Bundling insurance is a lot like shopping at a warehouse store like Sams Club, Costco, or BJ’s. You buy insurance in bulk, and you get a discount. Specifically, it’s the bundling of insurance policies that saves you money. It’s an attractive proposition, but does it always benefit you? No. You see, when you bundle insurance policies together, you ignore the single-line insurers. You might be surprised at what you find by doing just a little digging.
When It’s Good To Bundle
There’s definitely a time to bundle your insurance policies. According to at least one sample quote from Travelers, you could save $400 a year by bundling home and auto insurance that would cost $2,450 separately. Of course, Travelers is showing sample quotes. Your exact quote would likely be different, but the idea is valid – especially if you haven’t gone policy shopping in a while.
Timing isn’t all that important since you’ll never be over-billed on a policy as long as you process the paperwork required for switching in a timely manner. You’ll be prorated by both your old and new insurer, so you don’t have to worry about paying for double coverage. You do have to come up with additional premium for the modal (the first premium paid to the new insurer) though, and this might temporarily set you back until your old insurer refunds you.
Still, the answer is largely in the numbers. Point blank: if a bundled policy costs less for the same type of coverage, it’s usually a good deal (assuming all other things are equal or near equal like the insurer’s financial ratings).
What To Bundle
When you do bundle insurance, you’re typically offered the option of combining your homeowner’s, automobile, and life insurance. Some companies will also bundle umbrella insurance and specialty insurance policies that cover rare items like family heirlooms.
The best policies to bundle would be property and casualty policies like homeowner’s insurance, auto insurance, and umbrella coverage. These types of insurance carry a low commitment to the insurance company and there’s not much downside to canceling coverage and switching to a different provider. Life insurance, on the other hand, carries significant risks when you bundle it with other policies.
When It’s Not Good To Bundle
Life insurance is something most people commoditize. In other words, they view it like other types of insurance. It’s not. You’re often making a 20 or 30 year commitment with a policy (sometimes longer). Switching policies mid-stream might mean a drop in coverage just to save a few bucks. Even if you get the same coverage, your premium is almost certain to go up. Why? Because you’re older than when you initially purchased the policy. There’s also a hidden cost – the surrender cost. For some policies, like whole life and universal life insurance, policies have surrender charges. These charges are like penalties for canceling your policy before a specified length of time has elapsed. When you switch life insurance carriers, you renew that surrender charge period. Not good. If you have a good life insurance policy, keep it.
Don’t just switch policies because you’re saving a few bucks. There are more important things than money – sometimes. For example, consider the service you’re getting. Can you really get comparable coverage from your new carrier? Some insurers offer coverage that is unavailable anywhere else in the marketplace. Finally, ask your existing carriers if you are missing out on any discounts. You might be a phone call away from cheaper insurance – without having to switch carriers.
Adam Vaught has extensive experience as an insurance consultant. He enjoys passing on his knowledge through blogging. His articles mainly appear on personal finance blogs. Visit the largest home insurance agency in the United States – HomeInsurance.com for more information and to compare quotes in your area.