In the past two weeks, car insurance companies have dropped out of the lucrative premium program, which gives car owners an extra $1,500 in cash per year.
The new policy, announced Thursday, is much more competitive and offers customers a higher percentage of their total cost of insurance, but it comes at a price: Premiums for cars in the first six months are $3,300, while cars in subsequent years are $7,300.
In California, where the policy is offered, those prices are $1.50 more for the first year, $2.00 more for each subsequent year and $4.50 per year thereafter.
Car insurance companies say the new policy offers more flexibility.
“This policy is designed to help customers save money by offering the flexibility of a lower annual premium and offering a lower percentage of the cost of a vehicle, so it is not a one-size-fits-all approach,” said Scott Kappel, a spokesman for Progressive, which is based in Los Angeles.
California law allows the state to waive its auto insurance requirements in the event of an emergency, including when the vehicle is parked at a gas station or in a parking lot, when there is a serious fire, and when a vehicle is involved in a collision.
This year, California also offers car insurance discounts to those who get coverage through an employer-sponsored plan, said Bill Jelosky, president of the California Association of Insurance Agents.
The new policy also includes a new car-insurance benefit, which provides up to $1 million in federal assistance for low-income drivers who have car insurance and don’t qualify for the state’s premium assistance program.
That’s up from $500 per year in 2017.
In the state, auto insurance companies are only required to cover one of the following vehicles: a motorcycle; a pick-up truck; a utility vehicle; or a pickup with a payload of up to 12,000 pounds.
As a result, the new insurance policy may not have as much impact on the rate of car ownership as it did two years ago.
Some California insurers have been making changes to their rates to offset the loss of the premium incentive, said Kristin Zalewski, an insurance broker at Kelley Blue Book.
However, her company said it will not offer this type of policy to anyone with pre-existing conditions.
While California’s insurance companies were dropping out of Premium Assistance last year, there were still hundreds of insurers offering this type in the state.
It’s unclear whether this new policy will help lower the state average rate.
Although California’s state and federal insurance programs are the largest in the nation, the industry is also growing, with a national average of 1,096 policies offered by about 2,200 companies in 2018, according to data from the National Association of Insurers.
According to the Association of American Insurers, premiums in the U.S. increased 1.7 percent in 2018 to $9,835 for the premium of a new vehicle.
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