Most breed and cost guides, including our own, talk about reimbursement as a single percentage: 70%, 80%, 90%. Few of those guides get into the part that matters most: the number your policy applies that percentage to isn’t always your actual vet bill.
Pet Insurance Usual and Customary: The Real Math Behind Your Payout
Pet insurance usual and customary is one of the least explained phrases in the entire industry, despite sitting at the center of a real, specific consumer protection regulation most owners have never heard of. Understanding it changes how you should read any policy’s reimbursement percentage, and it’s a detail that even careful, well-researched shoppers can overlook.
Three Reimbursement Models, and Why They Aren’t the Same
Reimbursement percentage is only half the equation. The other half is what that percentage gets applied to, and pet insurers use one of three distinct approaches, each with meaningfully different real-world outcomes for the same headline percentage.
Actual cost
Your reimbursement percentage applies directly to your real, itemized vet invoice. An 80% policy pays 80% of what you were actually charged, after your deductible. This is the model most consumer advocates and comparison sites recommend prioritizing.
Benefit schedule
The policy sets a predetermined maximum payout for each specific condition or procedure, regardless of what your actual bill was. If your vet charges more than the scheduled amount, the difference is entirely your responsibility.
Usual and customary
The insurer applies your reimbursement percentage to what it considers the typical charge for that service in your area, based on its own internal data, not necessarily what your vet actually billed you. If your vet’s fee is above the insurer’s internal benchmark, you’re only reimbursed up to that benchmark.
Healthy Paws, an insurer with no financial reason to make competitors look bad, states this plainly on its own public comparison page: not all companies reimburse on the actual vet bill, and shoppers should specifically watch for benefit schedule or usual and customary language before buying.
The Regulation Behind That Reimbursement Percentage
This isn’t just an industry quirk insurers can handle however they like. It’s specifically addressed in real insurance regulation, dating back further than most people would guess.
What the Regulatory Record Shows
California became the first state to directly regulate this in 2014, through Assembly Bill 2056. The law requires pet insurers to disclose the basis or formula used to determine claim payments, including any benefit schedule and any usual and customary fee limitation, both within the policy itself and through a link on the insurer’s website.
In 2022, the National Association of Insurance Commissioners adopted a national Pet Insurance Model Act addressing the same issue at scale. Under the model law, an insurer using a usual and customary fee limitation must disclose its basis for determining those fees and explain how that basis is applied when calculating a payout.
States adopt model acts individually, and adoption has been progressive rather than universal, but the direction of travel is toward more pet insurance usual and customary disclosure, not less.
Practically, this means that if a policy uses a usual and customary model, the insurer is generally required to make its methodology findable, either in the policy document itself or through a disclosure page linked from its website. That disclosure exists, but it’s easy to never go looking for it.
A Real Number Worth Knowing, With the Right Context
An NAIC regulatory white paper, titled A Regulator’s Guide to Pet Insurance, cites Los Angeles Times reporting that, in 2016, roughly 37% of pet insurance claims filed in California were denied.
The white paper connects this exact finding to the case for stronger disclosure requirements, which is part of why California’s early transparency law and the later national model act both matter here.
This figure is specific to one state and one year, predates the regulatory changes discussed above, and denial is a different outcome from underpayment under a usual and customary schedule. It shouldn’t be read as a current national denial rate, and we’re citing it here specifically as the regulatory record’s own stated reasoning, not as a live statistic.
What it does illustrate is why California moved early to regulate disclosure in this space, and why the NAIC followed with a national model years later. The underlying concern, that owners often don’t understand how their reimbursement is calculated until a claim comes back lower than expected, is what drives this article.
A Related Disclosure the Same Regulation Requires
The NAIC’s Pet Insurance Model Act doesn’t only address usual and customary fees. It also specifically requires insurers and their producers to clearly distinguish pet wellness programs from actual pet insurance policies, since the two are frequently confused.
A wellness program is a reimbursement-based arrangement for routine, predictable care, like vaccines and annual exams, not insurance against unexpected costs.
Understanding this distinction matters here because a wellness add-on and a true accident-and-illness policy can use completely different reimbursement logic, and conflating the two makes it even easier to misjudge what a given “80% coverage” figure promises you.
How to Check Which Model Your Policy Uses
- Look for the insurer’s required disclosure document. In states that have adopted disclosure requirements, this is often a specific, named document, sometimes titled something like “Disclosure of Important Policy Provisions,” linked from the insurer’s main page. Under the NAIC model act, this document is meant to summarize exactly this kind of reimbursement mechanics in one place.
