Auto insurance is typically a great way to save money, but a recent study by Nationwide Insurance says that it may not always be the best way.
“The bottom line is, there are some circumstances where the cost of an auto insurance policy may be lower than what you would expect based on the size of your vehicle, the age of the vehicle, and other factors,” Nationwide Insurance’s senior vice president of risk and risk management, John V. Vickers, wrote in a blog post.
“But in many other circumstances, the cost to you may be greater than what your insurer is reimbursing for the same risk.”
Nationwide said it examined more than 12 million claims and found that the average premium paid in 2014 was $1,521.
Nationwide said most of those claims were for small vehicles that have more than 3,000 miles of range.
Nationwide estimates that there are more than 6 million drivers who use their auto insurance policies on a monthly basis, but it says that those are likely the same drivers who may not have insurance at all.
Nationwide found that a single-vehicle policy with no coverage limits is likely to cost about $1.20 more than a two-vehicles-per-month policy, while a two car-per $1 insurance plan would cost about the same.
Nationwide also found that some auto insurance rates have dropped considerably over the past few years.
Nationwide’s data showed that a two months of auto insurance in the first three months of 2015 was about $3,000, while it dropped to about $2,000 in the second and third months.
Nationwide says its analysis shows that if the average driver pays $100 per month for a two month policy, and that premium increases to $1 at the end of the year, the average monthly cost would be $1; that is, an average driver would save about $4,000 on their insurance over a year.
For drivers who get a two year policy, the annual cost would rise to $4.20 per month, while an average insurance rate would drop to $2.50.
Nationwide has posted similar analysis for car insurance.
“This analysis shows drivers will typically pay $1 to $3 more per month than they would have paid with a two or three-month policies, if the annual premium increases,” Vickers wrote.
Nationwide Insurance, which has more than 1.2 million insured vehicles nationwide, said the data is a result of its analysis of about 15 million claims from its insurance database.
Nationwide spokesman Andrew Kloos said Nationwide is not comparing its data to the data for auto insurance providers.
Nationwide is also looking at the cost for a collision policy, but Kloo said it doesn’t make a case for that option because it is not a guaranteed way to reduce your claim.
“If you’re going to go with collision insurance, there’s no benefit in having an auto policy with collision,” Klooss said.
“It’s an expense.”
Nationwide Insurance is not the only insurer to make such comparisons.
AARP, which represents auto insurance agents and other insurance professionals, is looking at auto insurance premiums for consumers in a similar way.
In 2014, AARP found that consumers paid an average of $2 per month on their auto policy, according to a blog article.
A recent AARP survey found that 55% of consumers said they would not pay more for insurance.
Nationwide and AARP did not respond to questions about whether their surveys had shown higher or lower rates than those in Nationwide’s analysis.