How pet insurance works: Deductibles, payouts, waiting periods and more

Pet insurance works much like human health insurance. You'll pay a premium for coverage, and there may be deductibles, reimbursements, payout limits, waiting periods, and more — all of which can affect your coverage and out-of-pocket costs.

More than 7 million dogs and cats were covered by pet insurance in 2025, according to the North American Pet Health Insurance Association (NAPHIA). Are you considering insurance for your pet, too? Before getting started, it helps to know the ins and outs of this unique insurance type. Below, we'll explain how pet insurance actually works and what you need to know before buying in.

Start by getting a free pet insurance price quote online today.

How pet insurance deductibles and payouts work

Pet insurance policies can have annual deductibles or per-incident deductibles, which you'll pay each time you make a claim. Deductibles can range from $0 up to a few thousand dollars, depending on your insurance provider, the plan you choose. The lower your deductible is, the higher your premium will usually be.

Here's an example of how deductibles come into play: Say you have a covered vet cost of $800 and an annual deductible of $250. The frequently used formula subtracts the deductible from the vet bill and then multiplies it by the reimbursement rate. With a reimbursement rate of 80%, you'd then be expected to pay $360 ($800 - $250 x .8). 

Since it's an annual, you would not need to pay your deductible again if you filed another claim that same year. Instead, your insurer would cover the full cost (up to your reimbursement limits, which we'll go into later). 

Pet insurance plans are typically reimbursement plans, which means you'll pay veterinary costs out of pocket at first, then file a claim for reimbursement with your insurer. 

But the insurance company won't pay you 100% of that claim. Instead, they'll pay you based on your plan's reimbursement rate, which usually ranges from 50 to 90% of the costs. Higher reimbursement rates mean higher premiums, while lower reimbursement rates result in the opposite.

Keep in mind your policy will also have coverage limits, which dictate how much your insurer will pay out in total across the 12-month policy period. Once you hit that amount, you will be responsible for all remaining veterinary costs out of pocket.

Learn more about your potential pet insurance costs and protections here.

How pet insurance waiting periods work

After purchasing a policy, you will often have a waiting period before coverage kicks in. In some cases, the waiting period may apply only to certain types of coverage (such as pre-existing conditions, illness, or orthopedic conditions). Waiting periods can also vary by state, provider and coverage item. Some can be as long as six months, while the average is typically two weeks.

It's important to understand a policy's waiting periods before purchasing. If your pet is injured or develops an illness or condition before the waiting period ends, your policy won't cover it, and you'll be responsible for all veterinary costs out of pocket.

What pet insurance may not cover

Pet insurance policies typically have a number of exclusions — conditions, treatments, and services that they explicitly will not cover. For example, many insurance companies will exclude pre-existing conditions or enforce a waiting period for certain ones, depending on whether they are curable. 

Exclusions can vary by plan and insurer, but common exclusions can include:

• Exam fees
• Routine dental care/teeth cleanings
• Breed-specific hereditary conditions
• Behavioral modification/training
• Special food or dietary products
• Breeding expenses
• Alternative or holistic treatments
• Grooming
• Boarding

Routine and preventative care are usually excluded, too. This means vaccinations, annual check-ups, heartworm and flea/tick prevention, etc. won't be covered unless you purchase a wellness package. Finally, insurers may also have age limits on the animals they cover. These limits can range from 10 to 14, depending on the company.  

How to file a pet insurance claim

The exact process for filing a claim will depend on your insurance company. If they use the reimbursement method, which most insurers do, the claims process will usually look something like this:

• Pay the veterinarian out of pocket for any services provided. Be sure to save your receipt.
• Send in a photo of your receipt to your insurance company. You usually do this through an app or online dashboard.
• Provide details about the visit and the services provided. You may also need to provide a copy of your pet's medical records or notes from the visit you're filing a claim for.
• Submit your claim and await payout. You may be paid via check or direct deposit.

If your insurer offers direct payment (something only a few providers do), then they will pay your veterinarian directly, and you will only be responsible for your deductible and any coinsurance at checkout. 

Claims processes, waiting periods, deductibles, reimbursement rates, and other details can vary widely from one pet insurer to the next. Make sure you compare options and read the fine print on any policy you consider purchasing. You can also consult your veterinarian for guidance.