Auto Insurance Refunds a Covid-19 Silver Lining?

Auto Insurance Refunds a Covid-19 Silver Lining?

April 20, 2020
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It's a challenge to find any kind of silver lining to the cloud that Coronavirus has cast over us. But car insurance refunds or discounts could be one.

Because many of us are no longer using our vehicles to commute or run errands, or at least we’re using them much less, several leading insurers have decided to hand back part of the premium to their customers.

Others say they'll offer discounts to car owners paying monthly or when their policies come up for renewal.

The reason is simple: If you're driving fewer miles -- and some of Maryland's traffic is estimated to be down by almost two thirds -- you're less of a risk to the insurers. And once one company recognizes this by reducing rates, most of the others are bound to follow -- or risk losing customers.

Latest estimates say the value of these refunds or discounts could total more than $7.5 billion across the US insurance industry as a whole. Savings vary by insurer but range from a fixed sum of $50 to premium discounts of 20 to 25 percent on payments for April and May.

Will I Get a Car Insurance Refund?

Can you save up to 25% on your auto insurance? Or even more?

Whether you get a rebate or discount depends on several factors.

For example, not all insurers have committed to offering the saving yet. The list of those who've agreed to it is growing all the time. It includes most of the big names in the industry -- but not all of them.

The best way to find out if you're entitled is to check with the insurer. The fastest route is to do an online search on a term using the company's name. For example, "MyInsurer car insurance refund", but substituting the name of your insurer for "MyInsurer".

If you can't find the information you need, speak directly to the insurer (usually the customer service department) or your agent.

The situation also depends on how the refund or premium reduction will be applied -- automatically or on request. Most insurers seem to be going down the automatic route, issuing checks or direct bank deposits, based on your most recent payment method.

If you're a motorcyclist, in most cases you'll likely find your insurer will offer the same deal as they're giving to car drivers.

It's also worth noting that, in most cases, insurers are offering these savings based on premiums for the months of April and May, or, in some cases, just April. If the stay-at-home restrictions continue beyond those months, we may see further reductions, probably on a month-by-month basis.

Furthermore, savings are being offered across the board -- that's to say that, in most if not all cases, they'll be passed on to all active customers whether you're stuck at home or not. You won't be asked to provide evidence.

Finally, if you've confirmed that your insurer is operating a giveback but you haven't received or been notified of yours within a couple of months, contact them or again ask your agent for help.

Premiums Based on Mileage

Even if your insurer hasn’t joined the throng, there may be other ways to reduce auto rates during COVID-19.

Yours may be among those who offer a low-mileage discount to annual premiums and this might be the time to investigate this option

These firms generally cut premiums by between 5 and 30 percent, or by a fixed sum averaging around $100 per year, for drivers who cover less than 6,000 to 8,000 miles a year.

If your reduced driving takes you into this category, tell your insurer and ask for the discount. But, of course, if your driving breaches this limit when things get back to normal, expect your insurer to remove the discount.

Yet other companies base premiums on the actual mileage a person drives, which is very appealing to low-distance drivers. This is a big growth area for insurers and drivers alike and even some of the bigger companies have launched pay-per-mile policies, which have nothing to do with the Covid-19 crisis.

All of these changes may make this a good time to review your auto insurance and compare premiums, which a good agent like Rice Agency Inc. will be able to do for you.

If you opt to do it yourself, you may miss out on better discounts and lower rates. And, whichever method you choose, it's important not to cancel your existing policy until you've secured the new one.

Can I Delay My Premium Payment?

A discount or refund may be welcome but it may not be enough to bridge your budgeting gap if you're facing financial hardship because you've lost your job or been furloughed.

If you pay monthly or your premium is due or imminent and you expect to struggle to pay, speak to your insurer or agent as soon as possible. The earlier you do this, the less likely you are to end up in a financial flap.

At least two insurers have suspended cancellation and non-renewal of policies for late or non-payers, and late payment fees for those unable to pay on time; more are likely to follow.

What If I'm No Longer Driving?

As we've stated, it's probably not a good idea to cancel your policy altogether. And if you have an outstanding car loan, canceling your policy may be against the terms of the loan.

Your insurer may be prepared to temporarily suspend coverage, while retaining your policy. Or you may consider amending your policy to the minimum coverage required in our state, and/or keeping only the main essential driver's name on the policy. This may reduce your premium.

You should definitely be cautious about canceling. Depending on the circumstances, you could face a higher premium if you resume driving later, as you almost certainly will (unless, for example, you're of an age where you're considering stopping).

Final Thoughts

We're at a point in history where there's so much uncertainty about the future. Your financial wellness is an important part of that future. And your insurance is a powerful hedge against some of those uncertainties.

How your coverage works might change or be confusing at these times. For example, if you're picking up groceries or delivering medications to others, does your existing auto insurance protect you? Probably, providing you're not charging for the service.

If you have this or any questions whatsoever about auto or any other type of protection, please get in touch with us at the Rice Agency Inc.

Stay well and stay safe.