What is insurance bundling and does it make sense for you?
If you’ve seen television commercials or heard radio advertisements from property and casualty insurance companies, you’ve undoubtedly heard about “bundling.” The sales pitches sing the virtues of having more than one type of insurance policy with them (i.e., home and auto, renters and auto, life and home, etc.) and getting a car insurance discount on your policies for doing so. This is essentially what bundling is.
But does it make sense for you to bundle your insurance policies with one company? Sometimes it does, and sometimes it doesn’t. In this article, we’ll take a deep dive into the benefits and drawbacks of bundling so you can make a wise decision about whether to have multiple policies with one company (putting all of your eggs in one basket) or have your policies spread between different companies.
The top benefits of bundling insurance policies
Bundling your insurance has several attractive benefits that you should consider. These include:
#1: Bundling insurance policies can save you money.
The number one reason people bundle their policies is to save money on their insurance. It’s the main theme of the insurance advertising we talked about earlier. They stress savings through bundling because, as consumers, we’re attracted to discounts.
Insurance companies designed “bundle discounts” to appeal to the desire, and sometimes need, to save money on all types of insurance as premiums continue to climb. You’ll find bundle discounts ranging from 10% to 25%, depending on the insurer and the state you live in.
#2: Bundling can reduce your out-of-pocket costs if you have a claim.
With some companies, if you bundle your home and auto insurance, you’ll only have to pay one deductible instead of two if a single event damages both your home and car.
For example, if a fire breaks through your home and garage and damages both your car and home, some insurers will only have you pay one deductible for that incident. But if you’re filing claims for separate causes of loss (not related), then you would be required to pay both deductibles.
If you have several insurance policies with the same company, make sure you’re getting the bundle discount your carrier offers.
#3: Bundling can save you time.
Most major property and casualty insurance companies now have an app for your smartphone that lets you access your account, or they at least provide online access to your account, so you can check your coverage, pay premiums, initiate a claim, and more. If you don’t bundle, you’ll have to install multiple apps and log in on multiple websites to get information or service on your different policies.
When you bundle, you only need to spend time accessing one company’s app or website, and you only need to have one username and password. All of this can save you time, and as the saying goes, “Time is money.”
#4: Bundling makes the claims process easier.
If you have multiple claims simultaneously, bundling can save you from having a lot of headaches and frustration.
As an example, if a storm hits and you sustain home and auto damage, you’ll only need to contact one insurer if you’ve bundled your home and auto policies and deal with one claims adjuster, which will make your life much easier than if you’re dealing with two insurers and two adjusters.
If you’ve filed a claim for your home or car before, you know how time-consuming and frustrating it can be. Multiply that times two if your insurance isn’t bundled.
Common types of insurance you can bundle
There are many different types of insurance coverages. So, many people aren’t aware that insurers offer different types of bundle discounts, including:
- Home and auto insurance bundle: this is the one you hear about the most. Homeowners with cars are a prime target for insurance companies because both policies typically involve larger overall premiums, which means more revenue for the insurer who can offer bigger savings for the policyholder.
- Renters and auto insurance bundle: according to the National Multifamily Housing Council, 44.1 million American households are renters. This is a huge market for property and casualty insurers, so they offer a bundle discount for renters who also have a car insurance policy with them.
- Car and motorcycle insurance bundle: the Insurance Institute for Highway Safety tells us that there are about 8.6 million on-road motorcycles registered in the U.S., approximately double the number there were in 2002. This is another massive market for insurance companies to offer bundle discounts to.
- Life and car insurance: though relatively few insurers offer this discount, it’s worth looking into if you have life and car insurance coverage with the same company. If they do offer a bundle discount, it will be applied to your car insurance premium, not your life insurance.
Is bundling my insurance right for me?
One size does not fit all when it comes to bundling; it’s not suitable for everyone. So when isn’t it right?
Bundling may not be right for you if you can save more money by not bundling. For example, let’s say you bundle your home and auto insurance with Company A and pay $2,800 per year for both coverages combined. If you shop around, you might find that by unbundling and having your car insurance with Company B and homeowner’s insurance with Company C, it will only cost you $2,100 per year, which is a 25% savings by not bundling.
You may also not want to bundle if you’re concerned about your insurer's financial strength. For instance, you may live in an area prone to hurricanes and are concerned about your insurer with cheap bundled rates not being able to pay everyone’s claim in the event of a catastrophic storm. Spreading your policies around might lower that risk and give you greater peace of mind.
