Definition: the amount of money you pay to an insurance company in exchange for pet health insurance coverage for your pet.
What else do I need to know?
If you have two policies from different companies but with the same coverage, deductible, maximums, can you say that the lower premium policy is the better value? Unfortunately, no! Even when everything else is the same, the premiums can be different.
Let me provide a couple of examples to help us understand what is going on but first there's something we should know about cat and dog health. Cats and dogs are just like humans - the older they get, the more likely they are to get sick. It's kind of obvious isn't it but it'w worth highlighting that to help us understand the examples below.
Example 1:the premiums you pay every year match the cost of your pet getting sick. This means that the premiums are low at young ages but go up substantially at the older ages as the pet is likley to be sicker. Let's call this an Increasing Premium Plan.
Example 2:the premiums you pay every year remain the same over the life of your pet. The premiums are an average of the current and future health costs and take into account not only the cost of the vet bills in the future, but also inflation of those bills, how likely you are to keep your policy for all those years, the likelihood your dog or cat will live each year, and so on. Let's call this a Level Premium Plan.
Each example is a legitimate way of charging for a policy but they look very different when you compare quotes for a new policy. Since level premium policies include some portion of premium for higher vet costs later in life, increasing premiums start off lower than level premium policies; however, increasing premiums soon grow more than the level premiums and can become extremely onerous right when you need pet insurance the most.
Just to make things more complicated (sorry!), there is another wrinkle that distracts the issue. That is where the premiums stay level or increase but the coverage decreases over time. For example, that happens when the pre-existing conditions reset every year and conditions your pet had last year become excluded the following years (see this blog entry for more detail) or you reach a low maximum for an illness and have no more coverage.
So, what do the current pet insurers do?
VPI: a combination of the increasing premium plan plus decreasing coverage. VPI increases the premiums every 3 years and does not reset the pre-existing conditions every year.
Pethealth: a combination of the level premium plan plus decreasing coverage. The premiums do increase twice at older ages and coverage drops off once you have met a lifetime maximum for that illness (highest maximum is $6,000 as of June 2005). They are also introducing the claims-based premium. Basically, your premiums go up if you claim on your policy.
Hartville, Pet Protect, Pet Partners: a combination of the level premium plan plus decreasing coverage. They reset the pre-existing conditions every year.
The bottom line is to keep in mind what you are signing up for. If your premiums are going to increase in the future, find out what they might look like so you aren't surprised in the future.
Lower premiums don't necessarily mean better value.
Definition: the amount of money you pay to an insurance company in exchange for pet health insurance coverage for your pet.
What else do I need to know?
If you have two policies from different companies but with the same coverage, deductible, maximums, can you say that the lower premium policy is the better value? Unfortunately, no! Even when everything else is the same, the premiums can be different.
Let me provide a couple of examples to help us understand what is going on but first there's something we should know about cat and dog health. Cats and dogs are just like humans - the older they get, the more likely they are to get sick. It's kind of obvious isn't it but it'w worth highlighting that to help us understand the examples below.
Example 1:the premiums you pay every year match the cost of your pet getting sick. This means that the premiums are low at young ages but go up substantially at the older ages as the pet is likley to be sicker. Let's call this an Increasing Premium Plan.
Example 2:the premiums you pay every year remain the same over the life of your pet. The premiums are an average of the current and future health costs and take into account not only the cost of the vet bills in the future, but also inflation of those bills, how likely you are to keep your policy for all those years, the likelihood your dog or cat will live each year, and so on. Let's call this a Level Premium Plan.
Each example is a legitimate way of charging for a policy but they look very different when you compare quotes for a new policy. Since level premium policies include some portion of premium for higher vet costs later in life, increasing premiums start off lower than level premium policies; however, increasing premiums soon grow more than the level premiums and can become extremely onerous right when you need pet insurance the most.
Just to make things more complicated (sorry!), there is another wrinkle that distracts the issue. That is where the premiums stay level or increase but the coverage decreases over time. For example, that happens when the pre-existing conditions reset every year and conditions your pet had last year become excluded the following years (see this blog entry for more detail) or you reach a low maximum for an illness and have no more coverage.
So, what do the current pet insurers do?
VPI: a combination of the increasing premium plan plus decreasing coverage. VPI increases the premiums every 3 years and does not reset the pre-existing conditions every year.
Pethealth: a combination of the level premium plan plus decreasing coverage. The premiums do increase twice at older ages and coverage drops off once you have met a lifetime maximum for that illness (highest maximum is $6,000 as of June 2005). They are also introducing the claims-based premium. Basically, your premiums go up if you claim on your policy.
Hartville, Pet Protect, Pet Partners: a combination of the level premium plan plus decreasing coverage. They reset the pre-existing conditions every year.
The bottom line is to keep in mind what you are signing up for. If your premiums are going to increase in the future, find out what they might look like so you aren't surprised in the future.
Lower premiums don't necessarily mean better value.