Auto Insurance Loyalty - Benefits And Pitfalls

Most insurance companies offer perks to their customers for keeping policies active each year. A large number of insurance company loyalty benefits are formulated to prevent customers from moving to a new company for a better rate. However, most of us continue with the same at renewal time for the sheer convenience that it offers.

The benefits of adhering to the same insurance policy at renewal are many. But there are multiple pitfalls associated with auto insurance loyalty as well. Here we examine the two sides of the coin.

Advantages of Motor Insurance Loyalty:

Insurance providers employ perks and benefits to entice customers into staying with the same company. The most commonly seen rewards are offered after the customer has stayed for a certain duration with the insurer, and these may increase the longer he stays.

  • A discount on your total bill is a reward offered by insurance companies. This is in the form of a percentage reduction in your rates for keeping the policy active. This benefit is usually applicable to all policies that you have purchased from the same insurance provider.
  • Some insurance providers lower your deductibles for your loyalty with the company. However, this is usually dependent on certain factors such as claim-free years on your policy. In certain cases, your entire deductible will be waived off. In such a scenario, you need not pay any deductible in the event of an accident. Although this does not save you any premium, you will benefit immensely when you raise a claim.
  • An accident forgiveness option in your insurance policy enables you to benefit from no increase in rates after an at-fault accident. In such a situation, it is beneficial to stay on the same policy until your accident is not visible in the records. This is due to the fact that accident forgiveness cannot be transferred to a new insurance provider, and you will need to pay an additional charge for this benefit with another insurer.
  • Apart from the perks that you give up when switching insurance providers, you will have to bear the costs of starting new policies, such as new policy fees and down payments. These hidden costs make the process of shifting policies more expensive than you had initially anticipated.

Disadvantages of Staying Loyal:

  • In many cases, customers stay with the same policy due to the level of comfort that they have attained with the insurer. The fact that the premium has not changed also gives you a feeling that you have received the most lucrative policy. But this is not always true. You need to explore quotes from other insurance providers to get an idea of the best rates out there.
  • Every year as you renew your car insurance, you need to read through your policy documents and assess whether the same coverage is sufficient for your current needs. Also check the annual premiums and coverages that the insurer has been offering you to see if there are any discrepancies. It should be noted that your insurance provider may make slight modifications to the policies each year, that you may not be satisfied with. If this is the case, you may need to change your policy.
  • With the competition in the insurance market, customers can now avail a wide range of discounts on their policies. So, you need to browse through the offerings of other insurance companies to identify one that suits your needs.

The No-Claim Bonus (NCB) is a factor that prevents many from switching insurers. It is important to understand that the NCB can be easily transferred to your policy with the new insurance provider. Hence, there is no reason to worry about losing this benefit.

So should you stay loyal?

The answer to this question depends on your individual situation and insurance needs. However, it is a good practise to get quotes from various insurers to assess your rate in comparison to others. When you are comparing rates you need to take into account the discounts that you will be giving up and the costs associated with switching. You also need to consider the efficiency of the new insurer’s customer service and claims handling procedures.

It is good to note that loyalty usually pays off, but it may not be the best choice in all cases.

GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017

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