Pros and Cons of Staying with your Auto Insurance Company

Once you shop around, compare quotes and find a competitive and reliable car insurance company, it makes sense to stay with it until they lose their edge, prove not to be as good as you thought or something changes in your circumstances that make another carrier a better choice. Loyalty is a highly rated trait but for the right reasons and certainly not helpful when you start losing out on better coverage, cheaper policy and more satisfactory vehicle insurers.

It appears that policyholders are either loyal to their carriers or they don’t like to shop around. A recent AAA survey shows that 8% of motorists never changed their car insurance providers in the last 20 years, 21% in the last 6 years and around 1/3 of motorists never shop around. So, what convinces these people that they found a company worth staying with?

Advantages of Staying with your Auto Insurance Company

Most motorists don’t think that a lot changes in a few years. If they find a reasonably priced and reputable carrier, it doesn’t even occur to them that they might be able to do better by switching. Besides, staying put requires no effort, especially if they set up auto-renewal. So, people often stay because of inertia. Here are some of the other reasons convincing people to keep renewing their current policies.

1) Renewal discounts are offered by many vehicle insurers to keep customers. It may be a small percentage but give policyholders the feeling of being appreciated. Some companies start offering small discounts each time a policyholder renews with them. Many companies offer large discounts after 3 – 5 years.

2) Loyalty perks can add up to an attractive package with savings and free add-ons. According to Nationwide, you could get up to 15% loyalty discounts and up to 30% according to GEICO. This doesn’t mean everyone can get these savings but people can still get impressive savings. Various carriers offer other perks. For example, progressive offers free Accident Forgiveness after 5 years.

3) Accident Forgiveness is great, especially if you get it for free. Also, it can help companies keep customers. If you have one at-fault accident, your car insurer would not let it affect your rates if you have Accident Forgiveness coverage. This means the company won’t be able to charge you higher premiums.

But it would be harder for you to leave the company too because only your current insurer forgives the accident you had and all the other companies see it and offer higher quotes because of it for the next 3 – 5 years. So, it is highly important to choose the right company at the start if you are a type of person who is unlikely to switch for some time once you sign up.

4) Bundling and multi-car insurance arrangements can save a lot of money that people may not want to lose. They also make it tougher to make a move because policyholders need to break a stronger tie with their automobile insurance providers. On the other hand, they can save more when they find another carrier offering larger discounts for bundling and multi-vehicle insurance policies.

Still, it is harder to change your auto insurance when you know you will be losing a bundling discount on your home, which is usually more expensive and harder to find discounts.

5) The agent is often the reason people sign-up and stay with a particular company. A good agent would make sure changes in your life would be considered and your policy remains up to date. They can also put their customers on better rates since they can bind policies on behalf of the company. Many policyholders stay for the agent.

Disadvantages of Staying Loyal to your Car Insurance Carrier

One of the first pieces of advice experts give about vehicle insurance is to shop around at least once a year. They must know something worth investing time to get a few quotes, compare them and make a decision. Here are some of the ways loyal policyholders can lose out if they ignore the advice given even by their own providers.

1) Missing out on savings can make it costly to renew your current automobile insurance policy. Deciding to stay put has an opportunity cost and it can be hundreds of dollars. Policyholders are more likely to save big when they haven’t shopped around for a while and are paying high rates at the moment.

Many motorists may be paying higher premiums at the moment because they are young, had an accident or speeding ticket last year. They may see that their rates came down a bit and feel relieved and stay. However, this may be their change to move away from a high-risk car insurer to a standard one and not only save money but also get better policy provisions.

2) Getting caught by a price optimization algorithm can be a punishment for staying loyal. Several studies confirm that policyholders can save on average 20% if they haven’t shopped around for 5 – 8 years, despite all the loyalty discounts they are currently getting. This suggests that some auto insurers are giving with one hand and taking away with another.

Price optimization is a practice used by some vehicle insurance companies, in which they profile the loyal policyholders who aren’t likely to leave the company even if their rates aren’t great and charge them more. So, this is one of the reasons why many experts keep recommending shopping at least once a year. Imagine your loyalty discount actually costs you more money because you are caught by a price optimizing algorithm, which singles you out as a loyal customer who isn’t likely to shop around and raises your rates 20% over time.

3) You may be overstaying your welcome when a recent change in your details may be punished too harshly by your current provider. While an automobile insurance provider can offer great prices for low-risk drivers, they may not be as good when you add a high-risk automobile or a teenage driver to your policy. Motorists are required to update their details and it may be best to get a few quotes when they do.

4) You may lose out on better coverage and free add-ons. Often companies offer different incentives like free roadside recovery, diminishing deductibles or switching discounts. There are also other innovative products that may serve you better but not offered by your current provider like pay-per-mile or telematics-based auto insurance policies.

You can decide what to do at the end but you should always shop around to gauge the market at least once a year. Also, it is better to do it the moment you get your renewal notice so that you have time to judge the situation and make the most of signing discounts whether you stay or go.

Most car insurance companies offer numerous discounts geared to persuading customers to stay or switch and they can be for purchasing your policy in advance, loyalty, switching, signing online, paying in full and even setting up an Electronic Funds Transfer. These are easy saving opportunities with hardly any qualification conditions and they can make switching or staying sweater.