How Deductibles Affect Your Out-of-Pocket Costs

Doug Kenney, DVM
Published: June 30, 2011
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When pet owners are looking for the best pet insurance company and policy for their pet, the bottom line is, "What are my potential out-of-pocket costs if I choose this policy?" Today, we will look at the different types of deductibles and how they influence the bottom line.

Think of the deductible as the amount you are responsible for (out-of-pocket) before the pet insurance company will pay for anything.

If you have a policy with a $100 annual deductible, for example, once you have spent $100 during that policy year, any veterinary bills for the rest of that year would not be subject to any more deductible payments.

With a per-incident deductible, however, you will pay it each time your pet is examined for a new condition. Let's say your dog has a skin problem, an ear infection, a bite wound and an episode of vomiting during the policy year — you would pay a deductible for each problem. If, on the other hand, you took your pet in for a skin problem and then had to take him back for several re-check visits, you would not have to pay another deductible because you are dealing with the same problem each time.

Notice the potential out-of-pocket expense with an annual deductible compared to a per-incident deductible:

Just as I wrote last week that all per-incident maximums aren’t created equal, not all per-incident deductibles work the same way, either. In the example illustrated by the table below, let’s assume that your dog was diagnosed with arthritis for the first time in February 2005, and you have a policy with a $100 per-incident maximum. With Company A, the per-incident deductible requirement for claims pertaining to the arthritis renews annually when you renew your policy. With Company B, once you pay the deductible associated with the arthritis, you don’t ever have to pay it again.

Let me give you a couple of other examples of how per-incident deductibles are applied to claims:

  • Your dog is hit by a car (HBC) and has a laceration and a fractured leg. Even though there are two different problems, only one deductible is applied because they are both due to the same incident (HBC).
  • You take your dog to the vet because he has diarrhea and while the doctor is examining the dog, you say, "Oh, by the way, he has been scratching his ears too." So, your veterinarian also diagnoses and treats an ear infection. In this case, the deductible is applied "per-condition" because the two problems (diarrhea and ear infection) are unrelated. Therefore, you would pay two deductibles.

The deductible is just one of the many variables in a pet insurance policy. It is important to understand how each type of deductible works, and therefore, how it influences the bottom line — your out-of-pocket cost. If you are considering purchasing a policy with a per-incident deductible, be sure to read a sample policy to determine how it will be applied, and if you have any questions, don’t hesitate to ask a company representative.

Some companies have policies with pre-set deductibles that can’t be changed. Other companies allow you to choose your deductible — usually between $0 and $1000. Policies with lower deductibles will have higher premiums. If you are able and willing to pay for more of your pet’s medical expenses out-of-pocket, you might select a higher deductible to lower your premium. Whether a policy has an annual or a per-incident deductible will factor into this decision. Generally, an annual deductible would be preferable if opting for a higher deductible.

Dr. Doug Kenney

Pic of the day: Bluey's new bandage from the cat attack by Adria Richards

Chihuahua dog with bandage, injured dog, insurance for pets, per incident deductibles, annual deductibles,