When customizing a pet insurance policy, it's very important to know which variables have the biggest impact on your premium and which variables have the biggest impact on your out-of-pocket expenses (premium included).
Pet insurance companies allow you to customize your policy primarily by allowing you to choose among several annual maximums, deductibles or reimbursement percentages.
Some companies allow you to customize only one of these variables and some companies allow you customize all 3 of these variables. I’m using Embrace pet insurance company to illustrate this. Embrace allows you to customize all 3 variables.
I’m also using a claim amount of $10,000 to calculate the out-of-pocket expense. The reason I'm using $10,000 is because 98% of pets have < $10,000 of claims filed annually. The other 2% includes claims up to $50,000 plus.
Before you start getting quotes, ask yourself:
“What is the maximum amount I can afford to pay out-of-pocket for a monthly premium?"
"If I had to file $10,000 in claims, how much can I afford to pay out-of-pocket ($10,000 - deductible and copay)?"
Consider how much cash as well as funds in your checking and savings accounts and any available credit. If you keep a budget, then you likely know how much discretionary income you have monthly plus savings and credit.
Amazingly, a lot of pet owners don’t even think about this until they are in their veterinarian’s office with a very sick or injured pet and they are presented with an estimate for diagnosis and treatment of several thousand dollars. That’s not the best time to start thinking about how you would pay for a potentially large vet bill.
Whether you have pet insurance or not, you need to think about this and have a plan BEFORE something major and unexpected happens. I can tell you after many years in practice, it will happen sooner or later and it's best if you're prepared.
Tip #1: Get the highest policy maximum you can afford
You buy insurance to cover those expenses you can’t afford to pay out-of-pocket. Amazingly, it also has the least impact on your premium.
As you can see, there is only a $95 difference in the premium between the lowest ($5,000) and highest ($30,000) annual maximum. So, you can get 6 times the coverage for only $95 more annually!
However, the difference in the out-of-pocket expense between the lowest and highest annual maximum is $3514. When you have a $5,000 annual maximum and $10,000 in claims, the deductible and copay don't even come into play. You pay the difference ($5,000 + the annual premium) for the year. Same scenario applies for the $8,000 annual maximum.
Tip #2: Get the highest reimbursement (lowest copay) you can afford.
Even after you’ve met your deductible, you’ll still pay the copay on every claim you submit. Since it's a percentage, the higher the claim amount, the more you’ll pay out-of-pocket.
The difference in the premium between the highest (90%) and lowest (70%) reimbursement is $125.
However, the difference in the out-of-pocket expense between the highest and lowest reimbursement is $1845.
Tip #3: Adjust the deductible to get a premium you can afford
It will have the greatest impact on the premium and least impact on your out-of-pocket expense.
When getting a pet insurance quote, select the highest policy maximum, highest reimbursement and then adjust the deductible to get a premium that you can afford to pay every month. Only if needed, lower the reimbursement percentage next. Lastly, and only if absolutely necessary, lower the policy maximum.
There are other ways some companies allow you to customize your policy. They may make coverage for exam fees, alternative therapy, prescription medication and wellness care optional. If you opt to have any or all of these covered, it will add a few dollars to your premium each month.
When getting a quote and comparing pet insurance companies, you want to get as close to an apples to apples comparison as possible. That's why I advise to include all optional coverages (except wellness) because some companies automatically include these coverages in their policy (Embrace is one of them) and you want to be able to compare companies as accurately as possible. However, because some companies don't offer wellness care coverage at all, don't include it in your quote.
You want to compare companies based primarily on their accident/illness coverage because that's the main reason you purchase pet insurance (unexpected/expensive events). After choosing the company with the best accident/illness coverage that fits your needs and budget, if you want to include wellness care coverage, hopefully the one you've chosen will offer it as an optional coverage also.
Watch this short video where I demonstrate how to do this using a quote from Pets Best:
There is another application for this strategy. Your premiums will increase over time due to your pet getting older, veterinary inflation (higher wages/benefits for veterinary staff, rising costs of supplies and drugs, new equipment, etc.), and actuarial adjustments each time the pet insurance company re-files their rates with the state Dept. of Insurance.
When premiums rise outside of what you can afford, the temptation is to drop the insurance. However, you should first consider downgrading your coverage - drop any optional coverage that you don't need anymore, raise the deductible, lower the reimbursement percentage, or lower the policy maximum (in that order). While you may not need to take all of these actions, buying a policy from a company that allows more flexibility when customizing your policy (ability to adjust all 3 - policy maximum, reimbursement and deductible) puts you in a better position to adjust your level of coverage to arrive at an affordable premium when the inevitable rise in premiums occur.