Is co-op auto insurance any good?

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Things to remember...

  • A co-op is a cooperative enterprise where a group of people works together for the common good of the group
  • Co-op car insurance offers an alternative to traditional auto insurance
  • Car insurance co-ops have lower overhead than traditional auto insurance companies because they do not have executives with bloated salaries
  • You must have a good driving record to join a car insurance co-op, and most of them do not offer discounts
  • Comparison shopping and conducting regular policy reviews helps you save money on your car insurance policy

A co-op is a group of people who work together for each other’s benefit. There are co-ops for many different things, including:

A car insurance co-op offers an alternative to buying auto insurance from a traditional company. However, not every driver qualifies to be a member of a car insurance co-op.

A co-op’s small size leaves it more vulnerable to risk than a traditional auto insurance company, so they usually don’t accept drivers with spotty driving records. Also, they rarely offer discounts on premiums, such as good student or multi-car discounts.

The following sections can help you decide if joining a car insurance co-op is right for you. They also provide information on how to ensure you get the best deal no matter what type of car insurance you choose.

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How Car Insurance Co-Ops Work


Car insurance co-ops operate differently from traditional auto insurance companies in a few important ways.

– Less Administrative Expenses

With traditional car insurance, customers’ premiums represent the company’s revenue. The company, like any business, pays its expenses from this revenue.

Some of these expenses are claims paid out to customers who have car accidents or otherwise receive vehicle damage.

However – and this is where traditional car insurance companies differ from co-ops – car insurers have a lot of overhead that isn’t directly related to paying claims for customers.

For one thing, traditional car insurance companies usually have the following employees who draw salaries:

  • executives
  • salespeople
  • a marketing staff
  • accountants
  • a host of other administrative employees

Their headquarters are housed in big, fancy office buildings in urban centers. They run expensive ads on TV and the radio.

Someone has to pay all these expenses, and it ends up being the customers in the form of higher premiums.

That said, the average customer’s share of their car insurance company’s administrative expenses is small due to the sheer number of customers most of these companies have.

Co-ops collect premiums just as traditional car insurance companies do, and they also pay out claims. But aside from a few employees vital to their operations, such as adjusters, they have none of the administrative expenses of traditional car insurance companies.

Rather than high-paid C-level executives, co-ops vote on a board of members (or customers) to make decisions on behalf of the group.

– Not for Profit

Another important difference: traditional car insurance companies are for-profit enterprises that exist to make money. Co-ops do not care about making money and only want to cover their expenses.

So they only charge enough in premiums to cover what they expect to pay in claims.

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Is joining a car insurance co-op a good idea?

The benefit of joining a car insurance co-op is that little to none of your premium dollars will be used to pay expenses that don’t directly benefit members of the group but this doesn’t necessarily mean you’ll pay lower premiums with a co-op.

And if you can pay less with a traditional car insurance company, does it matter that a dollar or two of your premium payment goes toward the CEO’s beach house?

– No Discounts

Traditional auto insurance companies offer the opportunity to receive several discounts on your premiums. Some of the more common car insurance discounts include the following:

  • Good student discounts
  • Multi-car discounts
  • Multi-line discounts
  • Anti-theft protection discounts
  • Accident-free discounts
  • Military discounts

By combining a few of these discounts together, you might be able to reduce your car insurance premiums substantially. But you’ll only get these discounts with a traditional car insurance company.

Few, if any, car insurance co-ops offer discounts. And because they only accept drivers with good records, you don’t get any benefits for remaining accident-free. Little variation exists in what auto insurance co-op members pay.

– Good Drivers Only

Traditional car insurance companies are huge and bring in a lot of revenue each year. They have thousands of customers who pay their premiums every month but never file a claim.

These good customers give them a nice cushion to take a chance on drivers with less-than-perfect records. Such drivers pay higher premiums, but ultimately, their insurance costs are still subsidized to some degree by the drivers who pay premiums but never file claims.

Even if your driving record is shaky, you can find a traditional company willing to ensure you.

Auto insurance co-ops don’t have the luxury of taking a chance on people with imperfect driving records. Co-ops are usually small and don’t have thousands of members.

So if a co-op has a member it has to pay out on at an excessive level compared to the premiums received from that member, the co-op can encounter solvency issues. Co-ops tend to accept only drivers with good records.

Getting a Good Car Insurance Deal


Even if you decide a co-op isn’t for you or you don’t qualify for one, you can get a great deal from a traditional car insurance company. Doing so requires that you shop around between several companies and review your coverage every six months.

Also, don’t just consider the price. Look at the amount of coverage you’re receiving and any perks that the company offers. Check out each company’s Better Business Bureau rating to see what other customers think about doing business with them.

Enter your zip code into our free comparison tool below to find the best rate for the car insurance you need.

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