How the Widow Penalty Affects Auto Insurance Rates

A person who drives a red sports car is likely to have a higher premium than someone who drives a minivan. And novice teenagers generally pay more than adults who have more years behind the wheel. That’s because auto insurance companies are allowed to charge different prices to different groups, as long as they have data to prove that one group is higher risk.

But some critics say that single drivers are unfairly charged more than their married counterparts, and that a so-called “widow’s penalty” punishes drivers who spouse's have died.

A 2015 study by the Consumer Federation of America found that most major auto insurers charge policyholders different prices based on marital status, and when a spouse dies, the surviving partner will usually see rates go up. The study found that at most major insurance companies, rates are almost always higher for single, separated and divorced drivers than for married drivers, and that the price differences seem to exist at all age levels.

Married drivers can save on car insurance

“Generally speaking, if you’re not married, your auto insurance is going to be about 20 percent higher, even if you’ve got a perfect driving record,” says Doug Heller, insurance expert with the Consumer Federation of America.

The Consumer Federation found that based on testing around the country, premiums jumped by an average of 20 percent for people who told their insurance companies that they were widowed.

“It’s not consistent across the country and from company to company, but often times we see higher increases for people who are single, and even higher increases for people who are single or divorced,” Heller says.

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Some industry experts defend the practice as being a function of risk assessment. Michael Barry, spokesman for the Insurance Information Institute, explains that insurers take into account a host of factors when determining an individual’s premium, and that being single doesn’t instantly produce high rates.

“Marital status is one of dozens of state insurance department-approved variables that an auto insurer uses when pricing a policy, so no driver needs to get married in order to reduce their auto insurance costs,” Barry says.

He explains that auto insurers also offer low-mileage discounts, as well as discounts to drivers who successfully complete defensive driving courses. A clean driving record and solid credit score can also help lower insurance costs.

Auto insurers offer discounts to married drivers because a driver’s marital status, to many insurers, is indicative to the probability that a driver will file a claim, Barry says.

“Insurers use underwriting criteria that directly correlate with losses,” he says.

States fight insurance penalties

Some states have come out to take a stand against the so-called widow’s penalty. In September 2015, Pennsylvania’s insurance commissioner issued a statement announcing she would not approve auto insurance policies if the insurer cannot provide “statistical support for including widows and widowers in the higher single rate category.”

Also last year, Delaware’s insurance commissioner came forth with a similar announcement a few weeks later.

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California actually addressed the issue back in 1988, when the state passed a ballot measure to rein in excessive auto, homeowner and business insurance premiums.

Under the measure, the No. 1 insurance rating factor is supposed to be the insured’s driving record, followed by the number of miles the person drives annually, and then by years of driving experience, explains Barry P. Goldberg, a personal injury attorney in Woodland Hills, California.

“For an elderly widow, the fact that she’s a widow or single is almost a non-factor,” Goldberg says.

What determines a risk classification?

In terms of legality, the question is whether the discounts directly infringe on an individual’s rights, says Peter Kochenburger, executive director of the insurance law program at the University of Connecticut School of Law. He explains that proposed risk classification must meet two criteria:

  1. Is the classification actuarially justified?
  2. If so, then does the classification offend or violate public policy, such as a proposed classification that would violate civil rights.

“Pretty much every state has the ability to question a classification and whether it is actuarially justified,” Kochenburger says. “The next step is if it is, should it be allowed?”

To get around this scenario, consumers can shop around for insurers that will not penalize you, as not all of them do. “It’s important to keep in mind that auto insurance is a highly competitive business, and most people find that they have an array of policy options at various prices to choose from,” Barry says.

But Heller contends that consumers can be even more effective by making their concerns known to lawmakers.

“What will really make the difference is putting politicians on alert that we don’t like this practice,” he says.