The dos and don'ts of shopping for pet insurance like health insurance

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The dos and don'ts of shopping for pet insurance like health insurance

There are lots of different types of insurance out there. Some insurance products you absolutely need for your personal and financial welfare. Life insurance is really important. Health and auto insurance are legally required in most cases. And, some insurance products you definitely don’t need. Hopefully you’ve checked out our 5-minute insurance checkup to figure out which products are the best fit for your needs.

But today, we’re going to talk about pet insurance. Did you know that only 1% of pet owners in America have pet insurance, but $15 billion is spent on pet care every year? Because pet insurance is so rare, a lot of people don’t understand it or make proper use of it. Most people assume it’s like health insurance, but for Fido and Garfield, right?

Well...kinda. There are some key differences between health and pet insurance. Still, knowing how they’re different can help you decipher your potential need for pet insurance and how to shop for it before you shop for it.

Let’s look at the do’s and don'ts of buying pet insurance like it’s health insurance – and answer some key questions about protecting your pet along the way.

DO: Consider your premiums

If you have insurance – life, health, homeowners, auto, whatever – you know what a premium is. It’s what you pay upfront, monthly or annually or semiannually, just to have your insurance policy in place.

Both health insurance and pet insurance have a seesaw effect when it comes to premiums and deductibles – the amount you’re responsible for before your insurance kicks in. If you pay more each month with your premium, you’ll have a lower deductible to hit, and vice versa.

Let’s say you pay $80 a month for pet insurance, and have a $1,000 deductible. If Spot has a $1,500 procedure, you’re paying $80 a month regardless, then paying that $1,000 before your insurance kicks in for the remaining $500.

When it comes to pet insurance, though, you also have to consider the reimbursement rate. The reimbursement rate is the percentage of costs that your insurance will cover after you hit your deductible. It’s usually between 70-90%. So in our above example, if you have an 80% reimbursement rate on that remaining $500, you’d still be responsible for $100 of it.

You can lower your pet insurance premiums by raising your deductible, or by lowering your reimbursement rate. In both cases, you’re taking on more risk of covering expenses.

DON’T: Lean too heavily on a doctor network

"Okay," you say, "I know this one only applies to pet insurance, since I definitely have to take my network into account when it comes to my health insurance."

Surprise! This tip goes for both health insurance and pet insurance!

When it comes to pet insurance, it’s easy: Don’t worry about your network, because there is no network. Unlike human health insurance, where facilities and even individual doctors are covered (or not) but a specific carrier or plan, pet insurance doesn’t pay out directly. Instead it works on a system of reimbursement. You pay the full cost of your vet bill, and your insurance will reimburse you after you submit a claim based on your deductible and reimbursement rate (now that term probably makes a little more sense). There’s no relationship between a medical facility and your insurance like there is with health insurance.

Even when it comes to health insurance, you shouldn’t be totally beholden to your network. Yes, you definitely have to keep it in mind, because the type of plan you choose (HMO, EPO, or PPO) affects how much you pay, and if you go outside of your network you could end up racking up a huge bill that you’re totally on the hook for.

But networks change a lot. Doctors drop carriers and carriers drop doctors all the time. While you may want to keep your current doctors, it’s risky to plan your whole health insurance policy around staying in a certain network because it can change at a moment’s notice. That’s why you should be aware of your network, but don’t lean on it too heavily.

DO: Consider your deductibles

Let’s go back to your deductibles quickly. The deductible is one of the key components in determining how much you’ll pay for any insurance policy. With both health insurance and pet insurance, you want to make sure you’re striking a balance of getting the coverage you need while not paying too much.

When considering your health insurance deductible, you have to know what kind of healthcare consumer you are – or what kind of consumer you expect to be. Do you see your doctor often, do you have a medical condition that requires lots of medication or lab tests, or are you expecting to get pregnant? If you lower your deductible, you’ll pay more each month in the form of higher premiums but your insurance will kick in sooner, so you might end up saving money in the long run.

