Confused by all of the pet insurance lingo? Although there are many different companies with different plans, the basic idea is the same across the board.

Buying pet insurance is definitely costly. You’ll want to ask specific questions to help you narrow your choices. Read carefully the clauses on deductibles, surcharges and exclusions before taking the pet insurance policy. Unless you are careful when choosing the policy, you may get stuck paying for procedures you thought were covered.

Here’s a quick glossary to get you up to speed on all things about pet insurance.

Premium:

An insurance premium is the actual amount of money charged by insurance companies for active coverage.

Benefit:

Amount payable by the insurance company to a pet owner when he or she suffers a loss.

Claim:

What you as an individual request of the insurance company. Generally this is a request for payment for animal medical services.

Co-pay:

The small fee that you have to pay when you arrive at your veterinarian’s office. The insurance company pays the remaining of covered expenses.

Example: $20 co-pay per veterinarian office visit – you must pay the first $20 of the veterinarian office visit bill before any other pet health insurance payments begin.

Deductible:

The dollar amount of medical expenses that you have to pay before the insurance company pays for your claim. Types of deductibles:

• Annual Deductible: Each policy year you are required to satisfy a given dollar amount before the insurance company will pay out anything. Once you reach that amount – you won’t have to pay any more. For example, if you cat has surgery and you have a $2,000 deductible, you must pay that amount first before the insurance company pays the remainder. Keep in mind that you only generally only have to meet your deductible once per calendar year.

• Per incident Deductible: Your deductible is applied to each incident. Every time you have to take your pet in to see the veterinarian you are required to satisfy a given dollar amount before the insurance company will pay out anything.

• Example:

$500 annual deductible, $100 per incident deductible, 100% coverage after deductibles
Policy goes into affect May.
On June 5th, your dog has surgery that costs $2,500
You pay $500 to satisfy the annual deductible plus $100 for the per incident deductible, then your insurance pays for some or all of the remaining $1,900 depending on your plan. If your dog has a second surgery later in the same year, you only pay the $100 per incident deductible before insurance begins since the $500 annual deductible was already satisfied.

Exclusions:

Some pet insurance policies only cover emergency care or particular veterinarians. Typically pre-existing conditions are excluded, but all policies have their own specifics. Be sure you know what is NOT covered. Make sure you read the fine print on your policy so that you fully understand the exclusions of your particular brand of pet insurance.

The following are common exclusions found in some pet health insurance plans. Look for another plan if you see an exclusion that you want to covered on the plan you are evaluating:

• Breeding or conditions related to breeding
• Congenital or hereditary defects or diseases
• Continuous coverage of chronic and long-term conditions that manifest in a previous policy year
• Elective procedures and cosmetic surgeries
• Expression or removal of anal glands or anal sacculitis
• Illness or injury that arises out of racing, coursing, commercial guarding, or organized fighting of your pet
• Orthodontics, endodontics and removal of deciduous teeth
• Pre-existing conditions

Surcharges:

Some pet insurance policies include a surcharge. These surcharges are usually attached to policies that include multiple pets, elderly pets, or previously-ill pets.

Maximum Payout:

Maximum Payout is the maximum amount of money the insurance company will give you.

Pre-existing Conditions:

A pre-existing condition is a condition which first occurred or showed clinical signs before the pet’s coverage started or which occurred during the policy waiting period. They are problems or diseases that your pet may have shown symptoms of or been diagnosed with before the effective date of the policy. Most pet insurance companies will use the date you first noticed the problem, not necessarily the day it was diagnosed by a veterinarian.

Waiting Period:

The amount of time it takes for your insurance to start after your policy goes into effect. There will be a waiting period for illnesses – usually 2 weeks or 1 month and 2 to 14 days for accidents. If your pet gets sick or injured before you purchase a policy or during this waiting period, it is unlikely the condition will be covered.

AM Best Underwriter Rating:

AM Best Rating is a leading insurance rating company providing an independent evaluation of an insurance company’s financial condition and ability to satisfy obligations to policyholders. It’s a good indicator of the stability and quality of the pet insurer you are considering.

How does pet insurance work?

Step 1. Sign Up. Choose a plan that is right for you according to your condition.
Step 2. Waiting Period. Your policy goes into effect after a certain time for accident and illness coverage.
Step 3. Get Treatment. When your pet is ill or injured, have your veterinarian list a diagnosis on the claim form.
Step 4. File Your Claim. Submit your claim online, via standard mail or fax to your insurance company.
Step 5. Receive Payment. Receive reimbursement from the insurance company.

Veterinary pet insurance is known as indemnity insurance. You pay a monthly fee, between $10 and $50 per month. Then you cover the cost of care upfront, file a claim with the insurance company, and receive reimbursement for a portion of the costs within 30 days. Usually you need to pay a deductible first—$50 or more—and then a copayment, usually 10–50 percent. Some companies implement an annual limit for the policy, while others stipulate you can spend a certain amount across the policy’s lifetime.

When you sign up for pet insurance you will have a waiting period before coverage starts. The time frame may be different for accidents and illnesses, usually no more than a month. Pet insurance companies do this to ensure people don’t get coverage just to make a specific claim.

It’s just that simple. In reviewing different companies, look carefully at the list of exclusions. Some companies won’t cover pre-existing or hereditary conditions. Also, make sure the provider is licensed in your state so you won’t be left with unpaid bills if something happens to them.

Veterinary procedures can be prohibitively expensive, sometimes ranging into to thousands of dollars. Pet health insurance helps shoulder some of the burden. Once you narrow your search down to a few pet insurance providers you’ll want to compare them side-by-side to see which offers the most at the best value.

Before making the decision, read the fine print for the following:

• How much is the deductible for illnesses and accidents (the portion you need to pay before the pet insurance company will reimburse you)?

• What is the pre-existing conditions policy?

• Does the plan allow you to see any veterinarian? Is there a surcharge for visiting an emergency clinic?

• How long will you need to wait to receive reimbursement after you file a claim?

• How long is the waiting period (the time you need to wait for coverage to kick in after you buy the plan)?

• How much coverage do you have for emergency care—unexpected accidents and illnesses?

• Are you fully understand the exclusions? Ask for a list of exclusions based on your pet’s past medical history and breed.

• Does the pet insurance plan implement annual caps? This means you’re only allowed a certain amount in reimbursements annually, either across the board or for a specific illness.

• Does the company implement a lifetime cap? This means you can only receive a predetermined amount in reimbursements for the plan’s lifespan.

• Does the company cover hereditary and congenital diseases? Hereditary conditions are passed down from parents, while congenital conditions are pre-existing at birth but may not have manifested yet. (For example, VPI Pet Insurance excludes these breed-specific hereditary conditions).

• Does your plan cover cancer and chronic disease (ie. heart disease, chronic kidney disease, and chronic liver disease)? Cancers treatment can get very expensive and chronic diseases usually happen in middle aged to older dogs and cats. Make sure you have coverage in these areas.

• Does the company provide different coverage or charge more for older pets? Enroll your pet before they are six years old for the best pricing. If your pet is older or has pre-existing conditions, they may not be eligible for coverage on certain medical conditions.

• Does the plan have national coverage (if you travel often)?

• Does the plan offer a multi-pet discount (if you have more than one pet)?

After reading the pet insurance 101 guide, use compare plans to help you with your research.