Costco doesn’t issue insurance policies directly. Instead, the policies they offer are underwritten by American Family Insurance under the brand name CONNECT.
American Family, previously known as Ameriprise Auto & Home Insurance, has been providing Costco members with insurance for nearly 20 years.
In addition to auto insurance coverage, CONNECT offers home, renters, specialty and umbrella insurance.
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How does Costco car insurance work?
Costco members in most states can lock in discounted auto insurance policies through the big-box store. The key word here is through.
Costco car insurance quotes are available through the store’s website or over the phone.
And it appears plenty of people are taking the company up on those quotes. Costco says more than 500,000 of its members have switched over their auto insurance to CONNECT.
Costco car insurance coverage
Although Costco markets their insurance as a less expensive alternative, CONNECT still offers the standard coverage options drivers would expect from their insurance company.
That includes liability, collision and comprehensive coverage as well as medical coverage and personal injury protection.
Upfront, Costco members get a discount “simply for [their] affinity to Costco” — though the size of that discount isn’t mentioned. Other discounts are available as well.
Additional coverage with Costco car insurance
Policies purchased through Costco also unlock a few extra coverage benefits.
- Windshield repair. Policyholders can claim any repairs (but not replacements) for chips without having to pay the deductible.
- Roadside assistance for executive members. Up to $75 of coverage per occurance, not including the cost of a battery or fluids.
- Lifetime renewability 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 Costco won’t cancel their policy for minor accidents or violations.
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Benefits of Costco car insurance
The biggest selling point to this insurance product is its affordability.
Costco boasts its members have saved an average of $587.17 in the first year they switched to CONNECT. And a few independent surveys back up the notion that it’s generally cheaper than the big nationwide 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 won’t see any savings at all.
When it comes to insurance, how much each policyholder pays depends on a huge assortment of factors, including their credit score, marital status, education level and ZIP code. And each company weighs those factors differently.
That being said, most customers who’ve stuck with the company seem happy with the coverage and pricing of CONNECT policies. Costco says nearly nine out of 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 has an “A” rating from the credit agency A.M. Best, meaning it’s financially strong, stable and its operating performance is sound.
Auto insurance discounts
Costco members who purchase a CONNECT car insurance policy are eligible for discounts as well. While additional perks like Roadside Assistance and Lifetime Renewability are for Executive Members, all members are eligible for other auto discounts.
Premier safety discount: Reserved for those with a spotless driving record.
Good driver discount: Currently, this discount is only available to policyholders in California.
Defensive driver discount: Drives can complete a 'refresher' course with any state DMV-approved or accredited organization.
Vehicle safety feature discount: For drivers whose cars have safety features like anti-lock brakes, air bags, anti-theft device and automatic seatbelts.
Garaging discount: Parking in a garage overnight could make you eligible to receive this discount. It's not available in all areas, so be sure to ask your insurance representative.
Student away discount: For any student attending school that is more than 100 miles away from home, this discount is for you.
Multi-car discount: Discount open to customers that insure more than one vehicle.
Multi-product discount: Bundle your auto insurance with another insurance policy and save.
Tenure discount: A loyalty discount that kicks in when you reach certain time-related milestones.
Drawbacks of Costco car insurance
Even if the price puts a smile on your face, the difficulty of making a claim could leave you snarling.
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 baseline is 1.0, so a company with a 2.0 rating received double the number of complaints you might expect.
In 2020, American Family CONNECT Insurance Company got a 6.31 rating from the NAIC, meaning it received more than six times the average number of complaints for an insurer its size. Last year, that improved to a 2.15 rating.
Meanwhile, the related American Family CONNECT Property and Casualty Insurance Company received ratings of 3.0 and above.
On top of that, American Family does insurance the old-fashioned way — meaning it doesn’t offer users an app to file claims or reach customer support. Although you can report certain losses online, generally you’ll have to initiate the claims process over the phone.
Even if that sounds like an acceptable trade off, you might not be able to take advantage.
CONNECT says it doesn’t 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 drivers in Massachusetts must be executive members to get the exclusive Costco discount.
Is Costco car insurance worth it?
If you’re already a Costco executive member, there’s a good chance getting your car insurance through the discount club could provide significant savings.
But if you’re worried about customer service — and adding more complaints to the stack at American Family — it’s worth exploring a few other options. After all, big-box shopping isn’t the only way to get a sizable 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 boost your score and see whether that unlocks better rates.
One of the easiest ways to improve your credit score is to deal with any troublesome debt you’re carrying from month to month.
Finally, the most powerful way to reduce your premiums is to simply shop around for better rates. As mentioned earlier, even though insurers look at the same information to come up with a premium, they all use their own calculations.
That’s why the Insurance Information Institute recommends comparing at least three quotes before settling on the right offer for you.
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Life with pets is unpredictable, but there are ways to prepare for the unexpected.
Embrace Pet Insurance offers coverage for treatment of accidents, illnesses, prescriptions drugs, emergency care and more.
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