On the other hand, if you don’t go to the doctor frequently, you might be better off paying lower premiums each month and handling any healthcare costs yourself, since you probably won’t hit your deductible unless there’s a medical emergency.

Pet insurance has that same give-and-take structure, but deductibles come in two flavors: per-incident and annual.

These are pretty much what they sound like. A per-incident deductible resets with each incident. So if your per-incident deductible is $100 and Lassie goes to the vet for a $500 procedure, you have to pay $100 before your insurance begins to cover the remaining $400. If, two months later, Lassie goes in again for another $500, you again have to pay $100 completely. You’re still coming out on top.

An annual deductible in pet insurance, on the other hand, is the same as in health insurance: a lump sum amount that resets at the end of the year.

Just like you can balance your overall health insurance costs by tweaking your deductible, you can balance your pet insurance costs by choosing the right type of deductible. A per-incident deductible is typically easier to meet if your pet only has to see the vet a few times a year, while an annual deductible helps cover costs for high users of petcare.

For health insurance and pet insurance, this would be an easy choice to make if we could see the future. Since most of us can’t, make sure you have a deductible that you’re comfortable and financially able to pay if the need arises.

DON’T: Wait to shop for health insurance and pet insurance at the same time

The more you can lump tasks together to get them done, the better. If you’re shopping for health insurance, find yourself thinking about the high costs of healthcare, and decide it’s time to buy insurance for Buddy as well, go for it. It’s one less thing you have to come back to later.

But pet insurance can be bought at any time. You can impulse buy it right after you’re finished adding those new shoes to your Amazon cart.

Health insurance can only be bought at certain times throughout the year. The most popular time is Open Enrollment, during which you buy your health insurance plan for the coming year and avoid the individual mandate penalty. The Open Enrollment period for 2017 ran from November 1, 2016, to January 31, 2017.

If you miss the Open Enrollment period, your only way to buy health insurance throughout the year is during a special enrollment period – anything that changes your coverage status. So if you leave your job that offered health insurance, had a baby, or moved, for instance, you can re-shop for health insurance. Otherwise not only are you on the hook for 100% of your medical bills, but you also have to pay a penalty of the higher of $695 or 2.5% of your household income. Sure, you’re not paying for health insurance in this scenario, but the savings don’t add up.

If your shopping cycles for health insurance and pet insurance line up, that’s great. But not having health insurance is incredibly costly, there are limited opportunities to apply, and pet insurance can be bought at any time, so it’s not worth deliberately putting one off until you buy the other.

DO: Think about pre-existing conditions

One caveat to that "You can buy pet insurance whenever" rule: the sooner you buy it in your pet’s life, the better, thanks to pre-existing conditions.

You don’t have to worry about pre-existing conditions – health conditions you had before you got your insurance – when you’re shopping for health insurance, because the Affordable Care Act, aka Obamacare, made discrimination based on pre-existing conditions illegal. That might change in the future based on Republican health insurance replacement plans that are floating around in Washington, but for the time being you can’t be denied coverage for a pre-existing condition.

This isn’t the case with pet insurance. Insurers can, and often do, deny coverage for pre-existing conditions. That means you’re limited to what your insurer will pay for. It’s not ideal, but it makes sense in the context of pet insurance. Because there’s no equivalent of an Open Enrollment period, you can buy and drop health insurance at any time. If insurers covered pre-existing conditions, pet owners could wait until their pet needed insurance, buy a policy then, get the benefits, and then immediately drop it. This would drive up prices considerably. (Maybe it’s time for Pawbamacare?)

That’s why if you buy pet insurance early, your furry friend will be covered long before they develop any medical conditions and you’re more likely to have any ailments covered going forward. Until there are any changes to healthcare laws, you can rest assured knowing your health insurer won’t use your pre-existing conditions against you, but when it comes to your pet, early is often better.

We treat our pets like furry family members. We buy health insurance to protect the human members of our family, and it makes sense to buy insurance for your pet, too. As long as you know the difference between buying health insurance and pet insurance, you’re well on your way to making sure there’s a safety net in place for your entire household – no matter how many legs they have.