Pet Insurance Terms and Definitions
We put together a list of the most common and most confusing pet insurance terms to help you understand what it all means.
Accident and Illness Coverage – A major medical plan is the base level pet insurance plan. They are by far the most common type of pet insurance plans purchased, accounting for over 98% of all policies sold. This type of policy covers veterinary treatment for unexpected health issues like broken bones, torn ligaments and long-term diseases like cancer. Learn More: Accident and Illness Policies
Accident Only Coverage – As the name suggests, this type of plan only covers injuries or conditions that are considered accidental in nature. This often includes injuries such as broken bones, lacerations, or emergency situations such as the ingestion of foreign substances or accidental poisoning. The exact list of injuries and conditions that are covered by this type of emergency pet insurance may vary from one insurance company to the next. For this reason, careful comparison is important before you enroll in an accident-only plan with a specific provider. Learn More: Accident Only Policies
Adverse Selection – Adverse selection is when people with the highest probability of loss are the ones most likely to purchase insurance. Pet insurance companies protect themselves from adverse selection by incorporating waiting periods into their policies. For example, if a pet owner has an older dog that has been limping for several weeks they may purchase a pet insurance policy to help pay for treatment when they visit the vet. Companies also use exclusions to protect their business from adverse selection. These exclusions prevent pet owners from enrolling to cover pre-existing conditions that have occurred prior to enrollment. If a pet insurer covered everything they would go out of business because their loss ratio would cause them to go out of business.
Age Restrictions – All pet insurance companies have age restrictions when you enroll in a plan. Every company has a minimum age requirement and will not insure pets under six to eight weeks old depending on the company. Some pet insurers also have maximum age limits, which means you need to enroll before a specific age. The most common maximum age limit for enrollment is 10-12 years old. The key is to enroll in a plan while your pet is young and healthy to avoid being denied coverage. The good news is that once you enroll in a plan, your dog or cat will be covered for life, regardless of their age.
Alternative Therapies – Just like humans, pets can suffer from degenerative, chronic health conditions. Fortunately veterinarians and specialists are adopting a holistic approach with alternative therapies. Most pet insurance companies cover alternative therapies in their standard policies. Other companies require you to add alternative therapies to their standard plan. Learn More: Alternative Therapies
AAHA – AAHA stands for the ‘American Animal Hospital Association.’ The AAHA is a veterinary association that provides continuing education, professional development and accreditation for veterinary professionals throughout the country. The American Animal Hospital Association, or AAHA, is the governing body that issues accreditation status for pet hospitals in the U.S. and Canada. If you’re looking for the best-of-the-best pet hospitals you can find a list on AAHA’s website under “referral practice,” which is a fancy word for pet hospital. These are the clinics that have MRI machines and can treat major surgery or cancer. The AAHA was founded in 1933 and is headquartered in Lakewood, Colorado. There are currently 5,500 veterinary clinics and over 50,000 veterinary professionals accredited by the AAHA. Learn More: Find an AAHA Accredited Hospital
Annual Deductible – An annual deductible is the amount that must be paid out of pocket by the pet owner each year before an insurer will pay claims. For example, if you have a $200 annual deductible you won’t be reimbursed for claims until they exceed $200 during a 12-month period. Alternatively some pet insurance companies have a per incident deductible where you pay your deductible each time you make a claim. With this type of deductible if you had multiples claims in one 12-month period you would have to pay the deductible each time.
Annual Limit – The annual limit is the maximum amount a pet insurance company will pay for claims during a 12-month period. Some companies start the 12-month period when you enroll while others use the regular calendar year. And while some pet insurance companies offer an annual limit other companies have a per incident limit. Whether the company you choose has an annual limit or per incident limit the higher your limit the better.
