Wednesday, February 8, 2017

Does Bundling Insurance Really Save You a Bundle of Money?

I really appreciate this post by one of our readers, Ema, because I know next to nothing about insurance, and how to get the best rates, and I'm thrilled to be learning more.

If you’ve seen or heard a commercial for insurance, you’ve probably heard this common call to action: “Bundle and save!” The implication is that purchasing multiple kinds of insurance coverage from the same carrier—be it auto, homeowners, renters, business, or another type—can yield discounts and advantages that will save policyholders money. To determine whether bundling insurance is the right move, it pays to look at all sides of the equation. Keep reading to learn more about some of the ins and outs of bundling insurance so you can make an informed decision next time you’re considering whether your coverage is the best fit for your needs.

Earning Up-Front Discounts
Taking out multiple insurance policies from the same provider can earn you special discounted rates that add up quickly. Let’s say that you’re talking about combining your auto insurance with your homeowners coverage. How much could you expect to save? Up to 20 percent, according to Nasdaq. Combining home, auto, and life insurance policies could reduce your rates by up to 25 percent per the same source.

There is also a certain convenience that comes with entrusting your policies to one provider. With one number to call with questions and one online account to check for information, it can streamline the logistics to consolidate your insurance holdings into one source.

How to Get the Most Out of Bundling
The concept is simple, but there are certain behaviors that savvy consumers can undertake to make sure they’re maximizing their bundling experience, if that’s the route they choose. Personal Finance Expert Laura Adams cites five important guidelines for making the most out of multiple policies:

  • Know what you’re getting vs. what your insurer is getting: Turnover costs companies money and resources, so it’s advantageous for them if you stay. Keep this in mind when you’re communicating with your agent.
  • Ask outright: You’ll never know if you don’t ask about discounts beyond the obvious advertised ones. Seek out specifics before committing to anything.
  • Shop Around: Establish a standard for comparison. Before agreeing to any bundles, get at least three car insurance comparison quotes and an equal number of homeowners quotes so all your options are on the table.
  • Look at the long-run cost: Don’t get distracted by the up-front discounts alone. Investigate whether your deductible will change because of bundling, and crunch the numbers on how these financial decisions will affect you over time.
  • Use bundling for leverage: Having multiple policies from the same carrier may entitle you to future discounts if you ever need to add another policy. Use loyalty to your advantage.

When It’s Time to Shop Around
The idea of bundling rests significantly on convenience and immediate gratification. Neither of these factors address quality. When you bundle, are you getting the amount and quality of coverage that you need for your assets? As LinkedIn contributor and CEO of INGUARD, an insurance and risk management consultancy, Parker Beauchamp writes, you should search for the trifecta: convenience, savings, and proper coverage.

A recent J.D. Power and Associates study that examined customer satisfaction found that customers who bundle their auto insurance with their home policy have lower satisfaction in regards to price. Jeremy Bowler, the senior director of J.D. Power’s insurance practice, noted that, “Customers have come to expect a discount for holding multiple policies with their insurer, and it appears that the positive effect of this discount has become diluted.”

In other words, don’t get so enamored with the initial discount that you let coverage quality and policy details fall by the wayside. The only way to truly make sure you’re getting the best deal across all areas is to shop around and juxtapose different options to find the best fit for your needs.

See my disclaimer.