The Pros and Cons of Bundling Insurance Policies

The increase in the number of natural disasters and traffic accidents involving more expensive vehicles explains the high insurance rates for home and auto policies. But other factors can severely impact a family’s budget.

That’s why some people opt to bundle insurance policies. It’s the practice of purchasing different policies, such as a home and auto insurance package, from a single company to earn substantial discounts. Some companies even include life insurance and more in the package.

Working with the same insurance company instead of several companies for each policy brings benefits to the consumer. However, this is not always the best option. Before deciding to bundle home and auto insurance, it’s good to analyze the pros and cons of this practice.

The Basics

It’s natural to want to save money when looking for an insurance policy, but this is also one case where the cheap becomes expensive. You need to make sure you have adequate coverage that will not leave you helpless in a disaster or accident involving your car or house.

When looking for any type of insurance, note the following details:

  • The Right Coverage– Search with several companies until you find the coverage you need. Find one that doesn’t make you pay for things you don’t need, but at the same time can help you in unexpected situations.
  • Be Informed– Read the contract’s fine print to find out exactly who you are hiring and the coverage you are receiving.
  • Compare– Even if you have a long relationship with the same company, compare the prices of others from time to time.

The Pros

Insurers want to retain customers for as long as possible, and one of their practices is to offer discounts to those who choose several policies. As a consumer, you can have many advantages:

1. Saves Money

Bundle home and auto insurance is the combination that offers the highest discount. Having both policies with the same company can represent a discount between 5 and 25 percent. Depending on the company and the area you live in, this means paying almost $1,000 less per year. Some states offer larger discounts. A few years ago, for example, bundling home and auto insurance in Mississippi provided a 23 percent discount.

2. More Convenient

In addition to saving money, bundling insurance is more convenient because it saves time. The same agent will help you with both policies, making the process quicker and easier (you don’t have to work with different companies and different contracts).

Today there are apps for everything, and in the case of insurance, it’s no different. Bundling allows you to follow your policies through the same app and access the data quickly when necessary.

3. Easier Billing

With an insurance package, you will receive a single invoice for all the policies you have with the same company. In addition to combining the payment process, this means less paperwork and less opportunity to miss a deadline. It also makes paying faster and seamless.

The Cons

While it may seem like the better option, bundling insurance also has some disadvantages that you need to consider before making your decision:

1. Less Research

By opting for a single company, you stop exploring the prices offered by the competition and may miss more competitive rates while focusing on a discount that, after a few years, will no longer seem as good. Research policy costs separately at other insurance companies before opting for bundling. It may be possible to find lower values at two separate companies than it would cost a package at a single one, even with the discount applied.

2. Could Still Have Multiple Insurers

Sometimes you opt for bundling because of the convenience of working with the same company. Without realizing it, you can be dealing with affiliated companies or partners. This practice is even known as “fake bundling.” For example, the company responsible for car insurance is not the same as for home insurance but offers a discount for the package anyway. In the end, you will have to deal with two different companies.

3. Harder to Leave

If one day you find that the package is no longer worthwhile and want to leave, you will discover that the process is much more difficult. For example, to cancel your home insurance, you will also be required to cancel your car insurance and vice versa.

Although it looks like a good deal, the package you purchased may not offer coverage as comprehensive as separate policies. If you have any problems with the company and decide to leave, you will be forced to close both policies and look for two new companies.

Consider the Pros and Cons Before Signing

Bundling your home and auto insurance policies can be advantageous, but it can also be a headache. Companies often offer the package to retain customers, but you should weigh the advantages and disadvantages before signing anything.

Compare the total price of the two lowest-cost individual policies at different companies with the price of the cheapest package that your insurer is offering you. If the discount is more advantageous, do not hesitate to take the package. Remember that in addition to saving money by combining two policies, you also get the simplicity of dealing with one insurer and agent, which is already more advantageous than any discount for some consumers.