Could Costco's Car Insurance Save You Money?

Costco members who are sick of paying high premiums on car insurance might want to look to their favorite warehouse retailer for some savings. While Costco itself doesn't underwrite insurance policies, it offers discounted rates through CONNECT, an insurance company that's backed by American Family Insurance. 

How does Costco insurance work and are its rates lower than those of the best car insurance companies? Let's take a look at what makes Costco car insurance unique and whether it's worth buying. 

Costco members get an exclusive discount  

Perhaps the biggest perk to buying car insurance through Costco is that you get an automatic discount simply for being a Costco member. This is extra savings you won't find anywhere else and can be combined with other traditional discounts, like safe driving, paperless billing, and multiple policies. 

According to Costco, that extra discount helps most members save about $595.86 in their first year when they switch to CONNECT. That's about $50 of savings per month. Indeed, the insurance site The Zebra went even further and found that Costco was cheaper than seven major companies, including:  

• Allstate
• Farmers
• GEICO
• Nationwide
• Progressive
• State Farm 
• USAA

The highest average annual premium among these companies was Farmer's at $2,790. Costco's average came in at $1,069 -- about $1,700 cheaper. 

Of course, these are averages and not price tags. What you pay for car insurance will depend on your driving record, address, car, and coverage. Even if Costco has the cheapest average annual premium, it's still worth comparing its quote with other car insurance companies, just to make sure you're getting the best price.

Costco will throw in some extra perks 

In addition to cheap car insurance, Costco will also throw in some bonus perks, like windshield repair (also called "Glass Repair Deductible Waiver"). If your windshield is damaged but repairable, this policy will cover the repairs without making you pay a deductible. The policy covers up to $1,000 in damages and can be used twice in a 12-month period. 

Executive members also get some exclusive perks. These include:

• Roadside assistance: Executive members will be compensated up to $75 of what they spend on towing or other services when they're stranded on the road, whether from dead batteries, flat tires, or locked keys. 
• Lifetime renewability: If you ever get into a car accident, rest assured that CONNECT cannot drop your coverage with lifetime renewability. As long as you pay your insurance bills on time, don't have major traffic violations, and don't live in Maryland or Maine, you're guaranteed continuous coverage. 

Costco car insurance is cheap, but CONNECT's customer service is questionable 

One potential downside to Costco car insurance is that CONNECT's customer service doesn't have glowing reviews. The company has a 1.27 out of 5 on its BBB profile (out of 88 reviews), with 41 complaints in the last 12 months. 

Looking at the parent company -- American Family -- the situation is hardly brighter. While Costco itself claims that roughly 89% of its members were satisfied with its car insurance, American Family's National Complaint Index -- which measures how many complaints an insurance company receives to its share of market premiums -- is fairly high. Its NAIC is currently at 4.74, which means it receives more than 4 times the volume of complaints compared to the market. For perspective, GEICO's NAIC is 1.21. 

That might not be a dealbreaker. But as someone who has just gone through a lengthy auto insurance claims process, I can testify that having great customer service when you need it is sometimes more important than saving money. 

At the end of the day, if price is most important to you, it's worth getting a free quote to see how much Costco's car insurance could save you. I wouldn't assume Costco's car insurance is the best value, but depending on your circumstances, it could save you money.