How Pet Insurance Works

By CreditMeadow Editorial Team · Updated October 16, 2026

Most pet insurance works by reimbursement: you pay the vet, file a claim and get back the covered part of the bill after the deductible, your reimbursement percentage and any policy limits are applied. The Texas Department of Insurance (TDI) says plans usually cover 70 to 90 percent of the bill for covered services and rarely cover pre-existing conditions, so the time to buy is before your pet gets sick or hurt.

This guide covers a sample yearly pet budget, how claims are paid, common exclusions, renewals and how premiums compare with saving for a surprise vet bill.

What a year with a pet can cost

Suppose you have a medium-size dog and your yearly spending looks like this. These are example figures, not national averages; your own costs depend on the animal, its size and where you live.

That is $150 a month, a predictable budget line. What you can't schedule is an accident or a sudden illness. Washington's Office of the Insurance Commissioner describes a pet insurance policy as one that may help pay for veterinary bills if your pet is hurt or sick. Most plans cover dogs and cats, and some cover other types of animals.

How pet insurance pays a claim

With most plans, TDI says, you pay the vet and then file a claim to get paid back the part of the costs your plan covers. Washington's regulator describes the same order: some companies pay for covered services only after you pay the full bill, then reimburse you for the covered amount. In practice, you need cash or credit for the whole bill on the day of treatment.

Three terms decide how much comes back:

• Deductible. A set amount subtracted from your reimbursement. The California Department of Insurance notes that your veterinarian will expect you to pay any deductible or coinsurance amount.
• Reimbursement percentage. The share of covered costs the plan pays back; the rest is your coinsurance.
• Limits. Washington's regulator suggests finding out whether the policy limits payouts by incident, by year or over your animal's lifetime.

Suppose your dog needs $2,000 of covered treatment, your deductible is $250 and your plan reimburses 80 percent. The plan pays 80 percent of the remaining $1,750, or $1,400. Your share is $600: the $250 deductible plus $350 of coinsurance. This example applies the deductible first; ask how your policy orders the two.

Coverage types and wellness add-ons

TDI describes a range of plans. A basic plan may cover only injuries due to an accident, other plans also cover illnesses, and some even cover burial or cremation. Plans that cover more also cost more.

Washington's regulator lists what policies normally cover and what they may not:

Wellness programs are not insurance

Washington's pet insurance law, Senate Bill 5319, took effect on January 1, 2024. The commissioner's office describes wellness programs as usually subscription-based plans that spread out the cost of checkups and vaccinations, and says a wellness program is different from an insurance policy. In Washington, your pet's eligibility for insurance can't be tied to joining one, and insurers can't market a wellness program as pet insurance.

Compare any wellness fee with your routine costs, such as the $700 for a checkup, vaccines and preventives in the example budget.

Exclusions and waiting periods

California's department suggests asking each insurer that quotes you about these exclusions, and defines them:

• Pre-existing conditions. If the policy excludes them, the insurer will likely not pay for any condition for which you received medical advice or your pet received treatment before enrollment.
• Hereditary disorders. An abnormality that is genetically transmitted from parent to offspring and may cause illness or disease, such as hip dysplasia.
• Congenital anomalies or disorders. A condition present from birth, whether inherited or caused by the environment.

Washington's regulator adds that other conditions, such as diabetes or cancer, may be excluded entirely or covered only on a limited basis, and that some companies require a vet to examine your pet before you can insure it. TDI notes that some plans limit coverage for conditions that may be hereditary for a breed, while others charge more for some breeds or don't sell plans for them.

Under Washington's law, insurers must tell you if a policy excludes pre-existing conditions, hereditary disorders, congenital anomalies or chronic conditions. The burden of showing that a condition already existed falls on the insurer, not the pet owner.

A waiting period is the time that must pass before some or all coverage begins, and costs for treatment before it ends aren't covered, California's department explains. Washington's law doesn't allow waiting periods for accident coverage. It permits waiting periods of up to 30 days for illnesses or orthopedic conditions, and those can be waived with a medical examination.

Renewals and premium changes as your pet ages

Washington's regulator suggests asking how premiums will be based on your pet's age and breed and on the amount and type of coverage you choose. Prices vary widely: TDI's tip sheet, last updated in June 2022, says plans can range from less than $10 a month to as much as $100 a month.

At renewal, watch for three things:

• A treated condition can become pre-existing. If your pet is treated for a covered condition during the policy term, some companies may consider it pre-existing when the policy renews and exclude it.
• Claims can raise the price. California's department suggests asking whether the renewal premium increases if you make a claim, and by how much.
• Washington requires disclosure. Insurers there must tell you if coverage is reduced or premiums increase based on your claims history, your pet's age or a change in your location, and they can't require a medical examination for a renewal.

Premiums vs. a vet emergency cushion

Suppose a policy costs $40 a month, or $480 a year, with the same $250 deductible and 80 percent reimbursement. Here is what you would pay in three different years:

In the emergency year, the plan reimburses $2,200. Your cost is the $480 in premiums plus $800 at the vet: the $250 deductible and $550 of coinsurance.

Now compare a savings target. Putting the same $40 a month into a pet fund builds $480 a year, so reaching $3,000 takes 75 months, a little over six years. With the policy, a cushion of about $800 covers your share of that emergency, but you still need a way to pay the full $3,000 up front until the reimbursement arrives.

Pet insurance pays for your own pet's care, not for harm your pet causes others. Washington's regulator notes that the liability part of renters insurance can help if a pet injures someone or damages property.

What to ask before you buy pet insurance

1. Which conditions are excluded: pre-existing, hereditary, congenital or chronic?
2. How long are the waiting periods, and for which care?
3. What are the deductible, reimbursement percentage and limits?
4. Does the plan pay on your actual bill? California's department notes that some plans use a schedule of "usual and customary" charges, and your vet will expect you to pay the balance.
5. Can you use any vet? TDI says most policies allow it, while Washington's regulator notes that some plans require a specific network.
6. How will the premium change as your pet ages and after a claim?

In Washington, you have 15 days after buying a policy to change your mind, return it and get your money back, provided you haven't filed a claim. Anyone selling pet insurance there must complete training and be licensed by the commissioner's office. The way to check a seller's license with your state is covered in our guide to term life insurance.

For problems with a claim, contact your state's insurance regulator. In Texas, TDI handles complaints against the companies and people it regulates, though it can't force a company to pay a claim if the company didn't violate the law. In Washington, you can file a complaint against your insurance agent or company with the commissioner's office.

Key takeaways

• Most pet insurance reimburses you after you pay the vet, so plan for the full bill up front.
• Your payout depends on the deductible, the reimbursement percentage and any per-incident, yearly or lifetime limits.
• Pre-existing, hereditary and congenital conditions are common exclusions; read how your policy defines them.
• Premiums can change with your pet's age and claims, and a condition treated this year may be excluded at renewal.
• Compare a year of premiums with the savings you would need to cover a surprise vet bill yourself.