Pet insurance: what is it, what is covered and why should pet owners purchase it?
Two-thirds of U.S. households own a pet, according to the American Pets Products Association. Of those, 77% are dogs or cats, but only 2% of them are insured, according to the North American Pet Health Insurance Association (NAPHIA).
But what is pet insurance? It's a property-casualty product, filed as personal inland marine and issued on an annual basis. A p-c license is required to sell this line, and the product has three components: accident coverage, illness coverage and a wellness/routine care benefit. The most common purchase is a policy that covers accident and illness. Over 90% of policies in 2018 were for accident and illness, with an embedded wellness component, according to NAPHIA.
Pet insurance is different from other personal lines products. The veterinary bill is paid by the owner when leaving the vet. There is no co-pay, so the invoice and accompanying medical records are submitted for claim processing. The pet owner is reimbursed according to policy guidelines. A few companies follow a benefit schedule and each expense is reimbursed according to a fixed schedule. Most policies reimburse the policyholder based on a percentage of invoice basis. The pet “parent" selects a reimbursement percent, deductible and annual limit at purchase.
Here's a quick overview of some of the ins and outs of typical pet insurance policies:
Typical options:
Annual accident/illness limits: $250, $500, $750 and $1,000
Reimbursement percentages: 70%, 80%, 90% and 100%
Deductible levels: $100, $250, $500 or $750
Coverage components:
Illness: The pet parent is reimbursed for the costs of major and minor illnesses, including cancer, arthritis and ear infections.
Accident: Covers physical harm or damage to the pet.
- Wellness: Includes coverage for routine or preventative care including vaccines, routine exams and teeth cleaning.
So, why should pet parents buy this insurance?
Delivers peace of mind. Pet insurance allows for the choice of pet treatments, based on medical options and not finances.
Freedom of veterinarian choice. Pet parents can choose their veterinarian.
No age or breed discrimination. No age restrictions for pets over 8 weeks old, although some older pets may be excluded in certain states.
Provides an easy way to budget pet care costs. Premiums can be paid for monthly, quarterly or annually, with discounts for additional pets.
- Insulates the family emergency fund. Unexpected veterinarian costs can be covered by insurance.
To sell more pet insurance, follow these simple tips:
1) Ask your customers if they have a pet. This simple question is often overlooked.
2) Use pet insurance as a lead to discuss comprehensive insurance needs. Lack of awareness is the main cause of low penetration. Vets are also beginning to suggest that their clients explore insurance options.
3) Explain the merits of having their pet covered for catastrophic events. For example, 1 in 3 pets will have an annual event requiring treatment.
4) Help clients understand the economics. Explain that polices can be purchased for $20-$30 per month, whereas purchasing a purebred or hybrid puppy can cost over $3,500.
5) Include references to pet insurance in advertising and mailing campaigns. Increase your clients' exposure to the product and benefits in your marketing and communications.
Bill Horan is senior vice president, relationships & product, Figo Pet Insurance.
