How Pet Insurance Works: Premiums, Claims and Payouts
Pet insurance in the US mostly works by reimbursement: the owner pays the vet, files a claim, and the insurer pays back part of the bill. How much comes back depends on four terms: the monthly premium, the annual deductible, the reimbursement share and the annual limit. NAPHIA's State of the Industry report puts the 2025 average accident-and-illness premium at $836 a year for a dog ($69.67 a month) and $435 for a cat ($36.25).
The four terms
| Term | What it does |
|---|---|
| Premium | What the policy costs each month, whether or not there is a claim |
| Deductible | The part of each policy year's covered bills the owner pays first |
| Reimbursement | The share of covered bills above the deductible the insurer pays back (70%, 80% and 90% are common) |
| Annual limit | The most the policy pays in a policy year ($5,000, $10,000 or unlimited are typical) |
The payout is (covered bills − deductible) × reimbursement share, capped at the limit. The NAIC Pet Insurance Model Act requires insurers to disclose the deductible, coinsurance (reimbursement) and any annual or lifetime limit before sale (Section 4A) and to summarise how claims are calculated (Section 4C).
Worked examples from Fetch's published claims
Fetch publishes real claims with what it paid back. With the deductible already met and 90% reimbursement, the payout is simply 90% of the bill, and the arithmetic reproduces Fetch's figures:
| Claim | Bill | 90% of the bill | Fetch paid |
|---|---|---|---|
| Multiple tooth extraction surgery | $4,164 | $3,748 | $3,748 |
| Root canal | $3,140 | $2,826 | $2,826 |
| Periodontal (gum disease) treatment | $1,389 | $1,250 | $1,250 |
| Oral surgery | $620 | $558 | $558 |
If the $3,140 root canal had been the first claim of the year on a policy with a $250 deductible and 80% reimbursement, the payout would be ($3,140 − $250) × 80% = $2,312.
Accident-only versus accident and illness
NAPHIA tracks both. In 2025 the average accident-only policy cost $190 a year for a dog and $112 for a cat, against $836 and $435 for accident and illness. The most common dog claims in NAPHIA's 2025 data were gastrointestinal, ear infection (otitis), skin conditions and anxiety, behavioral or neurological, most of them illnesses an accident-only plan does not cover.
What a premium is built from
Insurers price on species, breed, age, location and the terms chosen. The published figures on this site show each effect separately: breed on the cost by breed pages, location on the cost by state pages, and age in the guide to pet insurance cost by age. Health problems a breed is prone to are on health problems by breed.
Sources
- NAPHIA State of the Industry Report 2026, highlights (June 21, 2026)
- Fetch: Prices for pet insurance (claim examples), checked October 20, 2026
- NAIC Pet Insurance Model Act #633, adopted August 1, 2022
Questions
How does pet insurance pay a vet bill?
Most US pet policies reimburse: the owner pays the vet, files a claim, and the insurer pays back the covered part of the bill above the deductible, times the reimbursement share, up to the annual limit.
What is the difference between accident-only and accident-and-illness cover?
Accident-only plans cover injuries such as swallowed objects or fractures; accident-and-illness plans also cover diseases. NAPHIA's 2025 averages were $190 a year for an accident-only dog policy and $836 for accident and illness.
Is a wellness plan pet insurance?
No. The NAIC Pet Insurance Model Act (Section 6) says a wellness program is not insurance, must be sold separately and may not be required to buy a policy.