Covid, Pets, and Insurance: An Unlikely Combination

As a voracious dog lover (11 at present) COVID-19 has had one upside as far as I’m concerned: pet adoptions have skyrocketed. According to a Chicago Tribune article from earlier this year, and as representative of the trend, humane societies, and similar rescue organizations have been inundated with adopters during the course of COVID-19. So much so that sometimes placement organizations have had to reach out to other, nearby ones for more pets for adoption. What a change from the usual dynamic!

But what, you ask, does this have to do with insurance? To supplement my recent post on the NAIC’s consideration of changing pet insurance regulation, this is intended as some background.

It’s probably fair to say that everybody has at least a general idea of the meaning of “insurance.” But to be sure, let’s give it a fundamental (albeit stilted-sounding) definition:

Insurance is a contract by which a person or entity gets financial protection or reimbursement from an insurance company for specified financial losses.

In practice, most insurance works like this:

· An insurance company licensed by a state offers financial protection to third parties (the “insureds”)

· The protection is for financial losses that the insured sustains while the policy is in force

· The kind of loss must be specified in, and not excluded by, the insurance policy

· In return for the financial protection, the insured pays money (a “premium”) to the insurance company

· Depending upon the terms of the policy, the insurance company may directly pay a provider of services (like a car repair shop) or reimburse the insured for money outlaid for a covered occurrence or service

· The insurance policy usually specifies a maximum amount of benefits (money) it will pay or reimburse. The maximum might be stated as a lifetime or annual amount, or a maximum per procedure.

· The most important factor to remember is that the whole purpose of insurance is to remove from you a portion of the risk of financial loss (expense) from a covered event. This is called the “transfer of risk.”

What’s the Connection?

A product that has come to be known as pet insurance is the connection. Pet insurance is categorized as “property & casualty” insurance, meaning that it covers things or property and not people. Unfortunately, the law categorizes animals, including pets, as things or property. While pet lovers know differently and consider pets to be part of the family, that’s how the law categorizes them.

There are many providers of pet insurance. Many are insurance companies that also sell “human” insurance but some specialize in pet insurance. Others are insurance licensees that work with insurance companies and essentially place their own brand name on the pet insurance product for sale. Pet insurance ensures that pets have access to preventative and ongoing health care by lifting some of the financial burdens of routine and non-routine veterinary care from the pet owner.

While pet insurance differs from human health insurance in many ways, some similarities will help you better understand it:

· The pet insurance policy is issued and remains in force in return for the premium. The premium is based in part on the age, and breed of your pet. Where you live is also a factor because fees for veterinary services differ geographically. Breed is a factor because some have proclivities to certain acute and chronic conditions that require veterinary care.

· Pet insurance policies differ in cost and the benefits provided based on the plan purchased. In general, the greater the level of benefits, the higher the premium. Likewise for human medical insurance.

There are also differences between human health insurance and pet insurance, including:

· Human health insurance often works such that a healthcare provider submits charges directly to an insurance company for payment; the insured (patient) pays only the co-payment or deductible when service is rendered.

· With pet insurance, you, the owner pay for veterinary services when delivered. You, perhaps with the help of the veterinarian’s office, then file a claim for reimbursement with the insurer. The amount reimbursed is based upon the insurance plan — there are usually several to choose from. The reimbursement may be a fixed amount per procedure or a percentage of the charge.

· A big difference between human health insurance and pet insurance is that an applicant for human health insurance cannot be refused coverage because of a pre-existing condition, nor can the condition be excluded from coverage. However, some pet insurance companies do exclude coverage for pre-existing conditions. Still others distinguish between “curable” and “non-curable” pre-existing conditions. If the condition is considered curable, the policy may impose a waiting period before fully covering that condition.

But Pets Can Be Expensive Anyway; Why the Added Expense of Pet Insurance?

That’s exactly why: Pets can be expensive. Sometimes they get sick. Sometimes they need surgery. They should always get their annual physical exams and inoculations. It adds up.

Look at it this way: If money were tight from job loss or otherwise when your pet needed medical care, would you be more likely to get the care if you knew that you would be reimbursed for at least some of it?

Disclaimer & Final Thoughts

I don’t sell pet insurance nor work for an insurance company that issues it. I have no vested interest in the decision you make. All that I want to do is impart relevant facts so you can make the best decision for yourself. The pet that you adopted during COVID-19, the one that you had before COVID-19, and the one that you may get after COVID-19 deserve the best care that you can give to them. I want only to alert you that the insurance industry offers a product that may help attain that goal.