Schools are closed with kids at the kitchen table trying to do lessons from home. Millions are following shelter in place orders. What does that mean?
Well, many are facing unemployment as those numbers show. Still, others are making the transition from commuter to working at home.
One small positive is that Americans are saving money at the pump and putting fewer miles on their cars, and the insurance industry has taken note.
With so many people home, for a month or more, and so few people out on the road, Americans are driving less. When we drive less, there are fewer accidents. When there are fewer accidents, then insurance companies save money from claims. Many major auto insurers are passing some of those savings onto their policyholders with insurance refunds.
Read on to learn about the auto insurance refunds and other measures they are taking to give back to policyholders in the wake of COVID-19.
The California Effect
Many companies were influenced by regulations put in place by the state of California. The California Insurance Commission ordered insurance companies to offer relief in the form of refunds to their policyholders, knowing how little Californians were driving because of the stay home policies.
One study finds that there are as many as 60% fewer people on the California highways because of the shelter in place orders.
California residents can expect ordered premium reductions for parts of March and April. If the shelter in place orders continue in May, so should the premium reductions.
Insurers must reduce rates for:
- Private passenger automobile
- Commercial automobile coverage
- Workers’ compensation
- Commercial liability
- Medical malpractice
- Other insurance where the risk of loss has fallen substantially as a result of COVID-19
There’s little doubt that California’s strong stance to help policyholders in their state likely helped policyholders across the country.
Auto Insurance Companies
Many auto insurance companies have already announced their plans to help out policyholders because of COVID-19. Let’s take a closer look at the companies and their plans to help policyholders.
Allstate is the fourth-largest auto insurer in the country. They have announced plans to take the premiums paid by policyholders for April and May and provide a 15% premium refund.
Allstate announced that by mid-March, their drivers were driving about 20% less. By the first week of April, that number had increased to 50%. It’s simple when people drive fewer miles, and there are fewer accidents and fewer insurance claims.
American Family Insurance
The American Family Insurance company, the ninth-largest insurer in the country, announced an auto insurance refund to its policyholders. For every vehicle insured, they would refund $50 back per automobile to the insured.
Amica policyholders will receive a 20% credit on their auto policy premiums. The credit will be for April and May.
Farmers Insurance, including Farmers and 21st Century, will give a policy reduction in rates for April. Their policyholders will see a 25% reduction in prices for April and 15% reduction for May. It will automatically appear on statements.
Geico is the second-largest auto insurer in the US. They are a subsidiary of the Berkshire Hathaway company. If you have Geico insurance and your policy renews between April 8 and October 7, Geico will issue a 15% premium credit to both auto and motorcycle policies.
The insurance company is also offering the same incentive to people who purchase their insurance during the same period.
The Hartford insurance company, which also includes AARP auto insurance, will give customers a 15% refund on April and May auto premiums. The policy must be in place by April 1 to be eligible. They expect to give back about $50 million in refunds over two months.
Liberty Mutual is the sixth-largest auto insurer in the US. This insurance company is offering a 15% refund for two months of the premium amount as of April 7, 2020. The returns will be automatic, so policyholders don’t need to contact them and will begin in April.
As the number 8 auto insurer, Nationwide is giving policyholders a one-time premium refund of $50 for each policy. The policy must have been in effect by March 31, 2020, to be eligible for the return.
Nationwide explains this amount as about the average equivalent of 15% for two months of a bill. They will credit your most original method of payment within 30 days.
Progressive Insurance is offering about $1 billion in premium credits for its auto insurance customers. Those who have current policies by April 30 will get a 20% reduction on the May premiums. The same will happen in May. The plan needs to be present by May 31 and will be deducted from their June premiums.
Most significant of all the auto insurance companies, State Farm is also offering a premium credit for their insurance policyholders. Their customers will get 25% premium credit subtracted from their bill for between the dates of March 20 and May 31. The percentages may vary by state, so don’t assume you will get the full 25%.
State Farm will be offering about $2 billion in policy credits starting as early as June insurance premiums.
Another company, Travelers Insurance, is offering an automatic 15% premium credit for its customers for April and May. They are the 10th largest auto insurer in the country.
USAA will also help its policyholders. USAA is a member-owned association. It serves military personnel, former and current. This company will offer $520 million in premium credits. Members will be given a 20% bill credit for two months of their premiums. This will appear automatically on their bill.
While this list highlights many of the auto insurance companies, it is not an exhaustive list. It’s expected as the country continues to react and deal with the effects of the coronavirus, other auto insurers will come on board with relief for their policyholders.
It’s also expected that if COVID-19 lingers then insurers could opt to extend benefits for policyholders too. Many of the major insurance companies already mentioned should stay-at-home orders continue longer than expected, and they are open to offering more relief in the form of refunds and premium reductions.
Having Trouble Paying Your Premiums?
With so many people facing unemployment and struggling to pay their bills, what should you do if you can’t pay your premiums?
First, contact your auto insurance company. Find out what support they are offering to policyholders. Many already have some form of payment or cancellation deferral in place. This doesn’t mean you are off the hook for paying your bill. At some point, you will have to pay. But it often means you won’t get canceled for non-payment.
Many are anxiously awaiting their stimulus check from the CARES Act to pay bills like auto insurance premiums.
Policies vary greatly from company to company. Don’t make the mistake of reading about benefits for one company and assume your company is the same as you can see from the packages being offered. Some are offering refunds, while others are giving percentages back on premiums. You probably noticed there’s even quite a variance in the amounts.
Make sure you talk with your agent about the length of time the deferral lasts.
Avoid Insurance Lapsing
When money is tight, you are looking for places to save money. You might be thinking if I’m not driving, why pay for insurance? Letting your policy lapse is a big mistake.
First, many states have strict penalties for having a certified car that is uninsured. Some even force you to get insured through a state pool, which is significantly more costly than your regular insurance.
Insurance companies can also remove discounts or perks because your policy lapsed, and in the end, you pay much more than if you had just paid it.
Talk to your insurance provider about their COVID-19 cancellation policy.
Other Ways to Save
If you are worried about your premiums, there might be other ways to save during this challenging time.
Talk to your agent about a mileage discount. Many insurance companies offer discounts for policyholders who drive fewer miles. Because you are not driving or driving very little, you might get a discount this way.
Consider changing your deductible. If you previously drove a lot, you may have wanted a lower deductible because your risk was higher. If you are only driving to the grocery store and home, and there are fewer people on the roads, consider increasing your deductible. Higher deductibles mean you pay a lower premium.
If you have multiple cars, consider canceling your coverage on one car temporarily. There’s no reason to pay for two vehicles not being driven.
Auto insurance is a competitive market. If your auto insurance agent isn’t working with you, consider changing companies. Many will offer new policyholders similar incentives for joining their company.
COVID-19 Insurance Refund Relief
The effects of COVID-19 are not just medical. Millions are feeling it in their pocketbook too. The auto insurance industry offering insurance refunds might seem minimal, but every little bit can make a difference.
For more articles related to personal finance, be sure to visit the personal finance page.