Pet Insurance Deductibles

As a pet owner, you may be looking for a pet insurance policy. Whether your pet is young or reaching the twilight of its life, pet health is serious business. The best pet insurance companies help you manage the cost associated with all things related to your pet's health, from routine care to serious illness. Here, we'll explain how annual pet insurance deductibles work.

What is a pet insurance deductible?

It can be intimidating for a pet owner to purchase a pet insurance plan for the first time, primarily because of the new terms thrown your way. When you request a pet insurance quote, an insurance company representative will likely ask how much you want your deductible to be.

In a nutshell, a deductible is an amount you pay out of pocket toward your pet's veterinary care.

Types of deductibles

With most pet insurance policies, there are two types of deductibles -- annual and per-incident. Here's the difference.

Annual deductible

For budgeting purposes, an annual deductible is the easiest to keep track of because you pay it just once per policy year. No matter how often your pet sees a veterinarian, you only have to meet this deductible once. For example, your pet has recurring ear infections for the first few months of the policy year, and during that time, your vet bills have been high enough that you've met your deductible. That means no matter how often your pet needs veterinary care for the remainder of the policy year, the pet insurance carrier will pay its portion (as long as veterinary care was for a covered condition, such as an illness or injury).

Per-incident deductible

Some pet insurance companies offer per-incident deductibles. This is the amount you'll pay each time your pet sees a vet for a new condition. Suppose your pet is prone to health problems or sees a vet for various medical issues. In that case, you may find that a plan with a per-incident deductible costs you more than a policy with an annual deductible.

How do pet insurance deductibles work?

Pet insurance deductibles give you an idea of how much you'll pay out of pocket if your pet becomes ill or is injured. Here's how it works:

• Let's say you opt for pet insurance coverage with a $500 deductible.
• Once your deductible is met, the pet insurance provider pays 90% of covered expenses (or whatever percentage of the bill is called for in your pet insurance policy).

In real life, it may look like this:

• Your pet tears a ligament and needs emergency surgery.
• The total surgical bill totals $4,500.
• You pay the first $500 to cover your deductible, and the pet insurance company pays 90% of the remaining $4,000 ($3,600).
• You're left with a $400 balance ($4,000 – $3,600 = $400).
• Once you've paid the final $400, the total you're out for the $4,500 surgery is $900.

How pet insurance pays its portion of the bill

Whether you take your pet to see a veterinarian for a chronic condition or some other covered expense, how the insurance company pays its portion of the bill depends on the company. Some insurers contract with vets across the country. When that's the case, you pay any deductible owed, and the veterinarian's office bills the insurance company directly for its portion of the bill. You're responsible for the remainder.

Let's say it's late in the policy year, and you've already met the annual deductible for your elderly cat. The cat eats something he shouldn't, and you end up in an emergency pet hospital late at night. By the time the vet runs tests, gives the cat something to help him throw up, and keeps him overnight for observation, the bill is $900.

Since you've already met your deductible, you no longer have to worry about that bill. If the pet insurance company you chose accepts direct billing from the pet hospital, all you're responsible for is the portion not covered by the insurer. So, if your pet insurance policy covers 90%, you'll owe $90, which is 10% of the total cost ($900 x 0.10 = $90). If the policy covers 80%, you'll owe $180, or 20% of the total cost ($900 x 0.20 = $180).

A common way insurance companies pay their part of veterinarian bills is through reimbursement. Here's how it works:

• You pay the entire vet bill.
• The veterinarian's office fills out forms provided by the insurance company.
• You, or the vet's office, submit those forms.
• The insurer sends a check to reimburse you.

What factors impact the deductible?

There's a direct link between your deductible and monthly premium. The higher your deductible, the lower your monthly premium. So, one of the factors impacting the deductible is whether you're looking for a higher or lower monthly premium.

How to choose the right deductible

It's all about budgeting. If you're typically on a tight budget and worry you may not be able to come up with a large deductible at one time, opt for a lower deductible. Yes, your monthly premium will be a bit higher throughout the policy term, but there will be fewer surprise costs.

If you'd rather pay a lower monthly premium, opting for a higher deductible is the easiest way to make that happen. It comes down to the pet insurance cost that fits your current budget.

Throughout history, the thought of buying health insurance for a dog, cat, rabbit, or bird would probably have elicited a chuckle. Today, we know that pet health insurance is an excellent way to minimize out-of-pocket costs while allowing our pets to live the healthiest life possible.