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You’ve probably seen embedded insurance in the wild. Here's an example: Let’s say you buy a new refrigerator. During checkout, you’re asked if you’d like to get insurance for the item. That insurance policy, or “protection plan,” gets embedded into your purchase as a single transaction.
Companies can offer insurance policies on everything from buying the latest iPhone to renting a U-Haul. But if getting insurance can be so easy, then why is it such a hassle when you buy or lease a new car?
In order to understand whether embedded car insurance is right for you, it helps to get context on how it all works. More importantly, that should also answer a bigger question: Can this actually save you money?
Rising anxiety about the cost of owning a car
Getting a new car isn’t all that different from any other purchase. If you’ve ever bought a laptop, an espresso machine or even a high-end electric toothbrush, you know the feeling: That sense of excitement that comes with being a new owner, especially after weeks or months of research.
But when it comes to big purchases, the word “ownership” can also cause anxiety. According to a 2023 NerdWallet survey, 53% of Americans plan to buy or lease a vehicle in the next 12 months. However, 23% of Americans who own a personal vehicle consider the cost of vehicle ownership to be a source of stress.
Those numbers might seem contradictory, but the reality is that the total cost of owning a vehicle is hard to calculate. You can budget your car purchase to the dollar, but it can still be hard to predict gas prices and car insurance rates. In fact, the average car insurance price for 2023 is nearly 32% higher than the average rate for 2022, according to NerdWallet's annual analysis.
The burden of financing, insuring and paying off a vehicle lasts years after the initial excitement wears off. So drivers are looking for ways to save wherever they can, including at the dealership.
What is embedded insurance?
One way to reduce the stress of buying a new car is to find ways to simplify the process. This is why bundling auto insurance into a car purchase (not unlike our example of buying a new fridge) appeals to drivers.
“There’s no need to call your agent, spend 20 minutes on the phone digging up and providing details then waiting for your proof of insurance. With embedded insurance, it's instant and seamless,” said Cassi Conrad, chief insurance officer at Sure, in an email. Sure is a digital insurance platform that supports embedded insurance providers.
Almost every state requires drivers to have liability insurance, so you’ll need proof of coverage before you can purchase a vehicle at a dealership. But having the car dealership bundle an insurance policy into your financing package might save you time and effort, both during the “checkout” process as well as when it’s time to make payments.
Additionally, consumers are more likely to buy insurance at the time of a car purchase. 50% of Gen Z (ages 18-26) and 54% of millennials (ages 27-42) believe the best time to shop for auto insurance is when buying or leasing a vehicle, according to the NerdWallet survey.
The convenience of bundling insurance into a purchase — combined with a rise in digital insurance as a whole — has created a demand for embedding policies into the car buying experience, Conrad said.
But can embedded insurance save you money?
All of this lines up with what drivers actually want when buying a car: 72% of recent car buyers would have liked to purchase insurance directly from the dealership, according to an online 2022 survey of recent car buyers by Polly, a company that sells embedded auto insurance. That same survey states that 42% of car buyers received no support from the dealership about actually getting insurance in their most recent car purchase.
Part of this disconnect is tied to availability. Embedded insurance is sort of an ongoing experiment for both insurers and car dealerships, and there just isn’t enough information available to predict whether it will save you money.
In fact, while embedded car insurance is definitely convenient, you could end up paying more for insurance over time. If you’re offered a single price for financing that includes a car loan and an insurance policy, you may end up paying interest on your insurance, which is unnecessary as well as expensive.
Choosing insurance is subjective. It’s largely dependent on how much coverage you want as well as what you feel comfortable paying, and the factors that determine pricing vary by person. But because there isn’t a standardized embedded auto insurance offering right now, the details could depend on the dealership, insurer and financing terms rather than what you want or need.
Ways to save on new-car insurance right now
If you do get offered embedded insurance at a dealership, it’s probably in your best interests to decline at this time. But that doesn’t mean you can’t find other ways to save money on insurance for a new car.
Remember all those hours you spent selecting the perfect year, make and model? Apply that same process to finding car insurance. Spend one hour getting a few different quotes for the specific vehicle you want, then compare those rates to find the best fit for your situation. If you do this before you get to the dealership, you can compare their offers to the quotes you already have.
Embedded auto insurance is still an evolving thing. Until some sort of standard policy offer exists, we recommend prepping before you get to the dealership to decide if embedded insurance is a good fit. You may still decide to add insurance to your cart at checkout, but at least you'll know whether its the best deal before you sign the paperwork.