Auto Insurance

COVID-19 and Car Insurance: What to Know and How to Save

COVID-19 and Car Insurance: What to Know and How to Save

Some insurers are returning money to their customers during the COVID-19 pandemic, but whether or not your insurer is offering refunds, there are steps you can take to save money on your monthly premiums.
People in a car wearing masks.
People in a car wearing masks. Source: Getty Images

Editor's note January 2022: Car insurers have mostly finished providing pandemic-related rebates to car insurance customers. However, if you qualified at the time and have not received your rebate, contact your insurer to find out how you can receive your funds.

{"backgroundColor":"white","content":"\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cstrong\u003EEditor's note January 2022\u003C\/strong\u003E: Car insurers have mostly finished providing pandemic-related rebates to car insurance customers. However, if you qualified at the time and have not received your rebate, contact your insurer to find out how you can receive your funds. \n","padding":"double"}

Drivers are still required to carry car insurance in 48 out of 50 states, but millions of Americans are following orders to stay at home. As consumers cut down on driving, they may soon feel they're paying for protection they won't use.

Fortunately, there are plenty of ways to save on car insurance costs both during and after the pandemic. And, following an unprecedented drop in driving activity, some insurance companies are helping out their policyholders by returning money.

Even if you're not planning to drive, we don't recommend canceling your car insurance policy. Not only is there a chance you'll have to drive in an emergency, but gaps in your insurance coverage history can result in higher rates down the road.

How does the coronavirus pandemic affect car insurance?

For the moment, little will change about car insurance companies and your obligation to hold car insurance during the COVID-19 era. Even though you're driving less frequently, you're still legally required to hold a car insurance policy in accordance with state law.

One big change is that some insurance companies are deciding to give money back to policyholders as auto insurance claims decline along with traffic in a time of social distancing. If you're looking to save, you should ask your insurer about potential refunds in the coming months.

But even if insurance companies don't change their behavior, you can take steps to lower your car insurance costs. In fact, the same strategies that will normally help you save on car insurance — comparison shopping, applying for discounts and tailoring your coverage limits to your needs — will help you save on car insurance during the pandemic.

Which car insurers are giving back money to their policyholders?

As the volume of driving decreases significantly, insurers will inevitably see far fewer auto insurance claims in the coming months. If customers continue to pay the same monthly premiums and there are fewer claims, then insurance companies will see bigger profits during the pandemic.

Given these unique developments, certain insurance companies have decided to give money or credit — good for future payments on car insurance — back to their policyholders. And many companies have offered customers grace periods in which they do not have to pay their auto insurance premiums until a later date.

Our table below notes all insurance companies that have premium refunds or credits still in-effect during the pandemic.

Average annual premium
Average total savings
Acuity: A discount for new policies bought after March 11, 2020, or a credit applied to the renewal of policies bought before that dateN/AN/A
American Family: $50 refund along with a 10% discount to new and existing policyholders who had coverage from July 1, 2020, to March 2021. New and existing policyholders can also receive a 5% credit in April and May, 2021.$810$131
Amica: 10% off monthly premiums over a period of four months for customers who had a policy up until the end of 2020$1,376$46
Geico: 15% credit applied to six-month policies bought or renewed between April 8 and October 7, 2020, or April 8, 2020, and April 7, 2021, for 12-month policies$818$61
Indiana Farm Bureau: $20 refund per vehicle insuredN/A$20
Nationwide: One-time refund of $50 per policy for those active as of March 31, 2020$1,004$50
Plymouth Rock: 25% credit for the cost of liability and personal injury protection coverages as long as stay-at-home guidelines are in placeN/AN/A

There are an average of almost two vehicles per household in the country, but sample quotes for these companies are for a 30-year-old driver with one vehicle.

This table includes all insurance companies that have publicly committed to refund policyholders' money for the months of December 2020 and January 2021. Average annual premiums are for a minimum-coverage policy based on quotes collected by ValuePenguin across all 50 states. Average savings are based on how much you would save if you had the average premium, though your premium and thus savings will differ.

At the start of the coronavirus pandemic, a number of insurers offered discounts and refunds to existing policyholders. However, many of these discounts have been discontinued. For programs that are no longer active here.

However, if you're focused purely on car insurance savings, you shouldn't necessarily decide on a company based on its pandemic refund policy. Certain insurers offering refunds, such as Allstate, could be expensive to begin with, meaning you could find bigger savings by switching insurers.

Steps you can take to save on car insurance during the COVID-19 pandemic

We don't recommend canceling your car insurance policy during the crisis because you'll pay a penalty if you have gaps in coverage. However, you can still take steps to lower your monthly payments.

Ways to save on car insurance during the pandemic

Comparison shopping is a great way to save on auto insurance whether there is a pandemic or not

Insurance companies use proprietary formulas to calculate rates for their drivers. This means the same driver could receive a wide variety of prices from different insurers for very similar policies. And certain insurers charge on a pay-per-mile basis, giving you an opportunity to save if you feel you'll drive much less in the coming months.

For traditional car insurance, we found the cheapest insurers can save drivers more than $1,000 per year compared to the most expensive insurers. The only thing that has changed during the coronavirus pandemic is that some insurers are providing rebates to their customers.

Even if your insurer gives you a rebate, we recommend shopping around to see what other companies will offer you. It's possible that changing insurers will get you even more savings than the rebates on offer from your own insurer.

