Do Car Insurance Loyalty Discounts Actually Save You Money?

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    When it comes time to buy car insurance, it can sometimes feel overwhelming to deal with the sheer number of options. And once you choose an insurer, then you have a million and one options within the plan to choose from. Most car insurance companies offer a large number of discounts, too.
    One common offering is a loyalty discount. You won’t find a loyalty discount when you’re shopping around and applying for insurance, but once you’ve had your car insurance for a while, you might be offered a loyalty discount. What is it, and more importantly, does it actually save you money? Read on to find out.

    What is a loyalty discount?

    A loyalty discount is a discount handed out to drivers who've had a car insurance policy with the same company for a long time. Some companies give these out early, after a year or two, while others might wait until you’ve used their services for five years before giving you the discount.
    The concept of a loyalty discount is that you’ve been a loyal customer for a long time, and you’re getting rewarded for your continued business.

    How do you earn a loyalty discount?

    You don’t have to do anything to earn a loyalty discount other than stay with a car insurance company that offers such a discount for a long time. Once you’ve been with the same company long enough, you’ll be given this discount.

    What companies offer loyalty discounts?

    Most of the major car insurance companies offer a loyalty discount, though each company has different requirements for it. Many smaller insurance companies also offer a loyalty discount, and it’s usually better, too.

    Is there a catch?

    Yes. Most of the time there is a catch to loyalty discounts. Car insurance companies use loyalty discounts to soften the blow of raising your rates. Studies have shown that the longer you stay with an insurance company, the less likely you are to leave them. Once a car insurance company thinks they have your business no matter what, they might take advantage of that and raise your rates. However, they’ll also offer you a loyalty discount, so that you pay less attention to the fact that your rates are getting raised.

    Should you reject a loyalty discount?

    Absolutely not, unless you have to sign a new contract to get the discount. If your rates are getting raised, then your rates are getting raised, with or without a loyalty discount. Let’s say that your rates are getting raised 25%, and the loyalty discount is for 10%. That results in your rates getting raised quite a bit, but not nearly as much as if they get raised by 25% with no discount. Rejecting a discount isn’t going to keep your rates from increasing.

    What to do if you’re given a loyalty discount

    If your car insurance company tells you you’re getting a loyalty discount, you'll want to check your policy and see if your rates are being raised. And then you want to start shopping around for new car insurance.
    Even if your insurer isn’t raising your rates yet, they’re probably gearing up to. It’s a good idea to change car insurance companies regularly, to maximize the good deals and get the best prices. If you find yourself getting a loyalty discount, take that as a reminder to move on to a new and more affordable insurance plan.

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