Dear Liz: I have my homeowners and auto insurance with the auto club. For the past few years, I have called them about their $59 yearly membership fee. I advised them that I did not need any of their services, as my last three new cars have their own roadside service. I was shocked to find out that if I do not pay the $59 membership fee, my home and auto insurance will be canceled.
How is this legal, and why must I buy something I do not need to be covered for home and auto insurance? Also, I cannot pay my home and auto insurance by credit card so I can get my points. Again, is this legal?
Answer: Yes and yes.
The answer to your first question is embedded in the phrase “membership fee.” The regional auto clubs that make up the American Automobile Assn. are mutual-benefit membership organizations created to provide products and services directly to their (wait for it) members.
In addition to roadside assistance and insurance, clubs typically offer travel planning, DMV services such as vehicle registration renewals, proprietary financial products and discounts on hotels, theme parks and movie tickets.
If you don’t want any of those things, then you don’t have to be a member. If you want access to your club’s insurance coverage, though, you’ll need to pony up.
As to your second question, businesses and organizations in the U.S. are typically free to determine which payment methods they’ll accept. If they don’t want to take credit cards, they don’t have to.