Loyalty discounts reward long-time policyholders with lower car insurance premiums. These loyalty discounts can also increase over time. Some auto insurers offer higher loyalty savings for up to 6 years, depending on your current policy term and the state you live in.
Loyalty discounts on car insurance can vary in their amount and your eligibility. These discounts are intended to retain loyal customers and reduce churn. Still, loyalty discounts shouldn’t be the only reason to choose an insurance company. Our Experts recommend considering them along with your total cost of coverage, policy benefits, customer service, and other discounts. They should be an add on to get the best value on your car insurance policy.
What is a Car Insurance Loyalty Discount, and How Does It Work?
A loyalty discount is extra savings on their premiums that insurers give their policyholders for staying with their insurance company for a period of time. These auto insurance discounts encourage customer retention by providing savings to those who keep continuous coverage and don’t switch insurers. Typically, the longer you’re with an insurance company, the more money you save, with some companies increasing the discounts amount at each policy renewal.
How Do Loyalty Discounts Work?
Loyalty discounts are based on how long you’ve had an auto policy with the same insurance company. The discount is often applied automatically at policy renewal once you meet the eligibility criteria. However, some insurers may require a formal request. You must keep continuous coverage, and switching carriers resets the discount eligibility period.
What are the Different Types of Loyalty Discounts?
Car insurance companies offer several types of loyalty discounts that are listed below.
- Renewal Discounts: Some insurers offer fixed loyalty savings, like 10%, at each renewal. Others have legacy discounts for teens and young adults whose parents have had a policy for several years.
- Bundling Discounts: While not always called loyalty rewards, bundling multiple policies (auto, home, renters, or motorcycle insurance) with the same company can result in significant savings from 5% to 25%. This encourages consumers to purchase all their insurance coverage from one insurance provider.
- Additional Perks: In addition to loyalty savings, your current insurer may offer non-discount benefits for long-term customers. Accident forgiveness is a common benefit where the insurance company waives a premium increase after your first at-fault accident.
While loyalty discounts can save you money, they don’t guarantee the lowest car insurance rates. Car insurance rates can increase over time even with discounts. Always compare auto insurance quotes from several different companies to ensure you get the best rates and coverage options.
How Much Can You Save with a Car Insurance Loyalty Discount?
Loyalty Discount Savings are typically between 5% to 20% of your auto insurance premium, depending on the insurance company and your state. But calculating the actual savings is more complicated than that.
Several things affect the actual savings:
- State Regulations and Company Policies: Discounts and percentage reductions vary by state due to different insurance regulations. Each car insurer has its own rules and discount tiers.
- Discount Definitions and Marketing Practices: Some car insurers bundle or rebrand other offers—like a multi-policy discount—as customer loyalty discounts. This can create the illusion of extra value without a real, separate, loyalty-based discount.
- Length of Time with the Insurer: Real loyalty discounts often increase with the longer you stay with the same insurer. Longer commitments can mean higher savings.
- Non-Monetary Perks: Instead of or in addition to premium reductions, car insurance companies may offer loyalty program perks like accident forgiveness or priority claims service, which, while not direct savings, are added value.
How Can You Get a Loyalty Discount?
Qualifying for a car insurance loyalty discount—means maintaining continuous coverage with the same insurance provider for a while. The period can be anywhere from several months to several years. The exact duration you need to qualify-and the size of the insurance discount—varies depending on the insurer and where you live.
Some auto insurance companies offer loyalty discounts after a full year of uninterrupted coverage. Others may require two years or more before they’ll apply that benefit. And some even recognize the loyalty you built with your previous insurer when you switch providers. You can still get a discount if you’ve kept continuous coverage with your old insurer.
In most cases, loyalty discounts are automatically applied at policy renewal once you meet the eligibility requirements. Rules and availability can differ by state and company, so it’s always a good idea to check. Your insurance agent or customer service team can confirm your eligibility for you. You can also review your insurer’s website, log into their mobile app, or work with your agent to verify and apply any applicable loyalty discounts to your auto policy. That way, you can make sure you’re getting the full benefit you deserve.
When Should You Switch Car Insurance Companies?
Regularly reviewing your car insurance policy is key to having the right coverage at the right price. You should reassess your car insurance every six or twelve months, especially after big life changes like buying a new home or car, getting married or moving. These changes can affect your insurance coverage needs and may mean more savings.
Comparing quotes from multiple insurers is the best way to find savings. If you find another company offering the same coverage for less, it’s time to switch. Drivers who switch insurers save an average of $1,595 annually. Still, the exact amount depends on your driving history, vehicle, location, and coverage levels.
To get the most savings and avoid overpaying, review your policy and regularly compare car insurance quotes from other insurers. That way, you’ll have the coverage you need and the best price in the market.
Beware of Price Optimization by your Insurance Company
Price optimization is a pricing strategy used by some auto insurers to determine how much a customer is willing to pay before switching insurance providers. Instead of basing premium increases on risk factors or claims history, this approach uses consumer behavior data—especially loyalty patterns—to adjust rates for more profit.
