Coinsurance, Deductibles, & Limits
What are they and how do they differ?
Deductibles are put in place to limit the frequency of pet insurance claims. In most cases, the frequency of claims increase as a pet becomes older and this is why some companies increase the deductibles as the pet ages.
Trupanion does not use deductibles for veterinary medical care but has the pet owner pay their veterinarians examination fees and the 1st $25 of the daily hospital boarding fees instead. These act as a deductible but they are not in the control of the insurance company and therefore not able to raise the pet insurance deductible.
Coinsurance is the percentage of a claim that a pet owner pays or contributes towards the bill. Pet insurance companies, including Trupanion, use this control mechanism as an effective tool to ensure the appropriate diagnostic tests, surgeries, and medications are being used.
An insurance company abuses the effectiveness of co- insurance if their goal is simply to lower their cost of claims.
Trupanion pays 90% of all diagnostic tests, surgeries, and medications if an insured pet becomes sick or injured.
Limits are put in place to decrease the exposure of large claims.
Summary - Coinsurance, Deductibles, & Limits :
These are the three basic tools that pet insurance companies and their actuaries use to decrease the cost of claims to an existing plan. They may decide to implement these across the board (to all insured) but in most cases they implement these tools when a pet starts making claims or as the pet ages.
Most insurance companies know it is difficult for a pet owner to change carriers once they start making claims for their pet or as their pet ages. In other words, they know the pet owner is stuck and unfortunately, they often exploit this relationship.
The one other method that pet insurance companies may use to decrease the cost of claims occurs when a new plan is designed with the intention of limiting the coverage by adding exclusions to their policy. For example, a very simple way to limit the coverage is to insure for "accidents" but exclude all "illness".