- Search the policy itself for the phrase “usual and customary.” If it appears, ask directly how that figure is calculated and whether it’s based on your specific zip code or a broader regional average, since the two can produce meaningfully different real-world payouts.
- Ask what happens when your vet’s actual charge exceeds the benchmark. A straightforward answer here is a good sign; a vague one is worth pushing on before you buy, since this is precisely the gap that catches owners off guard after a claim.
- If comparing quotes, ask the same question of every provider. A slightly higher premium on an actual-cost policy can be worth more in practice than a lower premium on a usual and customary policy, depending on your local vet’s pricing and your insurer’s specific benchmark.
Why This Matters More in Some Places Than Others
Usual and customary benchmarks are typically built from regional claims data. If you live in an area with above-average veterinary costs, and your insurer’s benchmark reflects a broader or lower-cost region, the gap between your actual bill and your reimbursement can be larger than it would be otherwise.
This is worth asking about directly if you live in a major metro area with high veterinary costs, since the same policy can perform very differently depending on where you live.
What to Prioritize When Comparing Policies
Given everything above, these are the specific questions worth asking any provider before you commit to a policy, regardless of how attractive the headline reimbursement percentage looks.
| Question to ask | Why it matters |
|---|---|
| Actual cost, benefit schedule, or usual and customary? | Determines what number your reimbursement percentage is actually applied to |
| Where is the fee disclosure published? | Confirms the insurer is meeting its disclosure obligations and gives you the actual methodology |
| Is the benchmark based on my specific area? | A broader regional average can understate costs in high-cost metro areas |
| How often is the benchmark updated? | An outdated benchmark can fall behind rising real-world veterinary costs over time |
Frequently Asked Questions
Pet insurance usual and customary refers to a reimbursement model where the insurer applies your coverage percentage to what it considers the typical local charge for a service, based on its own data, rather than to your actual vet bill. If your vet charges more than that benchmark, the excess isn’t reimbursed.
In states that have adopted relevant disclosure laws, generally yes. California’s 2014 law was the first, and the NAIC’s 2022 Pet Insurance Model Act addresses this nationally, though state adoption is ongoing rather than universal. Always confirm current requirements in your specific state.
For most owners, actual cost reimbursement is the more transparent and predictable option, which is why several major insurers and independent comparison resources recommend prioritizing it. It isn’t automatically cheaper, but it removes the uncertainty of an internal benchmark you can’t see in advance, and it makes comparing quotes between providers meaningfully easier since you’re comparing the same underlying math.
Check your policy document for the specific terms “actual cost,” “benefit schedule,” or “usual and customary.” In states with disclosure requirements, insurers are also generally required to publish this methodology through a link on their website.
Not necessarily. A 90% usual and customary policy can pay out less in real dollars than an 80% actual cost policy, if the usual and customary benchmark is meaningfully lower than what your vet actually charges.
California was an early mover in pet insurance regulation generally, passing Assembly Bill 2056 in 2014 specifically to require disclosure of reimbursement methodology, years before the NAIC’s national model act followed in 2022.
Not automatically. NAIC model acts function as templates for states to adopt, modify, or decline, so actual protection depends on your specific state’s insurance code. Checking with your state’s department of insurance is the most reliable way to confirm current requirements where you live.
The Bottom Line on Pet Insurance Usual and Customary
Pet insurance usual and customary is a genuinely underexplained corner of an industry that mostly talks about coverage in terms of a single, simple percentage. That percentage means less than it appears to if you don’t know what it’s being applied to.
Real regulation, dating back to California in 2014 and extended nationally by the NAIC in 2022, exists specifically because regulators reached the same conclusion. Asking one direct question before you buy, actual cost or usual and customary, is a small step that can meaningfully change what you receive when you need it most.
For more on how policy terms affect real payouts, see our guides on pre-existing conditions and how the best pet insurance companies compare. You can also get a personalized cost estimate using our calculator, or learn more about how we research every guide on our About page.
Sources
- NAIC, A Regulator’s Guide to Pet Insurance (official white paper)
- NAIC, Pet Insurance Model Act, full text
- NAIC, NAIC Passes Pet Insurance Model Act (official announcement)
- NAIC, Insurance Topics: Pet Insurance
- Healthy Paws, 2026 Pet Insurance Comparison Chart
Sarah researches and writes PetCoverToday's guides, checking every cost figure, coverage term, and policy rule directly against insurers' own published pages and, where relevant, veterinary and industry sources. PetCoverToday is an independent research resource, not a licensed insurance agency, and does not sell policies directly. Read more about how we research and fact-check every guide.