COVID-19 has emptied a lot of people’s bank accounts, but some of that money may come back.
By Geoff Williams, Contributor, July 23, 2020
There aren't many positives to take from the coronavirus pandemic, but there may be some upside. For instance, you may have relished the extra family time while sheltering in place. Or maybe you've taken far more nature walks than you did in the past – and plan to continue them even after the pandemic. And, of course, there are the refunds.
Everything – from concerts to conventions – seems to be canceled or postponed, and so naturally a lot of people who have paid money for experiences or services and aren't getting them would like their money back.
So what type of refunds are being doled out? Get your wallet ready, but keep your expectations in check.
Earlier in the year, a number of insurance companies, including Travelers, Geico, State Farm and Progressive, just to name a few, began refunding money to customers since so many people weren't driving the way they had been. It wasn't all that much, maybe 15% to 25% of your April and May premiums, depending on the company.
Will insurers continue to refund customers their money? We got a firm "maybe" from Loretta Worters, vice president of media relations at the Insurance Information Institute, an insurance industry association in New York City.
"The answer depends on what happens going forward," Worters says.
On one hand, the lockdowns and sheltering in place have largely been lifted, which could negate the reason insurers have been refunding parts of premium payments. On the other hand, plenty of areas in the country are still having to at least partially shut down.
"If auto insurers continue to experience a sustained reduction in auto claim frequency, this could lead to additional premium decreases," Worters says. But she points out that "just because a customer's mileage decreases doesn't mean other risk factors disappear."
For instance, she observes, rising medical costs in America have an impact on car insurance premiums since recovering from a car accident in the hospital is more expensive. She also says that there's anecdotal evidence that some motorists, due to fewer cars on the roads, have been driving more recklessly – which can lead to more accidents and higher premiums.
"One thing I can tell you is since stay-at-home orders were lifted, auto insurers have seen a steady increase in driving and a sharp decline in the usage of public transportation across the U.S., as evidenced too by the gas consumption," Worters says.
So while it's possible you'll receive more insurance refunds, it's very possible you won't. And if you never received a refund in the first place, you may want to call your insurance agent. For all you know, you received a check, and thinking it was junk mail, tossed it out. You may also want to visit unclaimed money websites that state governments maintain. If you don't cash an insurance refund sent to you, it might eventually end up there.
As everyone knows, instead of April 15 this year, Tax Day was July 15 – which means that a lot of people are still receiving their tax refunds.
So what to do with your tax refund? If you want some guidance, Misty Lynch has some advice. Lynch is a certified financial planner, behavioral financial advisor and certified life and business coach at Beck Bode LLC, a financial planning firm in Dedham, Massachusetts.
"While it is usually tempting to go on vacation or make a big purchase, things are very different due to the pandemic," Lynch says.
She suggests thinking about sinking your refund into an emergency fund – but paying off debt is always a good strategy, she says.
If you have savings and your debt isn't out of control, she says you may want to save the money for a vacation in 2021 or invest it.
Most colleges have not refunded money to students who were online during the spring, but look hard enough, and you'll find some that have. For instance, Louisiana colleges are planning to give back at least $24 million to students.
If you're one of the lucky recipients of a tuition refund, many experts say that it's best to just put the money back into your 529 – because you could be taxed or penalized by the Internal Revenue Service for receiving that money.
Lynch agrees. Put the refund back into the 529, and count yourself lucky because college refunds have been pretty rare.
"If you do put the money back into the account or use it for qualified expenses, be sure to keep detailed records of the activity. Refunds are somewhat unusual, but everything about this year has been. Having great records is always helpful when tax time comes back around," Lynch says.
And if you're not crazy about putting the money into a 529, Lynch has another idea.
"If you believe you will be attending school virtually, you could use the funds to get a new computer, which would be considered a qualified expense," Lynch says.
Travel and Other Consumer Refunds
Gyms, hotels, airlines, festivals, trade shows – you name it. If there was a crowd involved, it's probably been scrubbed off the calendar this year, which means there are a lot of businesses that have had to refund payment because so much has been rescheduled or canceled.
If you're able to get a refund, great, and problem solved. If not, try talking to a manager instead of a customer service representative, suggests Becky Beach, a design consultant in Arlington, Texas, and a life coach at MomBeach.com, a website that offers advice on saving money as well as other topics, such as starting a business.
If the manager – who should have more power to make monetary decisions – can't or won't help, Beach says, "You could contact your bank and have them do a charge back for you if the company will not refund you the money."
If you do get a refund, Lynch suggests you reevaluate "which you refer – the money or the activity you couldn't do. If you are relieved to have the money back, it is probably the right time to cancel that and shift that budget toward something you will use."
But if you received a refund and you still want to do that activity, such as a vacation, Lynch suggests reserving the money in a savings account for that purpose – and doing more research to make sure you get even more out of the experience when you can go.
"Now that time is on your side, you can do some extra research to make sure when you can go on that dream trip it is exactly what you hope for," Lynch says.
Which seems like a perfectly good idea. After all, maybe there's a reason "fun" is part of the word "refund."
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