Pet Insurance Guide

Lesson 2:
How Does Pet Insurance Work?
Pt. 1

The best way to describe how pet insurance works is to compare it to something familiar: Human Health Insurance.


Similarities to Human Health Insurance

Similar to human health insurance, pet insurance has premiums, deductibles, co-pay, and maximum payouts.



Premium

The Premium is the amount you pay monthly or annually for your pet insurance policy.



Deductible

The Deductible is the amount of the veterinary bill you must pay before the insurance company starts paying.

Types of deductibles:

  • Per-Incident - This is the amount you must pay for each new illness or injury. This deductible is paid once for each new illness or injury. If a pet is hit by a car, that is considered one incident and has one deductible regardless of how many times the owner must return to the veterinarian for rechecks.
  • Annual - This is the amount you must pay each year regardless of the number of new incidents.

note    Choosing a higher deductible will lower your premium, but the amount of money you will pay out of your pocket for medical treatment will be higher.

Choosing a lower deductible will lower the amount of money you will pay out of your pocket for medical treatment, but your premium will be higher.



Co-pay

The Co-pay is the percentage of covered expenses that you must pay after the deductible is met. The insurance company pays the remaining percentage of covered expenses. So...if your co-pay is 20%, the insurance company pays 80%.

Remember this is 80% of covered expenses. There may be expenses you incur that are not covered by the insurance plan.

Make sure you know what the pet insurance plan covers before you buy it. This is one area where many who buy pet insurance plans fall short. They are then disappointed when their policy will not pay for procedures or treatments they thought were covered.

note    Choosing a higher co-pay will lower your premium, but the amount of money you will pay out of your pocket for medical treatment will be higher.

Choosing a lower co-pay will lower the amount of money you will pay out of your pocket for medical treatment, but your premium will be higher.



Maximum Payout

Maximum Payout is the maximum amount of money the insurance company will give you.

There are five different types of Maximum Payouts:

  • Maximum Payout Per Incident - This is the maximum amount of money the insurance company will reimburse you for each new illness, accident or injury. Once you hit this limit, that particular accident, injury or illness will no longer be covered and you will not receive any more money for that particular accident, injury or illness.
  • Maximum Payout Per Year - Also called Maximum Annual Payout. This is the maximum amount of money the insurance company will reimburse you each policy year. Once you hit this limit, you will not receive any more money for any injury, accident or illness for that policy year.
  • Maximum Lifetime Payout - This is the maximum amount of money the insurance company will reimburse you during the lifetime of your pet. Once you hit this limit, you will not receive any more money and your policy will be terminated.
  • Maximum Payout Per Body System - This is the maximum amount of money the insurance company will reimburse for a body system. Examples of body systems include: Digestive system, musculoskeletal system, and nervous system. Once you hit this limit for a body system, you will not receive anymore money for any injury or illness that relates to that body system.
  • Maximum Payout Based on a Predetermined Benefit Schedule - This is the maximum amount of money the insurance company will reimburse based on predetermined listed fee structure. Companies that use this structure tell you ahead of time the specific amounts they will pay for certain diseases.

note Some companies will use a combination of two types of maximum payouts. For example, some companies institute a maximum payout per incident and a maximum payout per year.

The higher the amount of your maximum payout, the more you will pay in premiums.

Picking the right type of Maximum Payout is important to pet insurance success. In lesson 6, I will show you how to make the right choice when it comes to Maximum Payouts.



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