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Tip of The Month: Does Insurance Company Loyalty Pay Off?

June 4, 2013

Tip of the MonthOne of the ways an insurance company works to keep its customers around is to offer perks for keeping your policy in force year after year. There are a number of insurance company loyalty benefits that various companies offer to keep you from moving on to a new company in search of a better rate. Whether or not staying loyal to the same insurance company really does pay off for you depends on a few factors.

Insurance Company Loyalty Perks

Insurance companies use a number of different benefits and perks to make it worthwhile for you to stay where you are. While it varies from company to company, the most common are discounts offered after a certain number of years with the company, which may increase the longer you stay, and deductible reduction or even waiver after a set number of years with the same company.

Discounts

A loyalty discount on your overall bill is the most common of the rewards offered by insurance companies. This is usually a percentage that is taken off your rates as long as you keep the policy in force. It usually applies to all of the policies you have with the same company, so that you can get a reduction on your entire bill. Some companies may offer a larger discount the longer you stay with the company.

Deductible Reductions

Some companies will lower your deductible the longer you stay on board, although this may be dependent on your policy remaining claim-free. In some cases you can even reach a point where the deductible is removed entirely and you will pay no deductible at all in the case of an accident. This doesn’t affect your premiums, but can save you a lot of money in the event of an at-fault accident.

Other Benefits of Staying With One Company

There are a few other things to consider when you are looking to change insurance companies. If you have already used your accident forgiveness option – meaning you have had an at-fault accident but have not seen an increase in your rates because you chose accident forgiveness, you will likely benefit from staying on the same policy until your accident comes off the record. This is because accident forgiveness doesn’t transfer over to a new insurance company, and other companies can and will charge you for the accident.

Comparing Rates Fairly

When you are comparing rates and shopping around for car insurance quotes, it’s important to keep in mind all of the possible perks you could be giving up by switching companies. Whether it is an actual discount or value-added benefits that are being offered to you as a loyal customer, those things should be a part of your considerations when you compare rates. Another company may offer a lower rate on the surface, but require a higher deductible to be in place, and cause you to give up and deductible reductions you have earned at your current insurance company. It may also be higher due to an accident your current insurance company isn’t charging you for because of accident forgiveness.

The Cost of A New Policy

In addition to the perks you might have to give up when you switch insurance companies, there are some other costs to starting up a new policy. Most insurance companies charge new policy fees and may require a down payment. These up front costs may make switching more expensive than you anticipated. Be sure that you know what the actual cost to start up the new policy will be before you agree to switch.

Should You Stay Loyal?

The question of whether or not it’s worth staying loyal to your car insurance company really depends on your individual situation. It’s always a good idea to shop around regularly and get some quotes – there’s no obligation to obtaining insurance quotes and it lets you know where your current rate stands in comparison to the other rates out there. When you compare the rates, take into consideration all of the costs of switching and all of the discounts and perks you may be giving up. Loyalty discounts and perks don’t always add up to the better deal; it could very well be that there’s a better rate out there for you. Of course, you also need to consider things like customer service and claims service; if you have always been happy with your current company that counts for something as well.

Before you switch, do your research. Loyalty can and does pay off, but that doesn’t mean it’s always the best choice.