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Should you get your car insurance from Costco?

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Should you get your car insurance from Costco?
Should you get your car insurance from Costco?

Proving once and for all you can find everything at Costco, the big-box retailer does indeed offer auto insurance exclusive to its loyal members.

The company promises a range of exclusive discounts and benefits, potentially saving drivers hundreds of dollars a year.

But even though Costco can be trusted to provide great deals on everything from printer paper to produce, it’s fair to ask whether a discount club is the best place to buy such critical protection.

For some club members, Costco car insurance could really be the most affordable option out there — but they may end up paying in other ways.

How Costco car insurance works

Busy mature man sitting in living room talking on mobile phone and making notes.
antoniodiaz / Shutterstock

Costco members in most states can lock in discounted auto insurance policies through the big-box store. The key word here is through.

Costco doesn’t issue insurance policies directly. Instead, the policies 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.

Quotes are available through Costco’s website or over the phone.

And it appears plenty of people are taking the company up on those quotes. Costco says more than 400,000 of its members have switched over their auto insurance to CONNECT.

What’s included in Costco car insurance

automobile windshield glass repair service.
Dmitry Kalinovsky / Shutterstock

Although Costco markets the product 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.

And like other insurers, CONNECT offers a range of discounts for things like safe driving; taking a driver’s ed course; installing safety features like anti-theft devices and airbags; parking overnight in a garage; being a good student; insuring multiple cars or bundling with home or umbrella insurance and being a long-term customer.

Policies purchased through Costco also unlock a few extra perks, like:

  • 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, 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.

The pros of Costco car insurance

Couple Using Calculator For Calculating Bills  On Desk At Home. Seen From Above.
Andrey_Popov / Shutterstock

The biggest selling point to this insurance product is its affordability.

Costco boasts its members have saved an average of $581.89 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 89% of policyholders reported being highly satisfied in a 2019 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.

The cons of Costco car insurance

Driver Making Phone Call After Traffic Accident
Monkey Business Images / Shutterstock

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.

Last year, American Family Insurance 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.

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, Rhode Island or West Virginia. 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.

What’s the right choice?

Thoughtful mature woman in eyeglasses with laptop, looking in distance.
ThirtyPlus / Shutterstock

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. You can use the same trick with home insurance, too, if only to make sure you’re not drastically overpaying.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.