Pay-per-mile insurance could be a cost-saving alternative

Shoppers who foresee a huge drop in their driving behavior should also look to companies that charge rates based on mileage, such as Metromile. Metromile is only available in eight states: Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia and Washington. But it could be a cost-saving option if you think your driving behavior will change for a long period of time.

And even some of the more traditional major insurers are offering mileage-based insurance coverage. For example, Allstate offers Milewise and Nationwide offers SmartMiles, which are pay-per-mile alternatives to the companies' regular policies. Like Metromile, these offerings are limited to certain states.

Make sure you have the right level of insurance coverage

If you can afford it, we generally recommend buying more car insurance coverage than you are required to hold. But there are situations in which drivers may have too much coverage.

For example, if you have a policy with comprehensive and collision insurance, you have bought it to protect against the cost of damage to your own vehicle. These coverages alone can cost more than $1,000 per year.

If you have an older car with very little value, you may be paying more for the insurance on your vehicle than it's actually worth. If you need to save money, now may be the time to make sure you have an appropriate amount of insurance.

Below is a short guide to knowing how much car insurance you need. We still recommend that drivers be conservative and buy more than is necessary.

Type of coverage
Do you need it?
How much coverage do we recommend?
Bodily injury liabilityRequired in every state except FloridaPer-accident limits approximating your net worth
Property damage liabilityRequired in every statePer-accident limits approximating your net worth
Uninsured/underinsured motorist coverageOnly required in 22 statesPer-accident limits at the same level of your bodily injury liability coverage
Collision and comprehensiveIf you lease a car or finance your purchase, your lender may require it. Otherwise, it's not required by state law.As a rule of thumb, recommended only if your car is worth more than $4,000
Personal injury protection (PIP) or medical payments coverageOnly required in 14 statesIf you don't have health insurance or your health insurance doesn't cover auto-related injuries, we advise purchasing an affordable amount of PIP

Drivers who are unsure about the amount of coverage they should obtain can receive a ballpark estimate using our insurance calculator.

If you're driving less than usual, tell your insurance company

One of the factors insurance companies use when calculating your rate is your estimated annual mileage. So if your insurance policy is up for renewal and you're driving less, then you should give your insurer an updated mileage estimate.

There is no guarantee your insurer will lower your rates, as companies have different methods of evaluating this factor. In fact, some may not adjust your rates at all. But if you're renewing your policy, then tell your insurer about your new driving habits and see if it will adjust your rate.

Call up your insurer and make sure it has applied all the discounts possible

Whether you're shopping for a new policy or staying with your current insurer, make sure all discounts are applied to your insurance rates. For example, younger student drivers can often get savings for good grades, while older drivers may be eligible for a senior discount.

Consider comprehensive-only insurance for extra vehicles

If you or your family owns multiple vehicles, it's possible that the onset of the pandemic has resulted in you needing to use one of the vehicles much less. If you see that trend continuing, it might be worth storing the extra car and covering it with comprehensive-only insurance.

Comprehensive-only insurance only covers your car for incidents that occur when you're not driving, such as theft or weather and fire damage. And because you're decreasing your coverage levels, the cost of covering that car will be much lower.

If you decide to take this approach, then you should plan for it. Insurance companies will require you to keep that car in storage for a designated period of time — usually at least 30 days — and if you take the car out during that period, you won't be covered. But for people or families with multiple vehicles who want to save, talk to your insurer about comprehensive-only insurance.

What happens if you can't pay your auto insurance premiums?

If you don't pay your car insurance bill, your policy will be canceled or subject to other penalties. These penalties can include an increase in your premium rates, suspension of your license or car registration, or even cancellation of your insurance policy. There will usually be a grace period of 10 to 20 days, depending on your state, after the policy is canceled.

However, given the record levels of unemployment, decreases in travel and high frequency of medical problems, insurance companies are offering discounts and other financial accommodations to their customers. Depending on your insurer, you may receive partial refunds or discounts, be freed from paying late fees temporarily or given an extended grace period to pay your premium.

Each insurer is taking a different approach, which is why it's imperative you reach out to your provider immediately to see what it can do for you.

Inactive car insurance programs

In response to the COVID-19 pandemic, several insurers offered refunds and discounts to their policyholders in 2020. However, many are no longer being implemented or were given for a limited time.

Average annual premium
Average total savings
AAA: Policyholders with insurance in effect from May 16 to September 30 receive a 10% refund for this period$809$34
Allstate: 15% refund on monthly premiums in April, May and June and free identity-theft protection for 2020$1,390$52
Auto-Owners Insurance: 15% premium refund for April and May premiums$648$16
Erie: 5% discounts to customers with policies in force as of April 1$452$23
Farm Bureau Insurance of Tennessee: Approximately 24% refund for two months of premiums on each vehicle$407$16
Farmers: 25% off premiums from April and 15% for those in May$1,470$49
Hanover: 15% refund on April and May premiumsN/AN/A
The Hartford: 15% credit on three months of premiums for all policies active as of April 1N/AN/A
Horace Mann: 15% credit on two months of premiumsN/AN/A
Kemper: 15% credit for April and May premiumsN/AN/A
Liberty Mutual: 15% refund on two months of premiums starting April 7N/AN/A
Mercury Insurance: 15% premium refund for April and May premiums$527$13
Show All Rows

While these insurers no longer have active discounts, many have adjusted their policies to accommodate customers in other ways. For instance, USAA and Erie both offer flexible payment options for drivers struggling to pay their premiums on time. Even if your insurer no longer offers financial compensation, you should contact a representative to discuss alternate options for saving money or managing payments.