Insurance Premiums Auto Refunds Due to COVID-19

So much about life in America has changed in the last few months—from how we work to how we play and travel. As more people are staying home, fewer are out on the roads, which sounds like it should be good news for driving safety.

However, most people are still paying for car insurance, despite their sudden reduction in car use. Insurance companies have noticed this and started to issue some refunds of premiums, ranging from small lump sums to percentages of their premium. The process can be a little confusing, and may raise questions about whether your policy still covers everything you want.

What kinds of refunds are being given?

Every insurance company is different, and every region of the country is different. Collision rates are going down in many regions, particularly the most crowded regions—California saw a reduction of about 60 percent in traffic volume and a 50 percent decline in roadway collisions, according to the Los Angeles Times. The results are mixed so far in various regions of the country—while traffic volume and collisions are down in some areas, others are reporting increases of fatal accidents and high-speed collisions. In Connecticut, fatal motor vehicle accidents have increased by 40 percent, possibly because driver see empty roads and increase their speed, risking losing control of their vehicles, according to an ABC News report.

For example, insurance company Progressive is issuing refunds of 20 percent to its customers through its Apron Relief Program, which are applied to future payments if the policy isn’t paid up and are sent back to the payment account if it is. American Family Insurance, on the other hand, is issuing lump sums of $50 to its policy holders per covered vehicle. Each company is deciding its own policy.

Most of them don’t require a policy holder to do anything to receive the refund, but many aren’t being issued as cash, either. USAA, for example, is giving a 20 percent credit on two months’ payments for customers who have an active policy.

Over time, some customers may see their rates go down overall as well. State Farm, the largest auto insurer in the country, aims to reduce premiums in every state by 11 percent, saving payers about $2.2 billion, in addition to paybacks through a dividend the company is distributing.

Your auto insurer can provide information about exactly what kind of payback program is available to you with your current policy. Even if there are no refunds available, many companies are offering programs to defer or reduce payments if you are financially struggling.

How does it affect my coverage?

The return payments are based on a windfall the companies are seeing with fewer accidents, and thus fewer payouts, this spring. These came on the recommendation of the Society of Actuaries, the professional organization for insurance accountants, who noted that the sharp drop in driving and accidents.

The payback should not affect your policy coverage—it’s a blanket policy being applied by particular companies. The refunds are based on your current policy premium and coverage.

Another way to get a refund from your insurer is to reevaluate your needs if you are driving significantly less and want to scale back your coverage. If you’re driving significantly less, you can call your insurer for a re-rate based on your new average number of miles driven; this may result in a lower premium. You can also change the policy coverage to drop certain portions of it or increase your deductible, but remember that this will expose you to more liability if you do get into a car accident.

Before jumping on the financial benefits of scaling back coverage, remember that the last few months have been fairly abnormal. Right now, most people are driving less often and for shorter distances, but that may change once the pandemic mandates are lifted and life resumes a little more normalcy. If you are financially struggling to pay your bills, ask your insurer about payment plans or relief programs before choosing to reduce your coverage or let it lapse.

Even though there are fewer people on the roads, there is always a risk of accidents. If you got into an accident in April, it may be confusing about what to expect during this time, especially with courts closed to in-person proceedings. If you have questions about your accident, we are available through this time over the phone and online to work with you.