Paying too much for car insurance? Or even wonder how personal car insurance relates to rental cars? Well, the vast majority of car renters rely on personal car insurance policies (sometimes unintentionally). While we speak about many of the considerations of insurance in our Primer on Rental Car Insurance, many renters who don't read insurance policies and terms every day forget that personal automobile policies are a common part of the rental car coverage equation. When a credit card provides secondary coverage for damage to a rental car, where does the primary coverage come from? That's right, a renter's personal automotive policy. And even if damage to a rental car is covered via primary coverage on a limited number of credit cards, what happens when a rental car driver causes that rare major accident. Who covers the liability to other people, vehicles, and property? Rentals in California don't include any liability coverage at all, and rental car companies in other states tend to only provide the minimum liability coverage required by law -- that personal automobile policy comes into play again. And while that personal policy is critical, no one wants to pay too much for insurance. Yet many of us will.
Gabi is a start-up insurance broker that is currently only licensed in the State of California. Their service promises to take a customer's current insurance bill and compare to other providers to see if there's the possibility of saving on equivalent service with other providers, much like Progressive Insurance and similar to what we do for car rentals here at AutoSlash. However, Gabi is a licensed insurance company, so they do become a customer's insurance agent if the driver switches providers -- AutoSlash just finds the deals at major rental car companies.
The company used their existing customer data to conduct a study to find which customers had the highest probability of being able to save money, and how much money. They found that most customers were overpaying for insurance coverage -- for instance, more than 3/4ths of all customers with Travelers, SAFECO, State Farm, Nationwide, and Farmers could save on their insurance premiums with identical coverage at a competitor. Customers with Ameriprise and GEICO were least likely to be overpaying, as "only" 1/3rd at each company could save money by switching insurance providers. Overall, the company found that the average driver requesting quotes could save $466 per year by switching car insurance companies, where Gabi becomes the insurance agent of record.
Those are some sizable savings, even in the State of California, where drivers have long been charged some of the highest insurance premiums in the nation. The average driver in California already expects to pay $1,673 per year for car insurance, where the "average driver" doesn't look very different than most of the AutoSlash team (our credit's much better than "good", though).
Rates are based on full coverage for a single, 40-year-old male who commutes 12 miles to work each day, with policy limits of 100/300/50 ($100,000 for injury liability for one person, $300,000 for all injuries and $50,000 for property damage in an accident) and a $500 deductible on collision and comprehensive coverage. The hypothetical driver has a clean record and good credit. The rate includes uninsured motorist coverage. Actual consumer rates will depend on individual driver factors.
The ability for the average Gabi user to save $466 by switching car insurance providers? That's real money that could be put toward many future AutoSlash rentals! Personal automobile insurance is a major financial commitment that we understand is really important -- for both our personal vehicles and rental cars -- and yet many of us pretend it's a Showtime Rotisserie.
"Set It and Forget It" doesn't work for car insurance.
Why Do So Many Overpay?
Gabi says that the reason for overpaying is a lack of transparency, where it's hard for users to compare among reputable insurance companies. In reality, it's what an economist would call a "switching cost". Many drivers know that they could save on insurance but there are time and mental effort required to research the costs. When it comes to fun family activities, "research insurance" tends to be near the bottom of the list, right by "schedule that root canal". So instead of periodically putting effort into finding the lowest rates on insurance, drivers don't think about switching until something becomes untenable.
Even though we help renters find lower rates on their rental cars every day, we admit to getting caught by switching costs and inertia on our own insurance policies. I've been insured by one organization since 1995. I went 21 years with periodic "negotiations" with the organization when rates tried to creep up, never requesting quotes from another provider until a 20% combined homeowners/auto increase was proposed last year. That led to a switch on homeowners insurance to my local Farm Bureau and a threat to leave the auto insurance policy that had been in place for decades without a traffic infraction or accident. The company then found a "special new Tennessee rating system" that produced an acceptable rate -- while I would love to see that $466 per year decrease the average Gabi user might experience in California (my insurance would be $4 per month), I drive like the old man I've become when I'm not doing donuts or on a skid pad.
Insurance premiums are set based upon presumed risk, and there's no single "cheapest insurer". Rather than allowing a car insurance provider to eat up a sizable chunk of our own budgets without question, it's important to know that insurance is a service that might be available for a lower cost from another provider. Saving money on auto insurance might pay for future car rentals, and those personal policies just might bail us out on a rental car if something goes wrong along the way.
Ready to rent your next rental car? Read your insurance policies (personal and credit card) to see what's covered, then request your car quote below. We'll search discounts among all the major providers and then send the best possible rates within minutes!