One way this website makes money is through affiliate marketing.  Some ads pay just to be seen, and others pay me only if you click on them.  With affiliate marketing, you generally have to do something (like apply for an account) for me to get paid.  I’m always wishing that the companies I use all the time and can highly recommend (like Vanguard, USAA, Bridgeway, Pentagon Federal, and Fidelity) would come out with an affiliate marketing program.  Recently, my wish came true for one of these companies, so I decided to finally get around to writing a review about it.

The United Services Automobile Association (USAA) was founded in 1922 as a group of military officers who wanted to insure their cars.  They gradually branched out into property insurance, life insurance, banking, and investing, originally just for military officers.  In 1995, membership was extended to enlisted personnel.  In 2009, membership was extended to all who have ever served in the military and their families.  The truth is, however, that with the exception of auto and property insurance, all of USAA’s services are available to anyone.

I currently use or have used USAA for auto insurance, rental insurance, homeowner’s insurance, flood insurance, umbrella insurance, life insurance, checking, a credit card, a mortgage, and a home equity loan.  I think they’re top notch in most of these fields, and certainly among the best in all of them.  I recommend them highly.

Auto Insurance

USAA does this so well that I won’t even consider going anywhere else.  I think they’re still either the cheapest out there, or close enough, but truthfully, I don’t care.  They’ve treated me so well through a half dozen claims that I’m willing to pay significantly more for that kind of service.  On three separate claims they’ve made the claim “no-fault” so they didn’t raise my rates.  The first was a car I rented and then banged up with poorly fitting chains on a mountain pass.  I pretty much trashed both front quarter panels.  No fault?  Hardly.  But they covered it as one.  The second I had a car totaled when an uninsured driver pulled out illegally in front of me.  It was his fault, but he couldn’t

be found on this side of the border when it came time to pay the claim.  The last was an incident where I was struck from behind and somehow, the investigating officer found that his buddy who hit me wasn’t at fault.  The judge later disagreed in court.  In all three of these incidents USAA treated me properly.  On another incident, when my wife was struck by a maniac whose insurance company initially refused to pay since the maniac said he didn’t do it (despite eyewitness accounts that he did as well as a lengthy criminal record), USAA paid us right away, long before it ever got paid by the insurance company.  Each time service was prompt, courteous, usually included a rental car, and often paid me quite generously for the totaled car.  If you qualify for USAA auto insurance, I suggest you use it.

Property Insurance

I’ve used USAA for property insurance for years, both renter’s, homeowner’s, and a “fire” policy on my rental property.  I’ve only had one claim for a leaky air conditioner that ruined some carpet and walls.  They paid for remediation (including mold) and replacement with no hassles at all.  I think my rates went up slightly after that one for a year or two, but have since come back down.  I also do my flood insurance and umbrella insurance through them, getting a discount for having auto, property, and umbrella with them.

Dividend Program

One of the really cool things about USAA is that, like Vanguard, it is member-owned.  Part of your premiums are returned to you each year in the form of a dividend.  Part of USAA’s required capital holdings is held in Subscriber’s Savings Accounts and a distribution is periodically made from it if approved by the board of directors.  Since 1973 when the program started, they’ve made distributions in all but 2 years.  I don’t have my most recent statement, but at the end of 2010 they paid me $78.35 (6%) on my previous balance of $1305.83, then added $364.033 to the account.  Considering I was spending something in the neighborhood of $2000 a year on auto and property insurance, that works out to something like a 4% discount on the insurance, which will increase every year (in addition to long-term policy holder discounts.)

Checking

I’ve written before about how I think USAA checking rocks.  Not only are there no fees or minimums, but we get free checks and reimbursement of all our ATM fees (up to $15 a month.)  The debit card on the account used to pay you 0.5% cash back, but they changed that last year when banking regulations changed.  My favorite part of the account is the deposit options.  I can scan checks into my computer and deposit them online.  I can even do it when I’m out and about on my Iphone.  There’s even a cool USAA app.  Here’s a chart comparing USAA checking to its usual competitors.

Credit Cards

I’ve had a USAA credit card for a long time.  Several times they offered me a deal that was too good to pass up, like 0.9% or 1.9% indefinitely (not just a year) with no fees.  So I wrote a check out to myself (after asking for a big credit line increase) and plopped it into a money market account paying 5%.  I haven’t gotten an offer like that for quite a while, but I also can’t seem to find a money market account paying anything more than 1% either.  The card is also good for a low, fixed rate.  No gimmicks or rewards, but if I actually needed to carry a balance on a card for a long time, I’d choose this one.  I think my rate is something like 7-8%, but confess I haven’t actually checked since I don’t plan to ever use it.  They also have rewards cards, that pay you back up to 1.25% of what you spend on them, but there are better deals elsewhere, notably through Fidelity (2% on the AmEx and 1.5% on the Visa) and PenFed (5% back on gas, 1% on everything else.)

Life Insurance

One of my life insurance policies is through USAA.  The rate was okay, but the big draw to me at the time is it would pay me if I died as result of an act of war (many policies don’t).  Since I was regularly deploying to a war zone back then, it seemed a prudent choice.  I usually include them when comparison shopping, but more recently went with MetLife for a policy as it was quite a bit cheaper and the war exclusion is much less important to me now.

Mortgage

When I got out of residency I obtained a mortgage with USAA after 20 minutes on the phone.  No documentation required.  Now granted, that was 2006 and most banks were handing out money like candy at a parade, but the fact that they knew my rank (and thus my salary) really cleared out a lot of obstacles to getting that mortgage lined up.  The rate was pretty good too.

Home Equity Loan

I have a home equity loan on my rental property.  The rate was okay, but the fees were very low and quite transparent.  Since my original intent was to use it as a bridge loan, the low fees more important to me than a low rate.  I’m now 2 years into that “bridge” and thus far it’s been a hassle free experience.

Investing

USAA offers brokerage accounts, mutual funds and IRAs with fairly low fees.  Their fees are lower than 90% of the investment firms out there, they offer index funds, and their precious metals fund has quite a good track record.  However, even their low fees are still often 2 or 3 times as high as Vanguard’s, so I generally recommend against using USAA for investing purposes.  But you could do far worse.  Most military docs, of course, have access to the TSP, which is even cheaper than Vanguard, so there is little reason to use USAA’s investing services.

All in all, USAA is a great firm to do business with.  If you can qualify to do so, I would use them for your auto and property insurance.  You may also want to look into using their checking account, credit cards, and mortgages.  If you think this review is all unicorns and rainbows, feel free to read the 199 bad reviews on USAA at PissedConsumer.com.  (Bank of American has 626 bad reviews, so 199 isn’t too bad I guess.)