And you might already be a fan of Costco's Top Tier gas for your car. But did you know that in addition to homeowners insurance, Costco members can go through the company for their car insurance needs? Before you get car insurance through the wholesale retailer, here are five things to know:
1. Costco Won’t Actually Be Your Insurer
I've written in detail about how car insurance works. Here's the gist: You pay an insurer a monthly or annual premium, and the insurer offers you financial protection if you're in an accident down the line.
With this in mind, Costco doesn't actually offer insurance. You won't pay Costco premiums and Costco won't be who you will call to file a claim. Instead, Costco acts as an insurance facilitator by linking its members with CONNECT Insurance, which is a subsidiary of American Family Insurance (AmFam).
To qualify for car insurance through Costco, you need to be a Costco member. A basic membership is $60 annually, or you can get an executive membership for $120 a year. Then — if you buy insurance through Costco — your insurer will be CONNECT.
When it comes to how CONNECT performs as an insurer, here are a couple of things to know:
- According to A.M. Best, CONNECT's financial strength rating is an "A," which is considered excellent. A.M. Best says this rating means CONNECT has, "an excellent ability to meet their ongoing insurance obligations."
- The National Association of Insurance Commissioners (NAIC) gave CONNECT a complaint index score of 2.16 on its 2023 Complaint Trend report. According to the NAIC, "The National Complaint Index is always 1.00. This means a company with a complaint index of 2.00 has a complaint index that is twice as high as expected in the market."
- Even though NAIC ranks CONNECT as having a higher-than-expected number of complaints, they only received two complaints in 2023 while collecting over 40 million in premiums. Even two of money expert Clark Howard's favorite insurers, Amica and USAA, ranked at 2.40 and 1.27 respectively.
Remember: Once you sign up for car insurance through Costco, you'll be dealing with CONNECT for all your insurance-related needs. So, it's worth looking into how CONNECT performs when it comes to overall customer satisfaction and claims handling.
2. All the Standard Auto Insurance Coverages Are Available
When it comes to coverage, CONNECT offers all the standard options as other insurers. This includes:
- Comprehensive: pays for damages to your vehicle caused by events other than an accident (ex: you hit an animal or your car is damaged by a weather-related event)
- Collision: pays for damages to your vehicle after an accident, regardless of who's at fault
- Bodily Injury: as part of their liability coverage, this pays for damages, losses and/or injuries to others resulting from an accident you caused
- Property Damage: as part of their liability coverage, pays for damages, losses and/or injuries to others' property resulting from an accident you caused
- Uninsured Motorist: pays for damages, losses and/or injuries to you and your vehicle resulting from an accident caused by an uninsured driver
- Medical Expense: pays medical expenses for you and your passengers after an accident, regardless of who's at fault
- Personal Injury Protection (PIP): pays for your medical-related expenses and certain financial losses after an accident, regardless of who's at fault (ex: medical bills and lost wages)
You can also choose from several add-ons like roadside assistance and towing. But money expert Clark Howard doesn't recommend getting roadside assistance from your insurer.
CONNECT also offers rental car insurance to cover rentals when your car is out of commission. And you can get gap insurance through CONNECT. We've got a guide to help figure out whether gap insurance is worth it for you.
3. They Offer Additional Benefits to Costco Members
In addition to standard coverage options, Costco members may have access to additional benefits with a CONNECT auto insurance policy. Here are a few:
- Accident Travel Expense Coverage: provides members with financial support for "travel or accommodation" if members are in an accident more than 100 miles from home
- Stolen Key Coverage: members with comprehensive coverage can get car locks replaced if their car keys are stolen; policy deductible is waived if replacement costs less than $250
- Windshield Repair: if your windshield needs to be repaired — replacements don't qualify — you can use the Glass Repair Deductible Waiver, which allows you to skip paying your deductible first
CONNECT also offers members "hassle free claims." The company says their goal is to, "make our claims process as pain-free as possible." As part of this pain-free process, members can report an accident 24/7, expect to be contacted within 24 hours of reporting a claim, and choose where they want their car repaired.
As you can see, each of these benefits has criteria that must be met. For example, if you don’t have comprehensive coverage then you don’t get stolen key coverage. And depending on where you live, benefits may vary.
4. Members May Save Money With Standard Auto Insurance Discounts
I’ve yet to find an auto insurer that doesn’t offer discounts to its members. As expected, CONNECT has a list of ways that members can save money on car insurance. Their offerings are typical for the auto industry, and include discounts such as:
- Defensive Driver: discount for completing an accredited defensive driver course
- Garaging: discount for members who park their vehicles in a garage overnight
- Good Student: discount for full-time students who meet certain grade-related academic qualifications
- Multi-Car: discount for insuring more than one vehicle with CONNECT
- Multi-product: discount for "bundling," or having multiple types of insurance (ex: auto and homeowners) through CONNECT
- Premier Safety: discount for policyholders with "spotless records;" requires no accidents, claims or traffic violations for a four-year period
- Student Away: discount for student drivers who are away at school and only using the insured vehicle on weekends, vacations, or other limited periods throughout the school year
- Tenure: discount for being a CONNECT policyholder for an unspecified, set period of time; CONNECT says you qualify, "when you reach certain time-related milestones"
- Vehicle Safety Features: discount for cars with specified safety features (ex: airbags, anti-theft devices, anti-lock brakes, etc.)
California residents also may qualify for a Good Driver Discount, which is awarded to members who have a history of safe driving. You might also qualify for a College Degree Discount if you have a bachelor's degree or higher. This discount isn't listed on the CONNECT website's discount page, but it was an option for me when I got a quote for coverage.
5. It’s Still Worth Shopping Around To Get the Best Deal on Coverage
In the world of auto insurance, there are so many factors that influence what you pay. Some of those factors — your driving history, the car you drive, how high you set your deductible, etc. — are in your control. But at the end of the day, insurance companies often weigh these factors differently. As a result, your insurance rate may vary greatly across multiple insurers.
For me, CONNECT doesn't offer the best deal. To see if they'll offer the best rate for you, you have to get a quote from CONNECT and other companies. We've got a guide on how to shop around for car insurance to get you started. And even if you're not a Costco member, you can still get a quote from CONNECT to see how much you could save.
Final Thoughts
Costco is known for offering members savings on just about everything. But car insurance might be an exception. For one, Costco doesn’t technically sell insurance. If you sign up for car insurance through Costco, you will be insured by CONNECT, which is backed by American Family Insurance.
Another thing worth noting is that most of what CONNECT offers members — from coverage to discounts — can be found with other insurers. So, the only way to find out if this “deal” is a good one for you is to shop around and compare quotes.
And even if CONNECT offers the lowest rate, remember this: The “best” insurance isn’t necessarily the same as the insurance company offering the lowest rates. Make sure you are comparing equal amounts of coverage from any company you consider. Then, be sure to take time to read reviews on how the company handles claims. Clark says:
“Sometimes you’re better off paying a little more to be with a quality insurer who will be there when the chips are down.”
We've got a list of some of the best car insurance companies — backed by data on claims handling — when you're ready to start shopping around!
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