How Are Pet Insurance Premiums Calculated?

Pet health insurance ensures your pet gets the care they need if they are sick or injured, and the coverage saves you money when their veterinary bills start to accumulate. Insurance providers consider many factors when determining your pet insurance premiums, and while some are beyond your control, others can be adjusted to reduce your annual premiums. 

Factors that influence pet insurance premiums

Pet insurance is a risk-based product. The job of insurance companies is to provide coverage while mitigating their loss. You can typically expect to pay higher premiums if your pet poses more risk to the insurance company. Policy-based factors, as well as pet-based factors, are considered when calculating the final cost.

Pet-based cost factors

Factors may vary depending on the insurance company you use, but the most common pet-based variables include:

• Species — Dogs typically cost more than cats. The estimated first-year cost for a new dog is about $3,220, while a cat is around $1,900. In addition, more claims are usually submitted for dogs, which means that you may have to pay more for dog insurance than for a cat. Providers offering exotic pet coverage are limited, and you may expect to pay more for their care.
• Breed — Large-breed dogs tend to cost more than small breeds, and higher premiums are usually charged for large- and giant-breed dogs. In addition, purebred pets may be at higher risk for certain diseases than mixed breeds, and specific breeds are known to be predisposed to particular health conditions. If your pet has a high risk for a certain disease or hereditary condition, you may have to pay more for their insurance.
• Age — Since puppies and kittens tend to have fewer health problems than older pets, their premiums typically cost less. In addition, some carriers refuse to insure pets past a certain age or, if your pet is previously insured, may increase your premium on a yearly basis when they reach a particular age.
• Gender — Statistically, more claims are submitted for male pets, who are considered higher risk than female pets, meaning you may have to pay more for your male pet’s coverage.
• Weight status — Obesity has been linked to many serious health conditions, such as cancer, diabetes, kidney disease, and arthritis, and some insurance providers consider your pet’s weight when calculating your premium.
• Location — Veterinary care is typically more expensive in metropolitan areas than in rural or suburban regions, and where you live may play a role in determining your premium cost.

Policy-based cost factors

Your coverage amount and variables, such as deductibles and reimbursement percentages, are also used to calculate your premium.

• Policy type — Every insurance company offers different policies, but the most common types include:

  • Accident and illness plans — These plans typically cover issues such as accidents, emergency care, surgery, hospitalization, cancer, allergies, systemic illness, foreign body ingestion, and eye problems. They may also cover hereditary and congenital issues under some conditions. Since these plans offer the widest coverage, they have the highest premiums.
  • Accident-only plans — These plans cover injuries related to unforeseen accidents. They do not cover illness or hereditary or congenital conditions, meaning that the premiums are lower.
  • Wellness plans — These plans are usually available only as an add-on to another plan. They provide coverage for wellness visits, vaccinations, parasite prevention, dental cleanings, microchipping, and spay, and neuter procedures. When a wellness plan is added, the premium is increased.

• Deductible — The deductible is the amount you are expected to pay toward your pet’s veterinary bills before coverage begins. Some insurance companies allow you to choose your deductible amount, and the higher the deductible, the lower your premiums.

• Reimbursement — Many pet insurance companies allow you to choose your reimbursement as a percentage of care costs. The higher your reimbursement percentage, the more your pet’s expenses will be covered, but the higher your premiums.

• Benefit limits — Some companies set maximum limits for coverage payout, allowing you to choose your limit. The higher your limit, the higher your premium cost. 

• Discounts — Many companies offer discounts, including:

  • Insuring multiple pets
  • Working for a particular employer
  • Diminishing deductibles if your pet stays healthy
  • Paying annually as opposed to monthly
  • Owning a service animal

Factors that don’t influence pet insurance premiums

You may be surprised to know that certain factors aren’t considered when calculating your pet insurance premium. These include:

• Prior medical history — Non-curable, pre-existing conditions aren’t typically covered by pet insurance, so your pet’s medical history is not an issue.
• Indoor or outdoor — Outdoor pets are at higher risk for injury and illness, but most carriers don’t consider this when determining your premium cost.
• Origin — Insurance providers don’t care where you acquired your pet and do not change the cost for pets from a breeder or shelter, or found on the side of the road.

Ways to lower your pet insurance premiums

You can’t change your pet’s species, breed, or gender, but you can take some steps to lower your premiums. These include:

• Enrolling your pet at a young age — Purchasing pet insurance when your pet is young and healthy will give you the lowest possible premium.
• Checking for discounts — Check to see if you are eligible for any discounts that the insurance company offers.
• Paying your premium annually — Many companies offer discounted rates for paying your premium annually instead of monthly.
• Raising your deductible — Increasing your deductible will decrease your premium cost.
• Lowering your reimbursement rate — Decreasing the reimbursement rate lowers the amount the insurance company pays for your pet’s veterinary care, and lowers your premium.
• Decreasing your benefit limit — If your insurance company puts a cap on their pay-out amount, setting a lower limit will decrease your premium.
• Choosing a more affordable plan — Accident-only plans provide less coverage than accident and illness plans, and their premiums are lower.
• Researching multiple insurers — Get quotes from multiple insurers to find the right provider for you and your pet.

Obtaining pet insurance is the best way to protect your pet’s health and wellbeing, but you want to find a policy that is affordable and appropriate for your needs. Whether you have a rottweiler or a Chinese water dragon, a little research will help you find a policy that offers you peace of mind.