Benefit Schedule – A benefit schedule sets a fixed payout amount for a given health condition. It is a long list of healthy conditions and veterinary procedures that includes the amount the pet insurance company will pay for each. Benefit schedules aren’t very common in the pet insurance industry. In fact, the only plan that still uses a benefit schedule to pay claims is Nationwide’s Major Medical Plan. All other companies pay claims based a percentage of your actual vet bills. Learn More: Benefit Schedule
Bilateral Condition – A bilateral condition is any health issue that can occur on both sides of your pet’s body. For example, your dog could have hip dysplasia on his left leg and then his right leg. Bilateral conditions are most common when referring to orthopedic issues like hip dysplasia, elbow dysplasia and cruciate ligament damage. It’s important to understand bilateral conditions because they are more often than not excluded from pet insurance coverage. So if your dog has a cruciate ligament tear in his left leg then a tear in his right leg may be considered a pre-existing condition and will be excluded from coverage.
Chronic Condition – A chronic condition is a health condition or disease that is persistent or long lasting. In most cases, once a chronic condition has developed, it is deemed incurable or likely to continue for the remainder of the pet’s life. Due to the longevity of chronic conditions these diseases can be very expensive to treat. If you enroll your pet in a pet insurance plan after they’ve already been diagnosed with a chronic condition that condition will be considered a pre-existing condition and will not be covered. That is why it’s so important to enroll in a pet insurance plan while your dog or cat is young and healthy. Sample Chronic Conditions in Dogs: Addison’s Disease, Arthritis, Cancer, Cushing’s Disease, Diabetes Epilepsy, Glaucoma, Hypothyroidism, Hip Dysplasia, Inflammatory Bowel Disease. Sample Chronic Conditions in Cats: Cerebellar Hypoplasia, Ear Canal Ablation, Throat Cancer.
Claims – Just like auto insurance, pet insurance claims are a request to the insurance company asking for reimbursement after your dog or cat receives veterinary treatment. When making a claim you will send the company’s claim form and copies of your itemized vet bills. Once the company receives your submission they will have a claims adjuster determine whether or not the treatment is covered under your policy. After they make a determination the adjustor will calculate the amount of the payment based on the coverage you have, your deductible and your reimbursement rate. Most companies reimburse based on a percentage of your actual bill and a few still pay based on a benefit schedule. Learn More: How Pet Insurance Claims Work
Claims Adjuster – A claims adjuster reviews pet insurance claims and determines whether the claims should be paid and what amount is owed to the insured. Pet insurance is very similar to auto insurance or homeowners insurance. When your dog or cat gets sick or injured you submit a claim to the insurance company and they assess the loss and send you a check.
Clinical Signs – Observable changes in a Pet’s normal healthy state, bodily function or behavior. If your pet shows clinical signs for a disease or illness when you enroll in a pet insurance plan those health issues will be considered pre-existing conditions. This is why it’s so important to get insurance for your pet while they are healthy and symptom free.
Co-Payment – A co-payment is a predetermined, flat fee the pet owner pays for pet health-care services, in addition to what insurance covers. An example would be a $10 copayment for each office visit to the vet, regardless of the type or level of services provided during the visit. Copayments are not usually specified by percentages, but are stated in dollar amounts. Most companies don’t use co-payments and the ones that do usually only apply them to pet wellness and routine care plans. Don’t confuse co-payment with reimbursement rate, which is the percentage a company pays on your claims. Learn More: How Pet Insurance Claims Work
Congenital Condition – A congenital condition, or congenital disorder, is a health condition that is present at birth or that develops during the first month of a puppy or kitten’s life. Not to be confused with a hereditary disorder, is a condition that is passed down to a puppy or kitten from their parents that manifests later in life. The good news is that both congenital conditions and hereditary disorders are both covered by pet health insurance plans (just make sure you enroll before your pet shows clinical signs). Learn More: Congenital Condition
Continuous Coverage – Means that coverage is maintained from one policy period to the next without disruption. So if your dog or cat suffers from a serious health issues your coverage will continue without disruption. Most companies also provide a guaranteed renewable provision that ensures continuous coverage for the life of your pet, regardless of how many health issues or claims you file. It’s important that your pet insurance company offers continuous coverage because the older your pet gets, the more likely they will need treatment. Make sure you understand how continuous coverage is handled by the pet insurance company you choose before buying a policy. Take a minute to compare pet insurance companies before making a final decision.
