How many insurance companies do you have?
Not just insurance policies, but how many insurance companies are you juggling?
If you are working with multiple insurance firms you might be missing out on significant savings that you can get by bundling your insurance policies.
Most Americans have several lines of insurance to cover various aspects of their lives: car insurance, homeowners or renters insurance, and life insurance are some of the most common policies. Price shopping is common by consumers and often the lowest bid company wins.
But is that the best strategy?
How Does Bundling Insurance Policies Save Money?
When you purchase insurance coverage from a company your information is sent through an underwriting process that takes information known and assumed about you (or your age group, etc.) to calculate the premium the company will charge. That premium is enough to statistically keep the company profitable while also providing your insurance for much more than the cost of the premium.
If you have three insurance policies with three different companies you will pay a competitive premium to those companies, but it will still be enough for them to remain profitable.
When you bundle your insurance policies you drop the other firms and go with just one company for your insurance needs. To earn your business the company is willing to take less profit on the extra lines of insurance coverage you add with them in return for getting more of the total insurance premiums you pay during the year.
For example, you might pay $800 per year for car insurance, $700 for homeowners insurance, and $300 for life insurance with three different companies.
Your car insurance company calls you to see if you would like to see how much money bundling your policies would save you. They know you’re spending more money elsewhere, but don’t know how much. You’re spending $1,800 per year in insurance and they would like to get more than the $800 they are currently getting. When you go through the bundling process, you might end up only paying $1,450 per year total in insurance.
The company is taking on more risk for you by adding the extra policies, and they aren’t as profitable on the extra policies as the other companies, but they’ve netted an extra $650 per year from you. At the same time, you’ve saved $350 per year overall.
It’s a win-win.
Is Bundling Insurance Always Going to Save You Money?
As great as bundled insurance can be, it isn’t always going to save you money.
Companies know that if you bundle your insurance with them you aren’t likely to continue to price shop with other firms on a regular basis. You’ve already saved a lot of money on your policies, so you are likely to stay a customer longer.
You are exactly the type of customer any company wants to have: you make a buying decision once, and they get revenue from you for many years (or decades!) after that one decision.
This means you can miss out on lower premiums with other firms for specific types of policies. Insurance is a very competitive industry and different firms will have lower prices at different times during the year.
The Risks of Bundling Your Insurance
Combining your insurance policies with one firm will likely save you money, but there are some risks you need to be aware of:
1. Your insurance company goes under
Bundling seems like a great idea until the company you bundled with runs into financial problems, is purchased, or goes under. Instead of spreading your insurance bets over several companies, you are putting all of your eggs in one basket. The risk of a company completely going away is pretty small, but you do miss out on some of the diversification on the insurance side by going with one firm.
2. You won’t price shop as much
It is easy to shrug off looking for lower insurance premiums elsewhere when you’ve got everything under one company.
I have always asked for quotes from my insurance companies and their competitors on a regular basis — every 12 to 24 months. When you lock in with one company you start to develop some brand loyalty and there is mental inertia created around leaving. You might end up paying more because you missed a good deal with another quality firm.
3. You might miss a product you need
It’s hard to turn down saving a few hundred dollars per year when bundling, but in the process you might miss out on other insurance products you need that the bundling company doesn’t provide. You shouldn’t be dropping critical coverage in one area to save money in three other areas.
What Types of Policies Can Be Bundled?
The sky is the limit as to how many policies can be bundled for you.
Not all companies offer the same types of insurance, so it depends on your needs and what the company offers.
Policies that are commonly bundled together include:
- Auto insurance
- Homeowners insurance or renters insurance
- Life insurance
- Umbrella insurance
- Extra insurance for valuables inside your home
Give bundling a try the next time you do your periodic rate quote requests.
You might find that dropping two firms and putting all of your policies under one roof can save you hundreds per year. Just be aware of the risks and make sure you aren’t missing necessary coverage just because you want to bundle.
I have never bundled my insurance. I routinely check my insurance and never found that bundling saved me as much as individual policies with different companies. I think the key is to be an aware shopper.
Nope, but I’m hoping to save in a couple of months when my car insurance price drops.
I was disappointed to discover that I only save 3% by bundling my car and renter’s insurance with my provider. I agree with you though – having all of your policies under one roof makes you less likely to comparison shop.
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My husband has told me before that bundling my car and home insurance can give us more savings. But after making a comparison, we found out that it will only give us minimal savings. Besides, some insurance companies offer better package for car insurance but not with home, and vice-versa for others. So, we decided not to go with bundled insurance anymore.
Brent Pittman says
I only bundle renters and auto. Life insurance was locked in at low rates when I was a bit younger, so doesn’t make sense to shop for new life insurance now with my age being higher.
Can share with me that the company that provide bundling products? Thanks!
Mr. Frugalwoods says
When we bought our house, I shopped our entire insurance portfolio around. I found a pretty decent deal and it was definitely worth the time.
Every year at renewal time I call our insurer and ask for a cheaper rate. So far it has stayed the same or increased less than 1%, so I haven’t bothered shopping around.
We don’t have umbrella insurance yet, and our current insurer doesn’t offer it. So when we turn our house into a rental and I get some umbrella insurance I imagine we’ll need to switch companies for the entire portfolio.
Glen Craig says
Great job shopping around. And these days it’s not even a lot of work to shop around.