Why is GEICO so cheap?

This question is about GEICO

Merrill Burchell, Senior Finance Writer

@merrill_burchell 02/05/20 First posted on 07/01/19
Last reviewed on 02/05/20

GEICO is cheap because it sells insurance directly to consumers and offers a lot of discounts. GEICO is not the cheapest insurer out there, though. For example, GEICO ranks 21^st for the cheapest car insurance among 46 major companies, based on WalletHub’s 2019 GEICO car insurance review. Competitors like Esurance and Progressive are actually a bit cheaper overall.

Still, GEICO is pretty cheap relative to many other major insurance providers, and there are good reasons for that.

GEICO is cheap for many consumers because it offers a wider variety of discounts than many major providers. There are GEICO discounts based on a driver’s history and habits on the road as well as any affiliation they have with 800+ eligible organizations, including the federal government. You can also get discounts for taking a driver’s education course or making your payments electronically. GEICO offers a number of discounts for having a car with certain safety equipment, too, such as “passive restraint” seat belts and anti-lock brakes. Most consumers qualify for more than one discount, which helps to lower the overall cost of their premiums.

The fact that it sells insurance directly to consumers is another big reason why GEICO is so cheap. This eliminates the cost of middlemen. GEICO has significantly fewer local offices and agents than companies like State Farm and Allstate, limiting agents to high-population areas only. Having a smaller agent network gives GEICO savings it can pass on to its policyholders.

GEICO started with direct phone sales but has grown rapidly in the 21^st century by developing easy-to-use sales technology. In fact, GEICO focuses today on keeping their rates low by investing in, and beating the competition in, technology that helps reduce manhours, minimize their cost of selling and increase convenience to consumers. Today, you can use GEICO’s advanced website or mobile app to easily find information on insurance or get a personalized quote. You also can check rates and get help with coverage and discount decisions on GEICO’s apps for Amazon Alexa and Google Home.

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People also ask

Does Geico offer accident forgiveness?

Yes, Geico offers accident forgiveness in 47 states and the District of Columbia, with the exceptions being California, Connecticut, and Massachusetts. Geico accident forgiveness protects you from increases to your car insurance premium after your first at-fault accident. The accident forgiveness feature may only be used once. How much your premium would rise without accident forgiveness depends on your state, driving record and claim payment amount. The increase could range from 2% to 50%, or even more for a bodily injury claim.… read full answer

There are two ways to get Geico accident forgiveness. The first is to earn it as a free upgrade to your Geico car insurance policy. Policyholders who are 21 years of age or older can earn the upgrade by being accident-free for at least five years.

The second way to get Geico accident forgiveness is to purchase accident forgiveness as a supplemental coverage option. To purchase this protection, policyholders must meet minimum driving-record requirements. However, Geico does not specify what these minimum requirements are on its website, as the rules and coverage terms vary by state.

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Who owns GEICO car insurance?

Berkshire Hathaway Inc. owns GEICO. Berkshire Hathaway, led by well-known investor Warren Buffett, is a multinational conglomerate holding company headquartered in Omaha, Nebraska.

Warren Buffett has owned shares of GEICO stock since 1951, after an impromptu visit to the auto insurer’s headquarters. He made a second stock purchase, reportedly of a million shares, in 1976. Twenty years later, impressed with the direction that GEICO was heading, Buffett’s holding company made a $2.3 billion cash offer to buy all the GEICO shares that Buffett did not already own. As a result, GEICO became a subsidiary of Berkshire Hathaway in 1996.… read full answer

GEICO Corporation is headquartered in Washington D.C., and Warren Buffet serves on its board of directors.

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Are GEICO insurance rates competitive?

GEICO insurance rates are very competitive, ranking 2^nd overall (behind only Progressive) in WalletHub’s 2019 Cheap Car Insurance Study. The study compared 46 major car insurance companies for a variety of driver profiles. This means GEICO’s rates tend to be lower than those charged by State Farm, Allstate, Nationwide, Travelers, and other popular auto insurers.… read full answer

Individual results may vary, however. The rates GEICO quotes you are based on your driving record and experience, along with your location, credit score (in some states), vehicle age, and vehicle equipment. Your coverage and deductible choices matter, too.

GEICO tends to have relatively low rates for new drivers and those with less-than-perfect driving records. The following chart shows how GEICO ranks among 46 U.S. auto insurers in terms of monthly costs for different types of drivers. Learn more about how we obtained these sample quotes in the Methodology section of our 2019 GEICO Car Insurance Review.

Sample GEICO Car Insurance Rates:

Age	Clean Driving Record Cost	Rank	Poor Driving Record	Rank
20-24	$312 / month	5	$388 / month	5
30-34	$254 / month	15	$314 / month	10
45-49	$259 / month	22	$327 / month	15

Those quotes don’t take into account GEICO’s various discounts. GEICO offers impressive discounts for having multiple policies and certain vehicle safety equipment, for example. But it doesn’t have “green car” or loyalty discounts, unlike some of its competitors.

At the end of the day, knowing that GEICO ranks among the cheapest major auto insurers provides a helpful starting point as you shop for auto insurance. But the best option will be the one that gives you the coverage you need, plus excellent service, at a price that fits within your budget.

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