Coverage – Pet insurance coverage refers to the scope of protection in the insurance policy. Options range from accident only policies to comprehensive plans that cover everything. The broader your coverage and the higher your limits the more expensive your plan will be. We recommend all pet owners to get a least a major medical plan to ensure that any unforeseen medical issues are adequately covered. There are three different levels of coverage when considering pet insurance.
- Accident Only Policy – These plans are less expensive than major medical plans, but only cover claims for accidents. We don’t recommend these plans because illnesses are more likely and more expensive to treat.
- Accident and Illness Plans – Most popular. These plans account for over 98% of all pet health insurance plans purchased. Major medical plans cover everything except wellness care.
- Wellness Plans – Some companies allow you to add wellness coverage to a standard major medical plan. These plans cover expenses for routine care such as annual exams, heartworm meds, dental cleanings, etc.
Cruciate Ligament – The cruciate ligaments are located in the knee. These ligaments help to stabilize the knee joint. The cruciate ligaments of the knee include the anterior cruciate ligament (ACL) and the posterior cruciate ligament (PCL). These ligaments are two strong, rounded bands that extend from the head of the tibia to the femur. The most common ligament injury to dogs and cats is a strain or tear of the ACL. If your dog tears its ACL it will require corrective surgery, which costs $3,000 to $6,000 depending on the type of pet you have and where you live.
Deductible – The amount that must be paid out-of-pocket before the insurer will reimburse you for claims. Some companies offer a per-incident deductible and others offer annual deductible plans.
- Annual Deductible
- Per Incident Deductible
The most common pet insurance deductibles range from $100 to $500 and most companies allow you to choose the amount of your deductible. It’s also important to note that the higher the deductible you choose the lower your premium payments will be because you’re paying more before your insurance kicks in. Learn More: How Pet Insurance Claims Work
Effective Date – The effective date is the date is the 1st day when coverage begins. After you enroll there is a waiting period until the effective date starts. Most companies have separate waiting periods for accidents, illnesses, hereditary and orthopedic conditions. It’s important not to confuse the effective date and the enrollment date. Many pet owners believe coverage starts the day they enroll and that is not the case. Coverage begins on the effective date after the waiting period is over.
Emergency Vet – Describes treatment at either a veterinary hospital or veterinary clinic that offers emergency care. If your dog or cat has a severe accident or suffers from a serious health condition you will need to a pet hospital because your regular veterinary clinic will not have the personnel, tools or equipment necessary. Emergency vet hospitals are designed for trauma cases. These facilities have X-ray machines, MRI scanner, ICU and surgical facilities. Emergency vet hospitals can treat just about anything but treatment comes with a cost. Treatment for serious accidents and illnesses can range from $1,000 to well over $10,000. Learn More: Emergency Vet
Enrollment Date – The date you purchase your pet insurance policy. The enrollment date is important because it starts the waiting period, which is the time between enrollment and the effective date. The effective date is the first day when coverage begins. Most companies have separate waiting periods for accidents, illnesses, hereditary and orthopedic conditions.
Guaranteed Renewable – A pet insurance policy provision that guarantees the pet owner has the right to renew coverage at every policy anniversary date regardless of the age of their pet or the health status of their pet. With a guaranteed renewable policy the company cannot cancel coverage except for nonpayment of premium by the policyholder, however, the company can raise rates if they choose, provided they have specified this rate increase in the policy and are consistent with price changes. Policies with guaranteed renewable clauses provide continuous coverage without disruption, which gives you and your pet peace of mind.