In practice, insurers do this by offering small loyalty discounts while raising base rates, creating a buffer. For example, a company might increase your rate by 25% at renewal but give you a 10% loyalty discount, which looks like a 15% increase. But you’re still paying more overall.
Worse, insurers test incremental rate hikes to see which customers won’t shop around so they can charge those customers more and more over time. This penalizes loyalty, as long-term customers—seen as less price sensitive—end up subsidizing discounts or stable rates for new or price-conscious customers.
State insurance regulators have taken notice. A Consumer Federation of America (CFA) report has prompted several state insurance departments to investigate or act against price optimization. Florida has banned it, California and Ohio have warned insurance carriers. New York and the National Association of Insurance Commissioners (NAIC) are investigating it.
States that have banned Insurers from using Price Optimization
Loyalty to an insurer may seem like financial savvy, but consumers should know how price optimization works against them. Comparing rates regularly and being willing to switch providers can help protect against premium inflation disguised as customer retention.
States have banned the practice of price optimization by insurance companies are listed below:
- Alaska
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Indiana
- Maine
- Maryland
- Minnesota
- Missouri
- Montana
- Nevada
- Ohio
- Pennsylvania
- Rhode Island
- Vermont
- Virginia
- Washington
- Washington D.C. (District of Columbia)
More Car Insurance Discounts Beyond Loyalty Savings
While loyalty discounts are nice, they are just one of many savings opportunities available through car insurance companies. A more strategic approach to lowering your auto insurance premium is understanding the variety of discounts and evaluating your overall policy experience—service quality, pricing, and company reputation.
Some Other Common Car Insurance Discount Opportunities to Consider are listed below.
- Safe Driver Discount: You can often get a lower rate if you have a clean driving record—no accidents or violations for three years or more.
- Good Student Discount: Full-time students with a “B” average or higher may qualify for a considerable discount.
- Defensive Driving or Driver Education: Young drivers or seniors who complete an accredited driving course, in-person or online, can get a defensive driver discount.
- Low Mileage Discount: If you drive under 10,000 miles annually, many insurers will give you a lower rate (mileage thresholds vary).
- Vehicle Safety Features: Cars with airbags, anti-lock brakes, and electronic stability control qualify for safety discounts.
- Anti-Theft Devices: Vehicles with factory-installed or aftermarket anti theft deterrent systems get a rate reduction.
- Multi-Car Policy Discount: Insuring multiple vehicles under the same auto insurance policy often gives lower premiums.
- Multi-Policy or Bundling Discount: Combining auto insurance with other types of coverage, such as renters or homeowners insurance, can get you extra savings.
- Continuous Coverage: Keeping continuous insurance coverage helps you keep your loyalty discount and may give other loyalty-related benefits.
- Accident Forgiveness: Some insurers will forgive your first at-fault accident. This means your car insurance rate doesn’t increase after an accident if you meet your insurers requirements.
- Vanishing or Diminishing Deductible: If you remain accident-free, your deductible may decrease or go to zero over a period of time.
- Rate Lock: Some insurers offer programs that lock the price of your premium as long as you have continuous insurance coverage.
Important Note on Discount Limits
Insurers may cap the total discount applied to your insurance premium, regardless of how many you qualify for. Always check with your insurance provider to see if discount stacking is allowed.
The Bottom Line: Look Beyond Discounts
While accumulating discounts is smart, car insurance should be evaluated as a whole. Customer service quality, claims satisfaction, company reliability, and overall insurance costs are all critical for long-term happiness. If your insurer’s service is lacking or your rate is going up despite your good record, shopping around for cheaper car insurance quotes may get you better results without a loyalty discount.
Being loyal for a small customer retention discount may not be worth it if the service is terrible or better pricing is available elsewhere. Matching your coverage needs with competitive rates and a customer service oriented insurer will get you the best long-term value.
Frequently Asked Questions
How long must I be with an insurance company to get a loyalty discount?
Most auto insurers start offering loyalty discounts after 1 year of continuous insurance coverage, with additional benefits at 3, 5, or 10 years. These are rewards for long-term policyholders who have never had a break in their coverage.
Do all auto insurers offer loyalty discounts?
Not all insurers offer loyalty incentives. Availability, eligibility, and discount amounts vary significantly between insurance companies. So it’s best to compare across multiple insurance providers and check with each insurer for specific terms before you decide.
Can I combine a loyalty discount with other discounts?
Yes, most loyalty discounts can be combined with other common discounts, such as safe driving habits, bundling policies, academic performance, or vehicle safety features. Combining these savings can lead to big premium reductions.
How much can I save on car insurance with a loyalty discount?
Loyalty discounts usually offer 5% to 20% off the base premium. But the amount saved depends on how long you’ve been with the insurer and their discount program.
Is the loyalty discount applied automatically?
While many insurers apply the loyalty discount once you meet the qualifying criteria, checking with your insurance agent is best to avoid missing out on potential savings.
Are loyalty discounts always better than switching insurance companies?
Loyalty discounts can be a long-term value, but in some cases, switching to a new insurer can yield bigger immediate savings through lower base rates or promotional offers. Always compare quotes to ensure you’re getting the best coverage for your needs.