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Pet Insurance

Last Updated 9/22/2020

Pet insurance is similar to health insurance for humans. It includes exclusions, various levels of coverage, deductibles, and payment limits. Some carriers have different levels of coverage for the customer to choose from, while other carriers have one-size-fits all type plans. Most pet insurance companies exclude pre-existing conditions and hereditary or congenital conditions, and most general pet health policies do not cover wellness or preventative items, such as annual exams, vaccinations, and spaying or neutering. Some insurance companies will not accept pets after a certain age and many companies have waiting periods before benefits begin.

Insurance policies are usually broken down by the type of pet being insured and some companies allow the owner to choose their veterinarian. The actual monthly cost of the policy will depend on many variables, including the species of animal, breed, gender, age, location, and the coverages and deductible chosen. Most policies pay on a reimbursement basis and are not transferable to other pets, but with written approval and consent, some policies can be transferred to new owners.

Reimbursement methods can be slightly different among companies. Some companies use a benefit schedule, which reimburses policyholders based on the illness or injury and the coverage level chosen. Other companies reimburse percentages based on the amount spent by the policyholder. Although pet insurance is not for everyone, consumers who are considering it should do their research. There are many online education centers dedicated to pet insurance which include policy and company reviews, term definition and explanations, and questions consumers should ask of themselves and the companies they are considering.

According to the 2019-20 APPA's National Pet Owners Survey, 84.9 million, or 67%, of families in the U.S. reported owning a pet, and will spend an estimated $18.98 billion on vet care alone in 2019, up from $18.11 billion in actual costs in 2018. This is not a new trend; consumer spending on pet medical care has been consistently rising every year since 2001, the year APPA officially started collecting data. The rise in veterinary care spending comes at a time when sales of pet insurance policies are rising, as well. Highlights from the North American Pet Health Insurance Association (NAPHIA) 2019 State of the Industry Report show the total number of pets insured in 2018 reached 2.43 million, up by almost 17.1% from 2017.  As lifespans of companion animals increase, costs of veterinary care may increase for the consumer.  This could be beneficial for the pet insurance industry in the future as more consumers turn to pet insurance to help manage preventive care, acute and chronic illness, and emergency medical care costs for their animals. Moreover, the data from NAPHIA shows consumers prefer these types of "comprehensive" insurance plans for their pets: In the U.S., 98% were covered by Accident & Illness plans or Embedded Wellness plans while the remaining 2% were Accident Only plans.

The combination of a growing pet population and consumers willing to invest more in the health of their pet could create opportunities for insurtechs to enter this expanding market.  In February 2020, insurtech company Lemonade announced their intention to add pet insurance to their existing product lines in the near future.  

Other Pet Risk Management Tools

Wellness Programs: In addition to pet insurance, some veterinary offices offer their own wellness plans. These offer wellness coverage for items traditionally not covered by pet insurance, like vaccinations and examinations.

Discount Plans: There are some national discount programs that exist as well. Programs like these offer veterinary services discounts for a monthly fee, based on the number and kind of animals owned. Typically, veterinarians who are part of a network must be used in order to receive the discount.

Pet Pharmacies: Many pharmacies, like Target and Wal-Mart, are beginning to carry pet prescriptions.

Homeowners Insurance: Homeowners and renters policies can sometimes assist with covering damages incurred by a pet while on their own property. Additionally, arrangements, such as boarding, may be covered for pets in a homeowner's additional living expenses (ALE), while the home is being repaired for a covered loss. However, homeowners need to be prepared, and more importantly, do research to make sure their animal is not excluded by their insurance carrier as a dangerous breed. Usually, homeowners and renters policies protect an owner from liability caused by their animal, but if the carrier has identified the breed as dangerous, or a dog has a history of aggressiveness, that pet(s) may be excluded. For owners in such a situation, some additional or specific liability coverage could be purchased to cover the risk.

Status: In April 2019, the Pet Insurance (C) Working Group was established by the Property and Casualty Insurance (C) Committee and charged to review the NAIC White Paper, A Regulator's Guide to Pet Insurance, to consider whether a model law or guideline was needed to create appropriate regulatory standards for the pet insurance industry. A request for Model Law development related to pet insurance was adopted during the NAIC 2019 Spring National Meeting to address issues such as definitions, disclosures, violations, producer licensing, preexisting conditions, reimbursement benefits, and regulations for pet insurance. Currently, the Working Group is reviewing a draft document of the Pet Insurance Model Law. The Property and Casualty Insurance (C) Committee will determine if revisions are necessary before the final version is sent to the Executive Committee and Plenary for consideration.

Committees Active on This Topic

Additional Resources

Education & Training courses for regulators relevant to this topic:

Licensing and Reporting in the U.S. Pet Insurance Market (Journal of Insurance Regulation, 2020Article Overview

A Regulator's Guide to Pet Insurance (April 2019, NAIC White Paper)

An Overview of Pet Insurance in the U.S.
June 2018, NAIC Insurance Summit Presentation

Pet Insurance
Insurance Information Institute

Pet Insurance: Fido's Risk Management Options
October 2014, CIPR Newsletter


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