Reducing Car Insurance Costs During COVID-19

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Our personal financial security is paramount and with roughly 22 million people in the U.S. filing for unemployment between mid-March and April; understandably, people have real concerns about how they are going to afford to pay their bills.

If you haven’t seen it already, we’ve published an up to date list of personal auto insurance companies who are actively giving their policyholders refunds or credits due to the COVID-19 pandemic.

If you are one of the millions of people who are now having to stay at home, and have found that you’re not using your vehicle as much as you estimated on your insurance policy; then read on to see if and when you can ask your insurance carrier for a refund.

What Can You Do About Paying Auto Insurance During COVID-19?

While there is no legal mandate in place that forces insurance companies to take any action, things are changing at light-speed across all sectors on a daily basis. The best place to check and see if your insurance company is offering automatic refunds is by visiting their website. If they’ve made any type of announcement on this topic, it should be on their homepage, or either their news or blog feed. However, if they’re not on our list, and there is no information on their website about COVID-19 refunds, then you might still have a couple of options.

#1 – Modifying/ Dropping your Coverage

If you are no longer driving your vehicle at all and it is parked in your garage, then you might be able to reduce your coverage or drop it down to the minimum state requirements. For instance, if you are currently carrying $200,000 of liability coverage, and your state only requires you have $20,000 by law, then lowering these limits while you’re not using your vehicle could save you a little money in the short-term.

Another option could be to drop your collision coverage and keep only your comprehensive coverage in place. This means that while you will still be covered in the event it is damaged or stolen, but as you are not driving it, the need to have collision coverage in place is somewhat supplementary right now. However, this option should only be considered when you are not using the vehicle for any purpose, and where needed, you have another family car for running errands, etc. The best way to look at this is to see how much you are paying for the coverage Vs. the value of your vehicle. However, if you have a lease or loan on your vehicle, then you will need to make sure you keep the right level of coverage in place to satisfy any agreement or contract you might have.

Even if there is no legal requirement to have extended coverage in place, it’s always a good idea to ask yourself if you could afford to pay any out-of-pocket expenses to repair or replace your vehicle. If you can’t, then keeping this coverage in place might be the best option.

#2 – Asking for financial Relief

Ever since the COVID-19 pandemic broke out, many insurers have taken steps to help relieve some of the additional financial burdens their customers are now facing. There is a range of measures being put into place across the industry to try and help people overcome the difficulties they are facing. Here are a few that we know of.

  • Late fees and/or penalty charges – if you have missed a payment or incurred a few, then you can ask your insurer to waive this for you.
  • Extension of grace periods – If you miss a payment, then any auto insurance company will usually cancel your policy after a specific grace period. In some cases, this can be as quickly as ten days’ time. We have already seen many auto insurance companies extend their grace periods for up to 60 days. 
  • Request a payment plan – There are lots of insurance companies who are helping their policyholders through this time by offering payment plans.

Aside from this, please check directly with your insurer to see they are offering any insurance premium refunds, as this could also ease the financial burden.

#3 – Re-rating your Policy

If you drive a significant number of miles on a daily/weekly/monthly basis, then you might find there is a minimal saving to be had by lowering your annual mileage on your policy, based on 2-3 months less driving in a year.

However, for most people, changing policy mileage isn’t going to have any noticeable impact on the price. Particularly, where the annual mileage is going to be reduced by any amount that is under 5000 miles. If you expect to have a significant drop in mileage over the year, or your job has changed, then contacting your insurer and asking them to re-rate your policy could be one way to see if you can get lower premiums.

#4 – Increasing your deductible

Your insurance deductible is essentially the total amount of money you will need to pay out for a replacement or repairs following a covered claim. Your insurer would then pay the remaining balance up to any predetermined limit on your policy. Typically, the average deductible can run anywhere between $250-$1000, and in some cases, this can be higher.

If you originally took out a lower deductible but have found that you are no longer driving your vehicle, then you might want to discuss increasing it with your insurer. A higher deductible will lower your monthly car insurance premiums. As long as you understand that in the event of a claim, you will need to cover the deductible amount, then it might work well if you’re looking to save money on your auto insurance while you’re not using it.

Always select a deductible amount that you would be comfortable with, and are able to afford should the need arise.

#5 – Check you’ve got the right auto insurance discounts

Auto insurance discounts are a great way to save money on your insurance. No claims discount is the most well-known, but there are plenty of others too. Here are the most popular auto insurance discounts that you could be eligible for.

  • Car Safety Discount – If you have any safety equipment fitted to your vehicle, such as daytime running lights, anti-lock brakes, etc. Then, this can reduce your medical payments or personal injury protection bill by as much as 40%.
  • Multi-Car Discount – Insuring more than one vehicle with the same company can typically yield a discount of between 8-25%.
  • Multi-Policy Discount – This is when you buy auto insurance, and then another type of insurance with the same company. Such as homeowners or life insurance, for instance. It is sometimes called a ‘bundling’ discount, and it can yield a discount of between 5-25%.
  • Anti-Theft Discount – If you’ve updated the equipment on your vehicle since buying it, or you were unsure what anti-theft devices were in the vehicle when you first purchased insurance, then you might be missing out on an anti-theft bonus. In some cases, this can be as much as a 5-25% discount.
  • Professional/Occupational Discount – If you a member of an association through your profession or you work in law enforcement, for instance, then you might quality for an extra saving on your auto insurance policy. Members of state bar associations, educators, and law enforcement personnel are just a few examples of those who could be eligible.

These types of discounts aren’t always automatic. So, if your car has anti-theft features, or you’ve bought more insurance policies with the same company, make sure you call them and ask for a discount review!

#6 – Search the market

There are many insurance companies offering their existing customers a discount of between 15%-35% over a 1-3-month period due to COVID-19. Aside from giving these discounts to their existing policyholders, many are also offering discounts to new customers as well. If your carrier will not consider any discounts, and you feel that this isn’t in line with the rest of the market, you might want to shop around to make sure you get the best deal for auto insurance during and after the COVID-19 pandemic. 

Q. Is it OK to let my insurance policy lapse during COVID-19?

A. No, absolutely not. If you are not driving right now, it might be tempting to let your insurance policy lapse. However, this approach is only going to end up cost you more money in the long-run, and it is not the best way to proceed in the current climate. Most states will now give out penalties for owners who allow their insurance to lapse, and some insurers will even charge a higher price to those with coverage gaps on their vehicles. If this is the case, any money you might save in the short term could be completely lost when you go to buy insurance in the future.

Before making any decision to cancel your auto insurance, you should always contact your insurer to discuss your options.

Final Thoughts

There are many insurance companies that are delaying policy cancellations due to non-payment at present. They are also working directly with policyholders who are experiencing financial problems due to COVID-19 and looking payment deferrals and plans to help you keep your insurance coverage in place. The best approach is always going to be, trying to speak with your insurance company over the phone, email, or live chat if they have it! They might be able to reassure you of changes that are due to come, and they might be able to give you a few practical ways to reduce the costs of your auto insurance, or even offer something in person that isn’t advertised online.

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