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When Does it Makes Sense to Bundle Insurance?


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The short answer to that question: Almost always. Most insurance providers offer more than one type of insurance. Many of them offer home, auto, boat and many other types, including life insurance. Substantial discounts – and some other benefits – await policyholders who buy more than one type of coverage from these providers.

What kind of discounts are we talking about? The amount varies widely by provider and by the types of coverage you bundle, but you can often get a discount of up to 20% for combining home and auto coverage.

Don't own a home? You also can get a price break for buying renters and car insurance from the same provider, though it's usually smaller than the home/auto package. Do you own more than one car? Some providers offer discounts of up to 20% for covering multiple vehicles.

Want something even bigger? Some providers will offer discounts of up to 25% for bundling auto, home, and life insurance policies.

Why you should like bundling

Saving money upfront on policies is a strong motivator, of course, but it's not the only reason for bundling. One advantage for buying multiple policies with one company is gaining familiarity with that provider. But you also could benefit from paying only one deductible on a claim that otherwise would involve multiple carriers.

What's a deductible? That's the amount you agree to pay out of pocket when you file a home or auto claim. For example, if your home suffers $5,000 worth of damage from a hailstorm and you have a $1,000 deductible, you'd pay the deductible and then receive $4,000.

But what if, under the same scenario, your car is damaged by the same hailstorm? If you don't bundle, you might have to pay the $1,000 home insurance deductible and a $500 auto insurance deductible before you received help from your policies. Some providers, when you bundle coverages, have a single deductible requirement – though usually you have to pay the larger of the two deductibles.

Why you should be careful

Many consumers compare insurance policies by looking at the bottom line – the size of their monthly payments. While bundling home and auto policies can reduce that bottom line, it's important to make sure you haven't reduced your coverage, too.

Specifically, make sure you have enough dwelling coverage – you can make sure it's adequate by using a calculator. The amount should be enough to rebuild your home from the ground up should it be destroyed by a covered peril such as fire or wind.

Make sure the deductibles match up as well, not to mention other limits on both policies.

Why providers like bundling

So why do providers offer discounts for bundling coverages? One reason is it tends to bolster customer satisfaction: A 2012 J.D. Power & Associates study found that customers were substantially more content when they purchased home and auto coverage from the same provider.

More satisfaction, of course, translates into more longevity with the same provider. Customers who bundle are much more likely to stay with their providers. According to the J.D. Power study, 46% of bundle customers say they "definitely will" renew with their provider vs. 28% of non-bundle policyholders.

The downside of bundling

More satisfaction – and more willingness to renew policies with one provider – also is the largest downside to bundling. Why? Because as admirable as loyalty is on most things, shopping for insurance isn't one of them. Over time, the benefits of bundling with a particular provider can disappear.

Consumers often can find better deals on coverage by shopping their policies annually with multiple providers rather than taking the easy path and just re-upping with their current provider. When you shop for new coverage, consider both bundling and buying coverages separately – bundling normally will win but not always. Again, make sure you're comparing the same coverages when you get quotes for your policies.

Arthur Murray writes for HomeInsurance.com, an online resource for homeowners and drivers across the country. Offering comparative automobile and home insurance quotes, consumers rely on HomeInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeInsurance.com blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Insurance , Basics , Travel and Lifestyle



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