Basics of Pet Insurance

People in the developed world have an affinity for pets. This is the reason why two-thirds of American households, i.e. around 80 million households have pets. All of us are aware that the costs of healthcare are rising exponentially in America and in other developed countries such as the UK. Similarly, the cost of veterinary care has also been rising. This is the reason why owning pets has become a very expensive proposition.

It has been estimated that American households have paid over $17 billion in the year 2018 in order to obtain healthcare treatments for their pets. Pet owners are able to bear most of the routine costs related to medical treatments for animals. However, if there is a severe illness such as cancer or if there is an accident, then the veterinary costs can escalate pretty quickly. This is the reason why a large number of people are opting for pet insurance. During 2018, the total premium collected for pet insurance has exceeded $1 billion. The total premium collected has been growing at about 15% every year. Experts believe that very few pets are insured as of now and the potential to sell more policies is still huge. Therefore, it would be appropriate to say that pet insurance is a rapidly growing niche in the insurance market.

In this article, we will explain some of the basics related to pet insurance.

Types of Pet Insurance Policies

Pet insurance is typically a hybrid between a health insurance policy and a property damage policy. This is because pets are living beings, but at the same time, legally they are considered to be a person’s possessions.

There are various types of policies which are commonly sold. Some of them are as follows:

• Veterinary Group Plans: There are certain groups of veterinary doctors which provide membership based services. They agree to charge reduced rates in exchange for a fixed monthly fee. However, it needs to be understood that this is not insurance. Veterinary doctors will charge less money for their services. However, they will not reimburse the costs of medicines or expensive surgical procedures. These plans are more like discount plans, and they are not regulated by the rule of law.
• Basic Pet Policy: A basic pet policy is the least expensive option for pet owners. However, this policy only comes into effect when the pet meets an accident or is suffering from some kind of critical illness. Preventive and routine check-ups are generally not covered within the policy. Also, these policies are known for restrictive terms. Some of them have co-pay conditions. There is also a possibility that there may be caps per accident or illness.
• Comprehensive Pet Policy: Comprehensive pet policies are more expensive when compared to basic coverage. However, they also provide a lot more benefits. They provide all the benefits that are provided in the basic policy. On top of that, they also pay for preventive measures such as x-rays, lab tests, and other diagnostic procedures. The deductibles and co-pay are generally lower than the basic policy. However, these policies also restrict the total amount of money that can be paid out per accident or illness.
• Wellness Policies: Wellness pet policies go a step ahead when compared to comprehensive policies. They provide all the services, but the deductibles and co-pay are even lower. Also, wellness programs such as de-worming and vaccinations are also covered in this policy.
• Third Party Protection Policies: If a pet animal injures someone then they decide to sue the owner, the owner can be held liable for the damages. Also, if a pet animal damages cars or other properties owned by other people, a pet owner can be considered to be liable. To protect themselves from this liability, many pet owners also buy a third party insurance policy. This may be sold as an add-on to an existing pet policy or as a completely different policy.

How Do Companies determine Pet Risks?

It needs to be understood that pet insurance is a relatively nascent market. There is a lack of data, and hence insurance companies decide the premium based on their own previous experiences. However, there are certain common characteristics that all companies look for while insuring pets.

• Age: Age is one of the most relevant characteristics while determining insurance premiums. The younger the pet, the lower the premium. Also, if a younger pet enrols in a policy, then when the same pet gets old, the company has a detailed medical history of the pet. They can, therefore, predict his/her future health condition more accurately.
• Breed: It is a known fact that pets belonging to some breeds fall sick more often than pets belonging to certain other breeds. For instance, the Rottweiler breed is more prone to cancer than other breeds. This is the reason why all insurance companies will either charge a higher premium or will simply deny insurance to a Rottweiler.
• Previous History: If a pet has a medical history, it is unlikely that any insurance company would insure the pet for the same or related condition(s). Also, if a pet has a history of damaging property or biting other people, then too, it may be difficult to get insurance for the pet.
• Location: The location of the pet can significantly affect the prices charged by vets. Hence, if there are two identical puppies and one is in New York City while the other is in Wyoming, it is likely that the insurance premium for the one in New York will be higher.

To sum it up, pet insurance is still a nascent field. However, it is growing at a rapid rate as more pet owners are becoming cognizant of the rising costs of pet healthcare.