Free Car Insurance From GM: A Great Deal For Some

The new offer could roll out nationally and drive new customers to Chevy, Caddy, Buick and GMC showrooms.

There is a price war going on among auto insurance companies including Geico, Progressive and AllState. But General Motors and MetLife have teamed up for the ultimate price war: Free car insurance if you buy a GM vehicle.

The offer, which runs until September 6th, is being extended only in Oregon and Washington, but GM is eyeballing a national rollout if the program attracts buyers to Chevy, Cadillac, Buick and GMC showrooms.

Why the Northwest states? It represents a market that is dominated by Asian and European brands and where resistance to GM brands runs highest. Barely one-third of vehicles sold in Seattle and Portland are from GM-Ford-Chrysler, according to GM data.

"We want to give residents of Oregon and Washington another reason to discover Chevrolet, Buick, GMC and Cadillac vehicles," said Chris Perry, U.S. vice president of General Motors marketing. "We have new products like the Chevrolet Cruze, Buick Regal, GMC Terrain and Cadillac CTS Coupe that are now even more appealing with a year's worth of insurance."

According to the Insurance Information Institute, the deal could be worth an average $727 for an Oregon motorist and $840 for drivers in Washington state. Obviously, it will be worth even more in states where rates run higher, such as California and New Jersey. And it remains to be seen if GM and MetLife leave some states with high rates out of the mix should the program be expanded.

How does GM pay for it? The company is taking the amount it has to pay MetLife to cover the cost of the auto insurance out of the marketing funds they would use to fatten up traditional rebates or discounted financing. An auto insurance discount is viewed psychologically, the thinking goes, as something with greater value and meaning than cold cash.

Some of the fine print: If the vehicle is totaled during the first year or 15,000 miles, MetLife will provide a replacement without charging the normal deductible called for in most insurance policies; and some commercial vehicles are not eligible.

For MetLife, the insurance giant gets an in influx of new customers. GM still has the biggest market share among all automakers in the U.S. Undoubtedly, some of the buyers who opt for the free insurance for a year will drop Geico and Progressive polices, for example. Then, after one year, the customer can shop again for the best rate, but at least MetLife is in the mix and has a chance to meet or beat the best offer from another insurer.

Why free insurance? Car makers have found that they need to get more creative in their offerings. A $2,000 rebate or 0-percent financing has become familiar and is easily copied. Hyundai, for example, has run offers such as agreeing to take over car payments for a period of time if the buyer lost his or her job.

Caution to car buyers: Just because you are attracted to a new, creative, original offer doesn't mean you don't still need to do your homework. Often, you can't pile up all the best offerings such as cheap financing on top of a rebate. If one year of free insurance on a Chevy Equinox in your state is worth $800, and the cheap finance rate you might be able to get on top of that is worth $1,500 over the course of a four-year loan, it still isn't as much as, say, a $3,000 rebate on a comparable car or SUV from Ford or Nissan.

Before buying any new vehicle, get out your yellow pad, pencil and calculator and work with the AOL Autos Shopping Tools to make comparisons.

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