Can I Get a Better Deal if I Bundle My Auto & Home Insurance?

Nothing can make even the savviest of consumers’ eyes glaze over quite like the phrase “insurance bundling.” And we get it — insurance products and policy details aren’t exactly the most riveting topics. But hang on for a moment because that disinterest can end up costing you a lot of money and create hassles down the line.

In this round of demystifying the insurance industry, we take on more than just auto insurance. We asked The Zebra’s insurance expert (and former agent for a national big-name insurance company), Neil Richardson, to fill us in on the what, why, and how of insurance bundling so you can get through the process as painlessly as possible, all while making sure you’ve got the coverage you need and aren’t overpaying.

Which Types of Insurance Policies Can You Bundle?

Most big-name national insurers — and many smaller regional ones, too — offer their customers the option of combining different insurance policies. Depending on the company and region, auto insurance can be bundled with homeowner’s and life insurance, and customers can add motorcycle insurance, boat insurance or other specialty insurance coverage options.

What’s the Benefit of Bundling?

The biggest reasons to bundle, according to both insurance companies and our expert, Richardson, are convenience and discount incentives. The incentives can often be substantial, and therefore enticing, he says, but in order to really save over a long period of time, consumers need to go into the process aware of the downsides.

The Downsides of Bundling

Unless customers carefully shop for all of their insurance policies by comparing rates both individually and as part of a bundle from a few different insurers (we’ll tell you how to actually do this below), insurance companies are likely to convince consumers of the ease of bundling. Richardson explains that insurance companies know that the more products customers have with them, the less likely they are to switch companies.

There isn’t much incentive to shop around when a customer has bundled policies because if they switch, say, their auto insurance, they’ll lose the discount, and if they switch everything, it becomes very complicated, very quickly. So, insurance companies can increase one policy a little and they know the customer will be unlikely to leave — this process of price optimization is used by some insurers throughout the auto industry, but Richardson says the incentive to run business this way increases with insurance bundling because the consumer is even more driven by inertia.

Another downside: The prospect of simpler bill consolidation from bundling might not play out exactly as planned. Insurance premiums are due each month on the date you opened your policy. So, if you get one policy on the 15th, and then add another a few months or years later on the 3rd, you’ll still have bills due twice a month, even if the insurance is with the same company.

A final downside: third-party lenders. Many insurance companies specializing in one type — say, auto — will give their customers the option of bundling other types of insurance — like homeowner’s or life — but they will sometimes use a third party to underwrite additional policies.

The fact that one part of your bundle is underwritten by another company isn’t a bad thing in and of itself, says Richardson, and reputable insurance companies will use good quality third parties. However, if one part of your bundle is underwritten by a second company, you’ll still need to deal with both companies in the event of a policy claim on both.

Here’s an example: A major weather event causes damage to your house and your car, and though you have a bundle with one company, you’ll be dealing with two different insurers when making your claims and getting your reimbursements, just as you would if your policies weren’t bundled. The only real benefit of bundling in this case, Richardson says, is the policy discount.

Bundling, says Richardson, most often benefits the insurance company, but there are still ways to beat the house.

Smart Bundling

If the convenience of bundling is a big draw — and if you’ve been quoted some deep discounts — bundling might be a good choice, but you’ll want to approach it the right way. A simple rule of thumb: Shop for your most complicated and expensive insurance policy first. If you’re a homeowner, your house is usually the biggest asset and has the most complicated insurance policy. Life insurance is also quite detailed and complicated. Auto insurance is more complicated and expensive than renter’s, so if you’re bundling the two, shop for auto first.

Bundling for Homeowner’s & Car Owners

For people with houses and cars to insure, homeowner’s insurance is almost always the most complicated and most expensive insurance policy they have. Not only is your home likely to be your biggest asset, the process of properly insuring a home can be long and complicated. So if you own a home, start shopping for this one first.

While shopping for homeowner’s insurance, get quotes from several insurers, narrow it down to your top choices, and tell them that you might like to bundle your auto insurance policy into your homeowner’s, and see what kind of discounts you’re offered. Richardson advises also shopping separately for auto insurance and comparing rates: Even with a discount from your homeowner’s insurance company, you might still be better served with an auto insurance policy elsewhere — the savings might be higher, or you might like the coverage better. Usually the discount you’ll receive from bundling homeowner’s and auto insurance isn’t as great as if you compared rates for both and went with the best deal from two separate companies.

Bundling for Car Owners & Renters

If you’re a renter, Richardson advises searching for your auto insurance policy first since between auto and renter’s, auto is usually more complicated and more expensive. Again, if you find a great auto insurance policy, tell your top choices you might like to bundle renter’s, compare rates, and then get some quotes for just renter’s, too.

Benefits from bundling auto and renter’s insurance policies are often worth it, says Richardson, because renter’s insurance is easy to switch. Homeowner’s and auto insurance bundling can still offer benefits, but the customer should be prepared to switch companies if rates increase.

Unbundling the Bundle

It’s frequently during a claim or other unfortunate scenario when customers realize their bundles aren’t actually as beneficial as they thought, Richardson says. Usually people will see an increase in one rate, so they will switch one policy, lose the discount on the other, and then be stuck shopping for two insurance policies. It’s better to get ahead of this by evaluating if bundling is right for you now.

Our best advice when shopping for more than one insurance policy is to look around, with the above tips in mind. Compare as many options as you can, and share quotes with various companies to see if they can offer competitive rates.

Keep in mind, nearly all auto insurance companies use credit data in their evaluations. So before you apply, make sure you know where your credit score stands. You can get started by checking your credit scores, updated every 14 days, for free on Credit.com.

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Image: SolStock

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