Hereditary Disorder – A hereditary disorder, or genetic disorder, is a condition that is passed down to a puppy or kitten from their parents. Not to be confused with a congenital condition, which is a health issue that develop in the womb or shortly after birth. It’s important that the pet insurance company you choose covers hereditary disorders because they can be extremely expensive to treat. Learn More: Hereditary Disorder
Illness Coverage – Illness coverage helps pay for veterinary care when your pet suffers from a serious illness or health condition. Some of the most common and expensive veterinary care is to treat illnesses for dogs and cats. Unlike accidents, which are relatively straightforward, illnesses and long-term health conditions can require treatment over a long period of time. In most cases illnesses are more expensive than accidents and are more common so we encourage all pet parents to enroll in accident and illness plans. Learn More: Accident and Illness Coverage
Incident – Each individual accident or illness that your pet suffers from during the life of the policy. For instance, if your dog broke his leg in April and then swallowed a sock in September that would be considered two separate incidents. The definition of an incident is important because pet insurance companies tailor their policies based on incidents. Some companies have per incident deductibles, which means they charge a deductible for each incident. The alternative to a per incident deductible is a standard annual deductible. Other companies also have incident limits, which means they have a limit on how much they’ll pay for each individual limit.
Loss Ratio – A loss ratio is the relationship of incurred losses (claims paid) compared to premiums collected. It is always presented as a percentage. For example, let’s say a pet insurance company paid out $55 million in claims last year and collected $100 million in premium. Their loss ratio would be 55%. Learn More: Loss Ratio
Maximum Limit – The max limit is the most a pet insurance company will reimburse you for claims. Some pet insurance companies have a per incident limit where the max limit applies to each individual incident. For example if your dog broke his leg the max limit would apply to treatment for the broken leg. Other companies have an annual limit where the max limit applies to all claims made during 12 month period. Before choosing a company it’s important to see what the company’s maximum limit is so you’re not surprised when you make a claim.
Orthopedic Condition – An orthopedic condition refers to health conditions that involve the musculoskeletal system. The musculoskeletal system is made up of the body’s bones (the skeleton), muscles, cartilage, tendons, ligaments, and joints. Most pet insurance companies have 6-12 month waiting periods for orthopedic conditions to avoid adverse selection. This is one of the many reasons it’s important to enroll your pet while they are young and healthy. However, if you’d like to reduce the 6-12 month waiting period many companies allow you to submit an orthopedic exam waiver after enrollment. This waiver will waive the 6-12 month waiting period if your pet is found to be healthy during the exam. Learn More: Orthopedic Condition
Orthopedic Exam – An orthopedic exam is an optional medical evaluation that can be done by any licensed veterinarian to reduce the waiting period or orthopedic treatment. During an orthopedic exam the veterinarian will examine your pet’s knees, elbows, hips and back to determine whether or not there are any pre-existing orthopedic conditions. If your pet passes the orthopedic evaluation with a clean bill of health then waiting periods for orthopedic health conditions like hip dysplasia and ligament tears can be reduced from 6-12 months to 14 days. Orthopedic exams are not offered by every insurer so check with the company before enrolling.
Per Incident Deductible – A per Incident deductible is the amount that must be paid out of pocket by the pet owner per incident. For example, if you have a $200 per incident deductible you will pay $200 each time you make a claim. So if your dog suffers from a broken leg the broken leg is the incident and you would be required to contribute $200 toward the treatment. If your pet has multiple incidents in one calendar year you would be responsible for the $200 deductible each time with this type of policy. Some pet insurance companies have an annual deductible where you only pay the deductible once per 12 month period regardless of how many claims you have. Whether you choose a company with a per incident deductible or annual deductible it’s important to note that the higher the deductible you choose the lower your pet insurance plan will cost.
Per Incident Limit – A per incident limit is the maximum a pet insurance company will pay per incident. For instance, if you have a $5,000 per incident limit and your dog needs surgery because he ate a tennis ball the most the company will pay for the surgery is $5,000. While some insurers have a per incident limit, other pet insurance companies have annual limits. These companies don’t have individual limits on claims, but they do limit how much they will pay out in a given 12 month period. It’s important to check the maximum limit before buying a pet insurance policy so you’re not surprised when you file a claim.
