Last Updated 10/18/2023

Introduction: 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. Some insurance companies will not accept pets after a certain age and many companies have waiting periods before benefits begin. 

Background: Pet insurance companies typically divide their products into 3 main categories: accident-only, accident and illness, and wellness coverages.  Each level offers specific services that are covered and excluded and will vary by price.

Insurance policies are usually broken down by the type of pet being insured. 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 2023-2024 American Pet Products Association's (APPA) National Pet Owners Survey, 86.9 million , or 66% of, households in the U.S. reported owning a pet, and will spend an estimated $143.6 billion on vet care and products  (pet food, treats, supplies, live animals, OTC medicine, vet care, product sales, and other services) in 2023, up from $136.8 billion in actual costs in 2022. This is not a new trend; consumer spending on pet medical care has been consistently rising every year since 2018, 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) 2023State of the Industry Report shows the total number of pets insured in 2022 reached 5.36 million, up from 4.4 million in 2021. Dogs continue to make up the majority of insured pets (80.1% vs 19.9% for cats).  As lifespans of companion animals increase, costs of veterinary care are likely to 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., 92.8% were covered by Accident & Illness plans or Embedded Wellness plans, 7% were Endorsements (riders such as wellness or cancer treatments) 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 and as of 2022, the product is available on their website for purchase.

Status: In April 2019, the Pet Insurance (C) Working Group  was 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. At the NAIC's Summer 2022 National Meeting in Portland, Oregon, members voted to adopt the Pet Insurance Model Act. Key elements of the model law address pet wellness programs, preexisting conditions, consumer protections, and training for insurance producers. State adoption information for the model can be found here. The Pet Insurance (C) Working Group disbanded in 2022, but the Property and Casualty Insurance (C) Committee continues to monitor developments in this area. Additionally, the NAIC reviews and updates NAIC model laws and regulations to ensure that they continue to meet the public policy needs.