Let’s dig a little deeper into how pet insurance actually works. What will you pay? How is the cost calculated? How much will the payout be?
A deductible, sometimes called an “excess,” is the amount that you are responsible for. Deductibles can take a number of different forms. Most will use either:
Per Incident Deductibles
This is a set fee that will be deducted off the top of the incident. This will either be calculated as a percentage, or it will be a set fee.
If it’s a set fee, then there is a chance that you’ll pay $100 for any payout. For example, if your dog needs stitches, you’d pay $100 of the $250 overall cost. But at the same time, if your dog needs some kind of surgery, you’ll pay $100 of the $2,000 cost.
Alternatively, this might be calculated as a percentage. In this case, you might pay 10% of whatever the total amount is. This option works out better for you for less expensive procedures, but is worse for costly ones.
An annual deductible is not charged per incident, but rather per year, so long as there has been a single accident. At the same time, if your dog has 3 accidents that year, then you’ll still pay just once for the whole year.
So which type of deductible is better? That ultimately depends on what happens to your dog! Each has pros and cons, and what is more important when comparing policies is the size of the deductible.
If you want to compare, imagine that your dog has a few accidents in a year, then imagine that they have just one. Do the math and see which type of policy would be the most affordable in each scenario.
Note: One more thing to remember is that the lower the deductible, the higher the premium will normally be and vice versa. So, if you only pay a little bit per month, you’ll be required to pay a hefty chunk of the total cost should anything go wrong. But if you pay a large amount of money each month, the total you pay will be much smaller should the worst happen.
Again, the right decision depends on your circumstances, the health of your pet, and the more minute aspects of the policy.
The reimbursement rate is the rate at which expenses get paid. What percentage of the total cost will you be paid?
In cases where the deductible is a percentage, this may not apply. In all other cases, you might have to pay a fixed fee, and then on top of that only receive a 90% reimbursement (meaning that the company only pays for 90% of the total amount). Reimbursement rates can also fall as low as 70%, so this is another very important consideration when calculating your total.
Ultimately then, the amount you receive will usually be calculated like so:
(Total Cost – Deductible) X Reimbursement Rate
So that might mean that for a $3,000 operation, you end up receiving the following:
(3000 – 150) X 90% = $2,565
The amount you pay will be the total cost, minus this number. In this case that would be:
Not nothing, but much better than $3,000! Plus, you can find better rates if you shop around.
Note: Keep in mind that you won’t always receive the full amount right away. Some insurance companies have a fixed schedule for their payouts, while others take their sweet time. Again, this is something to check in the policy, and to read reviews about.
Limits on Payouts
Keep in mind that there are usually some limits as to how much you can get paid out.
These limits can take on different forms:
Maximum Payout Per Body System
This is the largest payout that the company will reimburse for a “body system.” Body systems are digestive systems, nervous systems, etc.
Maximum Payout Based on Schedule of Benefits
This is the maximum based on allowances for specific health issues. For instance, the company might have a particular allowance for asthma and another for arthritis. You should always check this in the policy before signing anything.
Other maximums include:
- Maximum per incident
- Maximum per year
- Maximum lifetime payout
Not every company will have these maximums, and the amounts can vary drastically too. It’s generally a good idea to avoid companies that have a maximum payout per body system policy , or payout based on schedule of benefits. These policies can leave you with zero financial help once you go above a certain amount, rendering the policy somewhat useless.
Shopping around and reading the fine print will help you to compare the terms, costs, and payouts of different companies and policies. With that said, there are still more factors that come into play.
For instance, how good is the company’s communication? Are they loyal to existing customers, or do they have a bad habit of hiking up prices?
Another consideration is your dog. The premium you pay, like any form of insurance, is going to be calculated at least in part in terms of perceived risk. That means that if your dog is very old and has pre-existing conditions, it will cost a lot more to insure them, and it might not even be possible at all.
Different companies and different policies will vary in terms of how welcoming they are of these kinds of issues, so make sure that you shop around and consider all your options. Hopefully this guide will help you to make the best decision possible!