Last, you might not want to bundle if you have violations on your driving record (speeding, DUI, etc.), have poor credit, or live in a state with higher auto insurance rates. Because of these factors, you might be able to find cheap car insurance from a different carrier than you have your homeowner’s policy with and save more money than if you bundled those policies.
Should I consider shopping for multi-product or multi-policy discounts?
It would be best if you shop for both. Getting a bundled (multi-product) discount doesn’t exclude you from getting a discount if you insure two or more vehicles (multi-policy) with the same company. Most companies offer multiple discounts to policyholders.
How to shop for bundled insurance policies
If you want to save time and money by bundling your policies, you have to be a good shopper. Here are six tips on shopping for bundled insurance policies.
- Evaluate each policy’s merits: many people are quick to bundle insurance because they automatically think they’ll get better coverage for less money. Unfortunately, that may not always be the case. Price each policy separately from multiple companies and compare those prices to the bundle pricing and coverage. By doing this, you can make the best choice for your situation.
- Focus on more than price: sometimes the “best deal” isn’t always the best deal. The thrill of getting cheap rates will vanish quickly if you have a claim and went with a second-rate insurer. A big-name, top-quality insurer with slightly higher rates may be a better choice for you than a company that only has cheap rates going for them.
- Determine whether the insurance carrier can cover both policies: not all carriers accept all types of risks. For example, some insurance companies won’t insure motorcycles or RVs you want to bundle with your home or renters insurance. Before you sign on the dotted line for a policy, make sure the insurer writes coverage on everything you need insured so you can get the bundle discount.
- Evaluate your needs and know your policy limits: getting a bundle discount but being underinsured may end up costing you a lot more money in the long run if you ever need to file a claim. In addition, some companies only offer lower coverage limits when they bundle policies. Be sure you know how much coverage you need before you sign the application, and that it’s precisely what you’re getting.
- Shop around for coverage: it pays to shop around for insurance, and not just the first time you buy it. Insurance companies change their rates regularly, so shop every six months when you get your renewal notice to make sure you’re getting the right coverage at a rate you can afford. Bundle discounts vary by company, so don’t hesitate to compare companies and rates. If you find better rates with another provider, it may be time to switch auto insurance companies.
- Talk to an agent: an independent insurance agent who represents more than one company can get you quotes from several insurers at the same time, which will help you with your comparison shopping. It doesn’t mean you can’t talk to a “captive agent” who represents only one company and an independent agent at the same time. What matters is that you get adequate, affordable coverage.
How do bundling discounts compare to discounts for loyalty, good driving, or other factors?
Bundling discounts generally are among the best money-saving discounts you can get:
Source: allchoiceinsurance.com
Drawbacks of bundling insurance policies
There are a couple of drawbacks to bundling insurance policies.
First, you might pay more by bundling than you would have if you bought separate policies from different companies. This is why comparing rates regularly is important.
Second, you might pay more if you have a poor driving record, like a DUI or multiple speeding convictions. If this is the case for you, you might be better off buying cheaper car insurance from a company specializing in “higher-risk” drivers or SR-22 insurance.
Bundling is not always the best financial move for you, but it’s certainly worth looking into.
Frequently asked questions (FAQs) about bundling insurance policies
Why do insurance companies want you to bundle your car insurance?
Insurers don’t offer bundle discounts out of the goodness of their hearts. It comes down to the bottom line: the more money they can generate in premiums from you by giving you a discount, the better their profitability is and they can then pass savings on to their policyholders.
Is insurance cheaper when you bundle?
Not always. Sometimes your rates will be better by buying policies separately, particularly if you have a bad driving record, poor credit, or live in a state with very high rates.
Why is it often a good idea to bundle your insurance?
It’s often a good idea to bundle because, most of the time, you can save money by bundling. All types of insurance are expensive, so it means more money in your pocket if you can get a discount by bundling.
What does bundling do for an insurance company?
In addition to generating more profits, insurers benefit by bundling by making you “stickier.” This is what they say about customers being less likely to leave because they have more than one policy they’ll have to transfer to another company, which many people prefer not to deal with.
Disclaimer:
SteadyDrive is not an insurer or an insurance agent or broker. SteadyDrive does not provide you with an insurance policy, so make sure that you have insurance coverage while you drive. Please contact your insurer or an insurance agent or broker (if applicable) directly regarding questions you may have pertaining to auto insurance coverage. For more details, see SteadyDrive’s Terms of Service.
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