Woman near Exit signCar insurance companies care about keeping customers. To prevent you from straying, insurers offer a number of discounts, including ones that reward loyalty.

These loyalty discounts can be attractive. Nationwide, for one, says it may trim premiums by as much as 15 percent for someone who’s carried one of its policies for at least five years. GEICO says clients could see a 30 percent drop in their rates, depending on how long they’ve been with the company. Many carriers (especially the big ones) offer similar enticements.

But should loyalty rewards be the main reason you stay with one company?

Industry professionals say no, pointing out that while these renewal discounts can be valuable, they should be considered next to your overall coverage needs, the price you pay for them and other available discounts. Find the average car insurance rates in your city or town to find out what you can expect to pay.

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State Minimum: Required liability coverage to drive legally in your state; some states mandate additional coverage, such as personal injury protection, uninsured motorist, underinsured motorist. Liability Only 50/100/50: $50,000 per person/$100,000 maximum per accident for bodily injury; $50,000 for property damage. Liability pays for injuries/damage you cause others. Full Coverage 100/300/100: $100,000 per person/$300,000 maximum per accident for bodily injury; $100,000 for property damage; comprehensive and collision coverage with $500 deductible. Liability pays for injuries/damage you cause others. Comprehensive and collision pay for damage to your car.
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For  30  Year Old   Male  (Type:  Liability - Minimum )
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highest rate Highest Rate $68/mo.
lowest rate Lowest Rate $27/mo.
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90212 - Beverly Hills: $87
90210 - Beverly Hills: $87
91356 - Tarzana: $85
91203 - Glendale: $85
96094 - Weed: $35
95528 - Carlotta: $36
96027 - Etna: $36
96107 - Coleville: $36

“A loyalty discount for staying with your insurance company is nice, but it is just a discount — you shouldn’t stay with a car insurance company just because of it. If you’ve received bad customer service or believe you’re paying too much, go out there and shop for a new provider. By comparison shopping you may find cheaper rates even without receiving a loyalty discount.

A recent car insurance shopping study by the Texas Office of Public Insurance Counsel supports the idea that shopping for a new policy can lead to savings. A consumer who has stuck with the same car insurer for eight years could reduce the premium by 19 percent, on average, by switching, according to the report.

Michael Barry, the vice president of media relations for the Insurance Information Institute, says the III is neutral on loyalty rewards and other insurer discounts. Insurance is a very competitive business, he says, and firms use these provisions to keep policyholders while appealing to new ones.

Consumers should also examine policy details when shopping. Progressive, for instance, also includes service perks in its loyalty rewards program.

You can also get a transfer discount when switching carriers. Unlike a loyalty discount, this is usually offered only once, at the time of buying a policy. But loyalty discounts may kick in if you continue with the carrier.

Price optimization: Are insurers charging you more for staying loyal?

If you decide to stay with your current insurer, you should be aware of a practice called “price optimization.” Insurers sometimes use this little-known technique to penalize loyal auto insurance policyholders by charging them higher rates because the insurer believes they are unlikely to shop around for a better price. Some insurers try to predict who is less likely to switch companies by testing incremental price increases and then charging those customers more in order to squeeze out higher profits.

The practice is under review by some state insurance regulators, thanks to a report by the Consumer Federation of America (CFA). Insurance regulators in Florida have banned price optimization, while regulators in California and Ohio have issued warnings against it. New York and the National Association of Insurance Commissioners are investigating the tactic. Vermont Insurance Commissioner Susan Donegan recently directed all insurance companies to disclose any use of price optimization and highlighted the state’s prohibition on pricing techniques unrelated to risk.

Insurers, such as Allstate, have denied that they do this and maintain that their rates are based on risk factors and are legal and actuarially sound.

Going beyond loyalty rewards to save

Renewal rewards are just one of the car insurance discounts out there. There are several more — from those tied to safety features to bundling vehicle insurance with homeowners coverage. Here’s a rundown of what’s offered by most companies:

  • Safe driver: A clean driving record for a certain number of years — typically three — may snag a discount.
  • Good student: Full-time students with a “B” average usually qualify.
  • Driving classes: Young and older drivers who pass accredited courses can qualify. Many insurers accept online classes as well as those in the classroom.
  • Low mileage: A discount is usually for those driving less than 10,000 miles a year. The threshold may vary with insurers.
  • Anti-theft: You’ll probably get a rate break if your vehicle has anti-theft or recovery devices.
  • Safety features: Airbags and antilock brakes are among the safety features that will probably get you a discount.
  • Multi-car: Lower premiums typically come if you have more than one vehicle on the policy.

Be aware that some insurers limit the discounts you get for some coverages – your reduction total may be capped at a certain percentage, even if you qualify for all the discounts. Again, ask your insurer; they should tell you if discounts are capped.

A little research makes a lot of sense

Consumers should go beyond loyalty rewards and other discounts when buying insurance. Discounts are one thing to look at but you also need to look at customer service, consumer reviews, the financial stability of the company — and of course price.

Here are a few steps to help you find the right insurer:

  • What does your state department of insurance say? Every state has a department that regulates insurers and is designed to protect consumers. Most of these departments publish “consumer complaint ratios” on their websites, which usually show how many complaints an insurer receives per 1,000 coverage claims. Compare ratios from one company to the next. If your state department doesn’t have “consumer complaint ratios,” check other nearby states.
  • Is the company financially sound? Companies’ financial strength ratings are provided by Standard & Poor’s and A.M. Best, with both grading an insurer’s ability to pay out claims. Only consider companies with at least a B+ rating at A.M. Best and don’t go below a BBB for Standard & Poor’s. An insurer’s website may offer this information. Or search the Standard & Poor’s and A.M. Best sites.
  • Study satisfaction ratings. Consumer Reports, J.D. Power and other researchers frequently rate insurers. Consider companies that receive high marks. Also, Insure.com publishes customer satisfaction rankings that may be helpful.

— Mark Chalon Smith contributed to this story.

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Contributing Writer

Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions. When not writing, you can find her reading a book or watching anime.