One of the most significant factors that can increase your out-of-pocket expense when filing a pet insurance claim is having a policy with a "per-incident" maximum. What's that, you may ask? Per-incident generally means the maximum the insurance company will pay out each time a new problem or disease occurs. An annual maximum, on the other hand, is the maximum the company will pay out during the policy term (usually one year).
Let’s say that your pet is diagnosed and treated for pancreatitis and your insurance policy has a $10,000 annual limit and no per-incident limit. In this case, the company would pay out up to the full $10,000 for the illness. However, if your policy has a $10,000 annual maximum and a $1,500 per-incident maximum, the company would pay out up to $1,500 for the illness. The remaining $8,500 could be used for other accidents or illnesses during the year other than pancreatitis (up to $1,500 each).
If the bill for treating the pancreatitis is $5,000, the table below illustrates the impact on your out-of-pocket costs.
I have read numerous reviews by pet owners who purchased a policy like this and when they had to file a large claim like the one above. It was evident that they didn’t really understand the effect that the per-incident maximum would have on their reimbursement and, consequently, their out-of-pocket expense.
Not all per-incident maximums are defined the same way — especially when it comes to reimbursements for chronic diseases. In the illustration below, let’s assume that Company A and Company B both have a $1,500 per-incident maximum. Let’s also assume that your pet is diagnosed with diabetes and has ongoing monitoring and treatment expenses for several years.
With Company A, the total reimbursement for diabetes is $1,500. Once you hit that limit, no more benefits are available. This is sometimes referred to as a per-condition maximum. With Company B, the per-incident maximum renews every year so that you have a $1,500 annual reimbursement limit for the ongoing treatment of your pet’s diabetes.
There is also a pet insurance company that reimburses according to "categories," which are essentially body systems (e.g. musculoskeletal, heart, respiratory, etc). You can file multiple claims over several years for that body system until you reach the category maximum. Once you reach the reimbursement limit for that category (body system), there are no more benefits available.
Therefore, be careful when considering the purchase of a policy with a per-incident or category limit. As long as you are filing relatively small claims, you won’t notice the limitations of such policies. My advice is to always judge an insurance policy by asking yourself, "What will the insurance company pay and what will I have to pay out-of-pocket if I have to file a $5,000 or a $10,000 claim?" This will tend to magnify the shortcomings of a policy with a per-incident maximum.
Dr. Doug Kenney