimburse, based on a listing of allowances for different health conditions and illnesses. For example, the schedule might have a maximum allowance for asthma of $500. That’s the maximum payout you’d be eligible for, per year, for any expenses related to your pet’s asthma.
As mentioned above, some pet insurance companies reimburse based on a fixed schedule of costs or the “usual and customary charges” for the treatment”, rather than the actual vet bill you submit. This is never a good choice as you want to be reimbursement on your actual vet bills and then you really know what you are paying.
In general, the maximum payouts per incident is not the best choice. An incident could be a single life-threatening event (e.g., cancer or a serious injury) that requires expensive, lifesaving care. A per-incident limit is typically lower than an annual or lifetime limit, so the per-incident limit might actually defeat the purpose of pet insurance, which is to allow you to make decisions about lifesaving care without worrying about the cost.
On the other types of payout limits—annual and lifetime—are generally the most preferred as long as the amount is high enough to cover a worst case scenario which can run up to $30,000 for certain conditions. There are also plans with no limits on payouts. These plans provide the greatest peace of mind (and are still reasonably priced) and the real reason you purchase pet insurance.
For example, Healthy Paws is one of the few insurers that offer policies with no limits or caps, including annual, lifetime, or per incident caps. While other pet insurance policies offer unlimited benefits, it typically is with their most expensive plans and their unlimited benefit option is included in their standard plan. Their policies cover all accidents and illnesses, and there are no restrictions for hereditary or congenital conditions, including cancer.
Or Petplan’s annual limits can be set at $2,500, $5,000, $10,000, $15,000, $20,000, and $25,000 or unlimited so you can customize your limits.
The deductible is only part of the equation in enrolling in a pet insurance policy. Try to figure out what your dog or cat will need in this and the upcoming years. Make sure to get quotes from multiple pet insurance companies before making a purchase. Speak to their customer representatives, have your questions ready and figure out how much you can afford each month.
To get started, take a look at our list of the top pet insurance companies of 2018 that can help you choose a plan and answer many other questions you might have.