A Brief History of Pet Insurance: What it is and How it Works

Everyone loves their pets, but no one loves the large vet bills that can come with owning them! Not only are emergency vet visits emotionally stressful, they can be a huge financial burden for anyone who doesn’t have pet insurance. If you’re sitting there thinking, “Wait, I can insure my pets?” you’re not alone. A lot of people are unfamiliar with pet insurance, so let’s break it down, 101-style.

The history of pet insurance

Pet insurance has been around since the 1890s when a man by the name of Claes Virgin wrote the first ever policy. Claes’s policy focused on horses and livestock, but it would be another 100 years before smaller animals like dogs and cats came into the pet insurance picture, and you can thank one fluffy hero for that. 

Back before Marley & Me made grown adults sob, there was another beloved dog movie named after its canine star: Lassie. Lassie was so loved both in the movie and in real life that the famous collie actually became the first dog in the United States to have insurance! 

From that point on, more companies began offering pet insurance. First it was for dogs and cats, and eventually pet insurance became available for all kinds of pets including birds, hamsters, fish and more! 

As of 2018, over 2 million pets in the U.S. are covered by health insurance. That number makes a lot of sense, considering in the same year Americans spent over $18 billion on veterinary care. Health care costs aren’t just rising for humans, and unfortunately there’s no Affordable Care Act for pets, which is why if you haven’t already insured your fluffy (or slimy) friends, now is the time to do so. 

How does pet insurance work?

Pet insurance helps reduce the financial risk of any unexpected vet visits your pets may need. Similar to renters insurance, pet insurance generally runs on a month-to-month basis. You pay your insurer a monthly premium in exchange for emergency veterinary care coverage. Most pet insurance providers will reimburse you directly, rather than having to go through the vet first, meaning you can get care for your pets at any licensed vet in the U.S. without having to worry whether or not it’s “in-network.”

How do you receive pet insurance reimbursement?

There are three simple steps to receiving payment from your pet insurance carrier.

1. Pay the bill: You’ll be required to pay the vet bill in full during your visit, unless your pet’s healthcare provider has other arrangements like a payment plan (but this is unrelated to your insurance coverage). 

2. Submit your claim: After receiving care and paying the vet bill, you can submit a claim to your insurance company. 

3. Receive payment:The insurance company will process your claim and will reimburse you the amount due based on your policy. While this sounds simple, some pet insurance companies have set dollar amounts for specific types of care (known as a “schedule of benefits”) while other policies pay a percentage of your total cost.

What does pet insurance cover?

Generally speaking, pet insurance covers any unexpected accidents or injuries, meaning if your pup gets into the chocolate cake you left on the counter, you’re covered!

 Most plans also cover unexpected illnesses that pets may acquire as they age like cancer or glaucoma. Pet insurance will also cover the cost of any surgeries, medications, and diagnostic tests needed as long as they are not related to any pre-existing conditions. 

Some pet insurance policies even come with wellness benefits to make the costs of annual shots and preventive treatments more affordable. These are all generalizations though, so make sure to read whatever policy you’re buying (or selling!) carefully. 

What doesn’t pet insurance cover?

Speaking of pre-existing conditions, there are no pet insurance providers that cover them, meaning it’s best to enroll pets as early as possible, while they are still healthy. Your pet might still be eligible for pet insurance even with a pre-existing condition, but the insurer will not cover treatments or events related to the pre-existing condition. 

Most pet insurance plans do not cover routine care such as check-ups, wellness exams, or preventative care including spay/neuter procedures and vaccinations, but there are some out there that do. 

How is pet insurance regulated?

Pet insurance has become a hot topic recently due to a surge in “pandemic pets” (animals adopted to keep their humans company during 2020 lockdowns). Recently, California insurance officials teamed up to introduce a new bill to address the health care of these pandemic pets. The bill requires pet insurance companies to fully cover the costs of spaying/neutering procedures in an attempt to prevent overpopulation and pet abandonment. 

Along with covering the cost of spay/neuter procedures, the U.S. is still working toward setting a legal standard for pet insurance that would better define what exactly constitutes a pre-existing condition. This issue has been under debate in the pet insurance world for some time, and remains unclear. For example, one pet owner was shocked to find his claim rejected for pre-existing conditions when his dog swallowed a stuffed animal. 

Debates like this one have sparked the NAIC to begin a bigger conversation on pet insurance regulations, as well as requirements for insurers to be clearer in their disclosure of policy limitations. 

One thing that’s definitely not up for debate?  We love our pets! It’s clear from the increase in adoptions and pet purchases that Americans can’t get enough of their animal companions. 

In the meantime, as pet insurance grows in popularity (along with other niche lines of insurance) it will also come under greater state and federal scrutiny, and likely spawn a few new regulations to protect pet-owning consumers. When those developments arise, we’ll be sure to keep you updated. 

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