Pet Hospital – A pet hospital is just that, a hospital for pets! However, there are some key differences between pet hospitals and human hospitals. For example, pet hospitals are not required to be accredited like human hospitals. However, given the choice, you’d be crazy not to take your dog or cat to an accredited pet hospital. Learn More: Pet Hospital
Pet Insurance Agent – There are two types of pet insurance agents, captive agents and independent agents. Captive agents sell insurance from one pet insurance company. Independent insurance agents sell insurance from multiple pet insurance companies. The benefit of using a pet insurance agent is they can help you compare options and explain coverage. As a matter of fact, we’re licensed pet insurance agents who can answer your questions about coverage and help you find the perfect plan. Just like home and auto insurance, pet health insurance is regulated as property and casualty insurance so if you talk to a pet insurance agent ask for their license and what companies they represent.
Pet Insurance Policy – A pet insurance policy is just like an auto or homeowners insurance policy. It pays claims when something unexpected happens. Pet insurance is health insurance for your pet, so if your dog or cat gets sick or injured it will help pay for veterinary bills. Most plans pay 80-90% of your veterinary bill so if your pet suffers from a serious health problem the policy will reimburse you for the vet bills. Pet insurance policies contain six key sections. Each is important to understand what’s covered and what’s not.
Pet Medications – Pet medications can be expensive, particularly prescription drugs for chronic conditions. Pet insurance companies have different coverage options related to pet medication coverage so it’s important to understand what’s covered and what’s not. See how each pet insurance company handles pet medications and enroll in a plan before your dog needs expensive medication. Learn More: Pet Medications
Policy Conditions – Not to be confused with pet health conditions, are provisions that either qualify or place limits on the insurance company’s promise to pay. If the policies conditions are not met by the insured (you) then the insurance company can deny a claim or limit payment. Some common pet insurance policy conditions include:
- Document proof of loss in a timely manner
- Protect property after a loss
- Cooperate by providing timely information and detail during the claims investigation
It’s important that you follow the policy conditions to ensure your claims are paid and paid in a timely manner. A pet insurance policy is a contract with the insurance company that outlines your coverage. Like most insurance contracts a pet insurance policy has six sections.
Policy Declarations – The declarations section, or declarations page, is usually the first page or two in your pet insurance policy. The declarations page is the summary of what your policy covers pet insurance policy. It’s a quick snapshot that gives consumers a clear idea of what is covered and includes the following information.
- Company Name and Contact Info
- Customer Name and Contact Info
- Pet(s) Name, Breed, Age
- Effective Date
- Policy Period
- Coverage Overview
- Policy Limits
- Reimbursement Rate
- Annual Premium
- Applied Discounts
Policy Definitions – Every pet insurance policy has a definitions section. The definitions list important pet insurance terms used in the policy to help you understand coverage. The definitions may be included in the body of the policy or as an attachment. The definitions are extremely important because they provide clarity for what’s covered and what’s not covered. Policy Endorsements – A pet insurance company may change the language of a policy or adjust coverage with endorsements and riders. Typically endorsements and riders are written at the time or renewal to add, delete or modify provisions in the original policy. The pet insurance company is required to send you a copy of the changes. In most cases endorsements and riders enhance coverage but you pay for it at the time of inception.
Policy Exclusions – An exclusion is conditions that are not covered by the insurance policy. Every pet insurance company has different exclusion lists. Some companies have very few exclusions (good) while others try to exclude as much as possible (bad). Here is a list of common pet insurance exclusions.
- Pre-Existing Condition
- Bilateral Condition
- Elective Procedures
Make sure you check for exclusions before buying a pet insurance policy. It’s important to understand what’s covered and what’s not so when your dog or cat does get sick or has an accident you’ll know if you’re covered or not.
Policy Insuring Agreement – The insuring agreement summarizes the major promises of the policy. In summary the insuring agreement is the meat of the policy and describes what’s covered and what is not covered. In the Insuring Agreement the insurance company agrees to do certain things such as paying for covered losses and providing specific services.
Policy Period – The policy period is the period of time the insurance policy is in force. Pet insurance policies have a 12 month policy period beginning on the effective date. It’s important to note that with pet insurance your coverage will not start until after the waiting period is over. However, if you renew your policy in subsequent years there are no more waiting periods. Below is an example of how it all works.
