Should you buy your car insurance through Costco?
Prove once and for all that you can find everything at Costco, the big-box retailer offers exclusive car insurance to its loyal members.
The company promises a range of discounts and perks, saving drivers hundreds of dollars a year.
But while Costco can be trusted to offer great deals on everything from printer paper to production, it’s fair to wonder if a discount club is the best place to buy such critical protection.
For some club members, Costco car insurance might really be the most affordable option, but they might end up paying another way.
What is Costco Auto Insurance?
Costco members in most states can block discount auto insurance policies through the big box store. The key word here is through.
Costco does not issue insurance policies directly. Instead, policies are underwritten by American Family Insurance under the CONNECT brand.
American Family, formerly known as Ameriprise Auto & Home Insurance, has provided insurance to Costco members for nearly 20 years.
In addition to car insurance coverage, CONNECT offers home, renters, specialty and umbrella insurance.
Quotes are available on the Costco website or by phone.
And it seems like a lot of people are accepting the business on those quotes. Costco says more than 400,000 of its members have switched their auto insurance to CONNECT.
What’s Included in Costco Auto Insurance
Although Costco markets the product as a lower-cost alternative, CONNECT still offers the standard coverage options drivers expect from their insurance company.
This includes liability, collision and comprehensive coverage as well as medical coverage and injury protection.
Right off the bat, Costco members get a “just for [their] affinity with Costco” – although the size of this discount is not mentioned.
And like other insurers, CONNECT offers a range of car insurance discounts for things like safe driving; take a driving course; install safety devices such as anti-theft devices and airbags; overnight parking in a garage; be a good student; insure multiple cars or bundle up with home or umbrella insurance and be a long-term customer.
Policies purchased through Costco also unlock a few additional benefits, such as:
Windshield repair. Policyholders can claim all repairs (but not replacements) of chips without having to pay the deductible.
Roadside assistance for executive members. Up to $75 in coverage, not including the cost of a battery or fluids.
Lifetime renewal for executive members. Outside of Michigan and Maryland, any policyholder who has never had a major traffic violation or failed to pay their premium can rest assured that Costco will not void their policy for accidents. or minor offences.
Benefits of Costco Auto Insurance
The main selling point of this insurance product is its affordability.
Costco boasts that its members saved an average of $583.60 in the first year they switched to CONNECT. And a few independent surveys support the idea that it is generally cheaper than the major national insurance companies.
However, it’s important to note (as Costco does in the fine print on its site) that not everyone will see such savings. Some will see no savings.
When it comes to insurance, how much each policyholder pays depends on a lot of factors, including their credit score, marital status, level of education, and zip code. And every company weighs these factors differently.
That being said, most customers who have stayed with the company seem happy with the coverage and pricing of CONNECT policies. Costco says nearly nine in 10 members renew their policy, citing a 2021 survey.
And you shouldn’t have to worry about the company’s ability to pay your claim. It is rated “A” by credit agency AM Best, which means that it is financially sound, stable and has solid operational performance.
The Cons of Costco Auto Insurance
Even if the price makes you smile, the difficulty of making a claim might make you grunt.
The National Association of Insurance Commissioners, which helps regulate the industry and protect consumers, maintains a customer service index based on the number of complaints a company receives for its size.
The benchmark is 1.0, so a company with a rating of 2.0 received double the number of complaints you might expect.
In 2020, American Family CONNECT Insurance Company earned a 6.31 rating from the NAIC, which means it received more than six times the average number of claims for an insurer of its size. Last year it improved to a 2.15 rating.
Meanwhile, P&C insurance company linked to American Family CONNECT received ratings of 3.0 and above.
On top of that, American Family does old-fashioned insurance, which means it doesn’t offer users an app to file claims or contact customer support. Although you can report some losses online, you will usually need to initiate the claims process over the phone.
Even if it seems like an acceptable compromise, you may not be able to take advantage of it.
CONNECT says it does not do business in Alaska, Louisiana, North Dakota, Wyoming, Maine or Rhode Island. Costco adds that insurance products cannot be “obtained” through the company in New York. And Massachusetts drivers must be executive members to receive the exclusive Costco discount.
Is Costco Auto Insurance Worth It?
If you’re already a Costco executive member, chances are that getting your car insurance through the discount club could provide you with significant savings.
But if you’re worried about customer service — and adding more complaints to American Family’s pile — it’s worth exploring a few other options. After all, big box shopping isn’t the only way to get a deep discount.
For example: many states allow insurers to use your credit information to assess the risk you pose as a driver. If your credit is less than stellar, consider taking some time to raise your score and see if that unlocks better rates.
One of the easiest ways to improve your credit score is to manage any troublesome debt you carry from month to month.
Finally, the most effective way to lower your premiums is to simply look for better rates. As mentioned earlier, even though insurers look at the same information to set a premium, they all use their own calculations.
That’s why the Insurance Information Institute recommends comparing at least three quotes before choosing the right deal for you.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.