Protect Insurance

These Car Insurance Companies are Paying Quarantine Refunds

Dayana Yochim  |  June 24, 2020

We’ve been driving a lot less during the pandemic, but still paying full auto insurance premiums. Here’s what carriers are doing with the extra profits.

It seems wasteful to pay to insure a car that’s been stuck in “park” for months. But that’s what drivers under stay-at-home orders have been forced to do. With fewer cars on the roads getting into fewer accidents — reducing the number of claims — those insurance premiums have contributed to an estimated $2 billion in additional monthly profits for insurers.

Most car insurance companies have acknowledged that policyholders are in a financial tight spot. They’ve attempted to avoid adding insult to financial injury by waiving late fees, granting payment extensions and pausing nonpayment policy cancellations. 

Beyond softening punitive policies, many are offering a break on insurance premiums. The most common offering, according to a recent ValuePenguin survey, is a 15% credit or a refund applied to two months’ worth of premiums. But how much is that actually helping someone who is struggling to pay their bills right now?

All insurance breaks are not created equal

A discount or credit on your car insurance premium is certainly welcome, but it doesn’t offer much immediate relief. That’s because the typical 15% break is applied to future premiums.  

However, to reap any benefit, you have to remain a paying customer. If you decide to switch carriers or cancel coverage, zero dollars will be added to your bottom line. And if you reduce your coverage to save money, your  future discount is reduced, too. (PS: Please do NOT cancel your car insurance. Besides the potentially tragic consequences, it’s illegal to go without in most states.)

The better car insurance break is one that lets the customer decide what form the refund takes. For many consumers, cash in hand is worth much more than a future discount or premium credit.

Allstate, for example, lets customers decide whether the refund is applied as a credit to future bills or is automatically deposited into their payment account. That way the customer can spend the money on their most pressing needs.

Allstate isn’t the only major insurer redistributing part of their extra revenue directly back to consumers. 

9 companies offering cash to policyholders

Recently Insurify, an insurance comparison site, looked into which car insurance companies were sharing their windfall profits with policyholders. It found that nine out of the 20 top auto insurers had paid direct refunds to policyholders. (Individual reimbursement amounts are expressed as a percentage of premiums):

  • Allstate: Returned 15% of one month of auto premiums
  • American Family: One-time premium refund of $50 per policy
  • Auto-Owners: Returned 15% of auto premiums for April and May
  • Erie: Returned 30% for two months of auto premiums
  • Liberty Mutual: Returned 15% of two months of personal auto premiums
  • Mercury: Returned 15% of auto premiums for April and May
  • Nationwide: One-time premium refund of $50 per policy
  • New Jersey Manufacturers: Returned 15% for three months of auto premiums
  • The Hartford: Returned 15% of auto premiums for April and May

The amount each customer receives depends on what you pay in premiums (except in the case of carriers paying a universal dollar amount to all policyholders), but according to ValuePenguin, the average total savings from 25 major carriers ranges from $13 to $61. 

For some customers, having late fees waived will be even more valuable than cash back or discounted premiums. Late payments alone can quickly dwarf what customers are getting back in cash refunds. According to Policygenius, an insurance comparison and checkup site, an insurer may charge as much as $15 per day if it is unable to process a customer’s payment. (Most insurers have paused the practice of canceling coverage for nonpayment, but contact yours to make sure the pandemic policy is still in place.) 

RELATED: 7 Ways to Cut Car Insurance Costs During the Pandemic

As far as the quarantine refund, if you haven’t heard from your carrier, reach out. Many insurance companies automatically apply the credit or send a refund to policyholders who qualify. If you’ve cut back on your driving during the pandemic, make sure you’re getting all the discounts and credits you’ve earned. 

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