Get car insurance savings for being a loyal customer.
Typically shopping around and comparing options will ensure you find the best deal. But sometimes we’re just happy with the things we already have. When it comes to auto insurance, staying with your current provider could pay off before you know it.
How much can I save on car insurance with a loyalty discount?
Discounts vary by provider and location, because providers often can’t give discounts to all customers in every part of the country. If your provider offers a break for sticking around, expect discounts in the 15-20% range. Some providers, such as Geico, advertise a discount up to 30%.
Most providers don’t tell you how long you have to stay with them or how much you’ll save. You might be able to call your current insurance company to ask them if you qualify or how long you’ll need to stay loyal to get the discount.
Many providers also offer what’s called a renewal discount. Similar to the concept of a loyalty discount, this is something you’d receive when you renew your coverage with your provider rather than moving your business elsewhere.
How long do I need to stick around to get the loyalty discount?
Unfortunately, most don’t advertise how long you need to be with a provider to see any loyalty savings. Expect a time range of three to five years or more before the loyalty discount kicks in.
Who offers loyalty discounts?
Compare a few popular providers who offer discounts to loyal customers.
- Geico. Offers up to 30%.
- Nationwide. Save up to 15%.
- American Family
- Progressive
- USAA
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Is a loyalty discount worth it?
Not always. For some customers, staying with an insurance provider for long amounts of time can actually cost them more than switching providers. Most drivers can get better insurance rates by switching providers, which gives them more negotiating power, or asking for rates from their current providers every year or two.
First you have to meet the requirements of the loyalty discount by sticking around for several years. At that point, many customers feel invested in the company because they qualify for features like loyalty discounts, no claims discounts and accident forgiveness. Even with rate lock, which often guarantees your premiums for a year, your insurance rates tend to increase periodically from added fees and price optimization.
What’s price optimization?
The biggest cost of not switching is because of a little thing called price optimization in the insurance industry. It’s a nice way of saying insurance providers will increase your rate over the years if you stick with them, but not by large amounts.
It’s not optimizing anything for the customers. Price-optimized increases are meant to be gradual, creating a little extra cashflow for the insurer without scaring customers away with a sudden jump in costs. Think of it like insurance inflation for your premiums.
If you got a notice in the mail about a small rate increase, a tiny bump in cost probably isn’t going to make you go through the effort of switching to a new provider. Say you were paying $1,100 annually before, and for the next year you’ll be charged $1,175. With an increase like that, you would probably pay an extra $5 or $10 a month. You might not realize you’ve seen the same increase every year, so what you thought was a good deal on insurance is now higher than other market prices.
The goal of price optimization is to essentially charge what customers are willing to put up with and not any less than that.
What else affects my car insurance rate?
How long you’ve been with your provider can certainly be a factor, but for maximum savings, keep an eye on these other factors as well.
- Age. Young drivers under 25 as well as senior drivers will pay more for car insurance. Drivers under 25 are believed by the insurance industry to be at high risk for car accidents. This means the older you get, the lower your car insurance rates will tend to be, until you reach a certain age.
- Gender. Men can often expect higher premiums in most states, except for California, Hawaii, Massachusetts, Montana, North Carolina, Pennsylvania and Michigan. This is sometimes further modified by age and marital status; the differences in cost between men and women mostly disappear by the age of 35.
- Driving experience. Drivers with learner’s permits typically pay more, which often compounds the effect of age on premiums.
- Type of car. Luxury and sports cars are almost always more costly to insure than sedans and minivans. Fast cars tend to be driven fast, putting these cars and their drivers at a higher risk for accidents.
- Occupation. People who have long commutes or who drive around all day for work can expect higher premiums. However, many professionals who drive a lot have work vehicles, or else have car insurance coverage through their employers to cover their mileage when they’re on the clock.
- Marital status. Single people are seen by insurers as less stable than their married counterparts. If you get married, you’ll see your premiums decrease right away.
- Location. Some places are at higher risk of theft, vandalism and other potential hazards, which incurs higher costs. Urban drivers are at higher risk for an accident than people who live far outside the city limits. Similarly, if one area is more prone to flooding or storms, you may expect this to impact your premiums.
- Claims history. The more car insurance claims you have made in the past, the higher your premiums will generally be.
- Driving record. The more violations you have on your driving record, the more you can expect to pay for your car insurance. If you’re notorious for speeding, driving under the influence or trying to start a drag race at every red light, your insurer will likely know about it and raise prices accordingly.
- Credit score. Like it or not, nearly all auto insurance providers use your credit score to help calculate your risk before arriving at a policy cost. This is because multiple independent studies indicate that if your credit score is low, you’re more likely to be involved in an accident.
However, there are a few states where car insurance providers aren’t allowed to use credit to determine rates — California, Massachusetts and Hawaii. - Other drivers. Only certain people will be approved to drive the car, and all of them impact the cost. Even the world’s safest driver will get a substantial price hike by listing another less-safe driver on the policy.
- Typical driving habits. Your typical distance driven, how often you get behind the wheel and where you drive all play a part in your car insurance prices.
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Should I stay or should I go?
Once you know what kinds of loyalty discounts your provider offers, hold your provider to that number and watch for any other increases year over year to weigh out the actual savings from loyalty discounts.
Because some providers use rate optimization, which is actually banned in some states, you might get some nice loyalty discounts and still wind up paying more than you would if you switched providers.
To get a better grip on your numbers and the other factors in your policy, get in touch with an agent or directly with your provider.
Bottom line
Loyalty discounts can offer significant savings on your car insurance, but are unlikely to beat out the benefits of shopping around and taking good offers from other providers.
Monitor your annual insurance costs and watch for any increases that don’t seem warranted, as that could be a sign of price optimization. And if you’re feeling the effects of price optimization, it could be time to see what else is out there.