- Effective Date: October 1, 2014
- Policy Period: October 1, 2014 to September 30, 2015 (12 months)
- Waiting Period Accidents: 1 day from effective date
- Waiting Period Illnesses: 14 days from effective date
- Waiting Period Orthopedic: 6 months from effective date
Pre-Existing Condition – A pre-existing condition is any illness or injury that first occurred or showed signs prior to your policy starting. If your pet has suffered from a specific illness, injury or other health condition prior to enrollment then it will be considered a pre-existing condition and will not be covered by pet insurance. Unfortunately no pet insurance company covers pre-existing conditions, which is why it’s so important to enroll in a plan while your pet is healthy. Learn More: Pre-Existing Condition
Premium – The amount you pay for a pet insurance policy. Most premium payments are made on a monthly basis but you can opt for annual payments as well. Your premium is based on several underwriting factors including the type of pet you have, the age of your pet and where you live.
Reimbursement – The amount a pet insurance company pays you for veterinary expenses. It is expressed as a percentage ranging from 60% to 100%. The most popular pet insurance plans have a reimbursement of 80% to 90% of your total vet bills. Along with your deductible, reimbursement are how pet insurance claims are calculated. Learn More: Reimbursement
Renewal – The automatic re-establishment of an insurance policy at the end of the policy term. Most insurance policies renew without disruption in coverage from year to year. If your policy is being cancelled the company must notify you at least 90 days in advance so you can find other coverage. Most renewals are automatic as long as you continue to pay your premium and don’t voluntarily cancel your policy. Some companies provide guaranteed renewable policies so no matter how old your pet gets, or what type of health issues they have, the company guarantees to renew your policy each year for the life of your pet. The cost of your policy may increase at renewal depending on several factors including inflation, increases in vet fees and increases in the cost of commonly prescribed medicines. Some pet insurance companies will increase rates each year based on your pet’s age and health status.
Underwriter – An underwriter is an individual or organization trained in evaluating risk and determining rates and coverage. Pet insurance underwriters decide whether to provide insurance and under what terms. They evaluate insurance applications and determine coverage amounts and premiums.
Veterinarian – A veterinarian is a licensed professional who practices veterinary medicine. Most veterinarians are involved in general practice and treat animals of all types. Other veterinarians specialize in a specific group of animals such as dog and cat, livestock, zoo animals or equines. A veterinarian may also specialize in specific veterinary disciplines such as oncology, surgery, dermatology or internal medicine. Learn More: Veterinarian
Veterinary Review – A comprehensive assessment of your pet’s health history. The point of a veterinary review is to determine if your pet has any pre-existing conditions. Pet insurance companies exclude pre-existing conditions from coverage so a veterinary review is a great way to find out what will be covered before it comes time to file a claim. Some companies (Petplan) will perform a veterinary review before you enroll. Other companies (Embrace) will perform a review immediately after you enroll and allow you to cancel your policy if you don’t like the results. In either case you will have to request a veterinary review because it’s not a standard service. The good news is that they are free and provide a very quick turnaround. If your pet has a history of health issues or you’re unsure about a specific health condition then a veterinary review is a good idea. Veterinary reviews are free and provide very little work on your end aside from requesting your pet’s medical records.
Waiting Period – A waiting period is the time between the day you enroll and the day coverage starts. The day your coverage starts is referred to as the effective date. The reason companies have waiting periods is to avoid pet owners enrolling in a plan to cover a pre-existing condition. There are three different waiting periods:
- Waiting Period for Accident: 0 – 15 days
- Waiting Period for Illnesses: 14 – 30 days
- Waiting Period for Orthopedic Issues: 14 days – 12 months
Learn More: Pet Insurance Waiting Periods
Wellness Plans – Pet wellness plans are designed to ensure that pets has access to important preventative care and exams by covering expenses associated with pet health services. These are the necessary expenses that are planned and predictable each year. Because accident and illness plans, which are necessary in order to get a wellness plan, are designed to help you manage the risk of large, unexpected vet bills, you are receiving maximum coverage for your pet’s care, whether expected or otherwise. Learn More: Wellness Plans