You're probably driving a lot less because of the coronavirus pandemic. And if you're no longer commuting to work or are simply abiding by social distancing guidelines and staying home, you're probably paying too much for car insurance. Fortunately, it's becoming increasingly likely you'll be able to get a discount on your auto insurance this spring.
This week, some car insurance companies implicitly acknowledged they've been charging too much for policy premiums during the coronavirus crisis — and these insurers have begun giving money back to customers. Allstate and its subsidiaries Esurance and Encompass are giving policy holders a "Shelter-in-Place Payback," to the tune of 15% back on their premiums in April and May. Likewise, American Family Insurance just launched an "Auto Insurance Premium Relief Program" that provides a one-time $50 payment for each car you have insured with the company.
On Tuesday, Liberty Mutual joined in and also said it was giving its auto insurance clients a 15% refund on premiums for April and May. Geico has since followed with a different kind of discount, promising a 15% credit for auto and motorcycle insurance customers whose policies come up for renewal between April 8 and October 7. In total, the three insurance companies estimate their customers will save well over $3 billion in policy premiums. Then, on April 9, insurance giant State Farm said it would be giving a credit averaging 25% to its auto insurance customers, returning a total of roughly $2 billion.
While all of these figures sound impressive, bear in mind that Geico says the average savings will be about $150 per vehicle insured over the course of a year, and the programs offered by other companies will probably benefit customers significantly less than that. In other words, we're not talking big money in the grand scheme of things, when more than 16 million people filed for unemployment in just three weeks.
What's more, auto insurers aren't offering discounts out of the goodness of their hearts, of course. The coronavirus pandemic has caused a significant decrease in driving nationally — and a steep decline in car accidents to go along with it. According to a University of California-Davis study, the number of collisions and injuries related to car accidents has dropped in half in California since shelter-in-place measures were ordered in the state. Auto insurance companies have been making a fortune lately because there are so few accident-related claims to pay.
Insurers have come under pressure to give some of those profits back to customers. The consumers advocacy group Consumer Federation of America wrote to state insurance commissioners two weeks ago saying that unless auto insurers give money back "to the millions of Americans who are sheltering in place or have otherwise significantly reduced their driving, consumers will be paying unreasonable and excessive premiums based on outdated estimates of miles driven."
More car insurance companies may follow Allstate's lead and roll out their own programs giving money back to customers. Even if your auto insurance provider isn't proactively discounting your policy, you should be able to save some money. But it'll take some initiative: You'll have to call up your insurer and ask for a price break. Or you could simply begin shopping around for a better deal with another car insurance company.
How to Get Cheap Car Insurance Rates
Shopping around for cheaper car insurance is something you should have been doing regularly, long before the coronavirus crisis upended the economy and caused millions to lose their jobs or work from home. According to one study, you could be paying an extra $400 to $1800 annually if you never compare auto insurance policies or consider switching companies.
It's become even more important to compare car insurance rates and negotiate for lower-priced coverage now, as the decrease in driving justifies the demand for significantly cheaper policy premiums. How much should you be looking to save? Dan Karr, the founder and CEO of the insurance-rating site ValChoice.com, says the $50 payment offered by American Family Insurance is just the tip of the iceberg.
“$50 off is a nice gesture," Karr told Money. "We think it’s great that insurers are doing this. However, these are being announced as temporary gestures."
ValChoice estimates that many drivers should be able to save 20%, and perhaps as much as 70%, on their auto insurance premiums, because of social distancing and shelter-in-place guidelines. The savings could add up to hundreds or even over $1,000 per year.
How much you can save on car insurance varies widely, based on how much your current policy costs, what kind of coverage you have, how many vehicles you own — and how much you'll realistically be using your cars in the months ahead.
To save the most money, you might first think to just cancel the car insurance policy for one or more vehicle you're not using. But doing so is often a lot more complicated than you imagine. Depending on where you live, you may be required to have auto insurance for any car with a valid registration. So you'd have to cancel the registration, and perhaps show proof to your insurer that you've turned in the license plates, in order to cancel the insurance policy. There may also be some fee for cancelling your policy early, and when the time comes to get the vehicle insured again you may be dinged with a higher rate because of the lapse in coverage.
While cancelling a policy outright may not be worth the trouble, there are many other classic strategies you can use to lower your auto insurance premiums right now. Among them:
• Lower your mileage. Tell the insurance company your vehicle will be driven less than 5,000 miles, or perhaps less than 3,000 miles annually, and you could save 30% or more.
• Remove your car's "business" status. Insurers categorize vehicles for different kinds of usage — pleasure, commuter, business, etc. — and according to the insurance quote-comparison site The Zebra, you'll pay $150 less per year, on average, for a car designated for pleasure, as opposed to business.
• Get a higher deductible. Shifting your deductible from $250 to $1,000, or even $2,000, will result in significantly cheaper car insurance premiums. (Of course, this also means you'll pay a lot more out of pocket if you get into an accident.)
• Shop around with different insurance companies. Perhaps the best way to save on by getting car insurance quotes online and jumping ship to a new company, or threatening your current insurer that you'll take your business elsewhere. Given what's going on in the car insurance world right now, it could be a golden age for customers to switch companies and save a bundle on their policies.