Coronavirus and Your Car Insurance: A Practical Guide

The COVID-19 pandemic has impacted every part of daily life, from sheltering in place to lost paychecks. While car insurance is no exception, the good news is that every major provider has pledged to help Americans in need like never before. To separate fact from fiction, we spoke with experts and analysts across the country to determine exactly how the coronavirus crisis will affect your car insurance.

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      Is my insurer going to give me money back?

      As of March 22nd, Arity reports the number of cars on the road had fallen dramatically, about 20%, following the declaration of a national emergency in the U.S. Two of the largest auto insurance companies recently announced they will be responding to the lowered risk of auto claims with premium rebates for customers.

      American Family announced its Premium Relief Payment that will be “providing a one-time $50.00 payment for each personal automobile insured with us.” Payments will be released as paper checks as soon as they approved by each state’s regulators.

      Allstate’s Shelter-In-Place Payback will allow personal auto policyholders, with limited exceptions, to receive an average of “15 percent money back based on their monthly premium in April and May.” Payments will be automatically credited to your account or deposit directly into the account typically used to pay premiums. 

      State regulators are also putting pressure on all insurers to step up to support consumers with measures like extended grace periods, so if your insurer hasn’t yet responded with meaningful actions, you can routinely check its website to catch updates or reach out directly.

      Should I change my auto coverage because of COVID-19?

      If your auto insurance bill is a burden on your budget right now, Ariana Gibson, Head of Driver Insights at Clearcover, told us, “our recommendation for those customers who are looking to save money on premiums is to contact their insurance provider to discuss increasing their deductible or reducing their limits.”

      While you can definitely reach out to your insurance company to see if your lowered mileage could mean a discounted rate, keep the following in mind: Don’t cancel coverage you’ll need in the future. “Perhaps the most important thing for people to know is that they should keep their insurance unless they plan on giving up their cars,” says Virginia Hamill, Senior Insurance Analyst at Fit Small Business.

      Canceling your car insurance, even if it’s only for a limited period of time, can have several negative impacts:

      • You won’t be covered for any losses
      • Most states legally require car insurance before you can drive
      • A gap in coverage can mean higher premiums when you restart your coverage
      • There may be cancellation fees or unexpected costs

      How can I lower my monthly payments?

      Increase your deductible

      Your deductible is the amount of money you agree to pay out of pocket before the insurance coverage will kick in. Increasing your deductible helps lower your premium because you’ll be on the hook for a larger part of any potential losses, but that also means saving on your bill now is something you’ll need to weigh with your ability to take that additional risk.

      Reduce your liability coverage limits

      Lowering your liability coverage limits can also help you save on insurance, but it will likely make a smaller dent than changing your deductible. Your car insurance coverage will have both bodily injury and property damage liability, or the maximum amount your insurance company will cover, if you cause damage to someone else or their property.

      Switch to a usage-based plan

      If you’re driving fewer miles than usual, you may want to consider a usage-based car insurance plan. While traditional car insurance is priced using factors like your age and claims history, usage-based insurance relies on driving data (usually gathered through an app on your phone) to determine how much you pay for coverage.

      “Consumers might also want to look for a pay-per-mile plan. This is where the policyholder pays a base rate and is then charged for every mile he or she drives each month.” Hamill suggests.

      While there are companies like Metromile and Root that exclusively offer this type of coverage, some larger insurers like Allstate and Nationwide are also starting to offer usage-based options. Allstate’s website says “you can also get cash back just for signing up” for its Drivewise program.

      This option would be best for users who are likely to benefit from a usage-based policy for the long-term, though. Switching insurers too often can signal that you’re not a loyal customer, which can mean you may be quoted higher rates from even other insurers in the future.

      Will my future auto insurance premiums be affected by COVID-19?

      Most drivers are well aware that an increase in claims can spike car insurance rates, but the economy as a whole is also closely tied to an insurance company’s business.

      “[Insurers] collect billions of dollars and while that money is waiting to be paid out in claims it’s being invested and those investments are where insurance companies make their real money,” John Espenschied, Owner of Insurance Brokers Group explains.

      “But, if the investment world is tanking and government treasuries are paying less than 1% the only alternative is to raise insurance premiums,” Epsenschied predicts.

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      Will auto insurance claims be affected by COVID-19?

      With social distancing measures in place across the country, insurers are making sure their employees and customers stay safe by keeping the claims process digital.

      Depending on how tech-savvy your insurance company is, this may be a big change from a typically hands-on process or you may not see a change at all. Gibson says some insurers already have full-service apps where their customers can find everything they need “which includes filing a claim by submitting photos of the damage.”

      What if I can’t afford my auto insurance payments because of COVID-19?

      “If a consumer is struggling with his or her car insurance premiums, he or she should contact their insurer. Many are addressing the COVID-19 pandemic with programs to assist policyholders,” Hamill recommends.

      We put together a list of how the largest insurers are responding to COVID-19 where you can find announcements from major insurers as well as tips on how to find out if your insurance company is extending any relief to policyholders.

      Experts cited

      Virginia Hamill

      virginia hamill

      Virginia is a Senior Insurance Analyst at Fit Small Business. She previously worked in the wholesale division of Insureon and holds a Master’s Degree from DePaul. Follow Fit Small Business on Twitter.

      John Espenschied

      John Espenschied

      John is the owner of Insurance Brokers Group with over 20 years of personal and commercial insurance industry experience.

      Ariana Gibson

      Ariana Gibson

      Ariana is Head of Driver Insights at Clearcover, a Chicago based auto insurance startup. Follow Clearcover on Twitter.

      More Resources

      At the Simple Dollar, we have been following COVID-19 since the start. Check out the articles below for resources and the latest news on financial relief from the coronavirus.

      Samantha Kostaras

      Insurance Reporter

      Samantha Kostaras is an insurance reporter at The Simple Dollar, covering financial services and insurance. Before becoming a writer, she worked as a financial analyst and earned her Bachelor’s degree in Finance from the University of Alabama.

      Reviewed by

      • Adam Morgan
        Adam Morgan
        Senior Editor

        Adam Morgan is a senior editor at The Simple Dollar and an award-winning journalist who’s covered finance and culture for 15 years. His writing has been featured in The Guardian, Los Angeles Times, Chicago Tribune, The AV Club, and elsewhere.