In the world of insurance, customers have lots of options. There are thousands of insurance companies selling thousands of insurance products.
Basics like home, auto, and life insurance go hand-in-hand with specialty products like classic car insurance, wedding insurance, and even bed bug insurance.
Coverage needs vary from one person to another, but one thing is for sure: everyone needs coverage, and everyone wants to save money on their premium.
Customers typically purchase one or more insurance products from their insurance company but often don’t realize they can bundle their policies into one.
The benefits of bundling your insurance policies can be tremendous. Customers not only save hundreds on their premiums, but can also identify coverage gaps, combine their billing statements, and deal with one insurance provider rather than several.
Policy bundling, often referred to as a “multi-policy discount,” is a common practice in the insurance industry. Insurance companies usually offer discounts between 5% – 25% on each policy bundled depending on the insurer.
While insurance rates continue to climb in the U.S., bundling remains one of the most effective ways to see immediate savings on your premium.
Bundling is most useful if you can’t find cheaper policies separately. If purchasing two policies from two different companies is cheaper than bundling two policies with one company, you should abstain from bundling.
However, for customers looking to insure a risky home or establish a better relationship with their insurer, bundling is necessary.
But one of the biggest advantages to bundling your insurance policies is the simplicity bundling offers. Instead of dealing with several insurance companies offering different types of coverage, you only have to deal with one insurance company.
You can also access all the information on your different policies through one online service. By combining billing statements, customers can more easily detect lapses in coverage and can even align the renewal periods and effective-by dates on their policies.
The question remains: what policies should you choose to bundle? Each combination, whether it be home and life insurance or auto and health insurance, results in a different discount.
For instance, bundling your home insurance policy with your auto insurance policy can net you an average savings of $200 per year on your premium.
Conversely, bundling your life insurance policy with any other policy will usually only save you an average of $35 per year on your life insurance premium.
Your state of residence and the insurance company you choose will also affect your bundling discount. The cost of insurance coverage varies by state, as do the benefits of bundling discounts.
While every major insurance company offers bundling discounts, some bundles are more advantageous than others depending on the initial premiums offered and the customer’s state of residence.
For instance, Nationwide customers pay an average of $1,404 per year on their car insurance and $1,143 per year on their homeowners insurance.
While Nationwide only offers a 4% discount on their auto and homeowners insurance bundle, customers still save $303 more per year than State Farm customers.
State Farm customers get a 10% bundle discount but end up paying $2,748 per year for basically the same coverage. Typically, homeowners insurance offers the greatest bundling discounts, as your home’s value is (usually) greater than your car’s.
While it may seem like a clear cut benefit for both insurance company and customer, bundling can be a double-edged sword.
In their study, “Seller Beware: How Bundling Affects Valuation,” University of Chicago Booth School of Business Professor Ayelet Fishbach and Chicago Booth Ph.D. candidate Franklin Shaddy probed the world of bundling.
“Consumers will demand more compensation for and experience greater dissatisfaction from the loss of items from bundles, compared to the loss of the same items in isolation,” Fishback concluded in the study.
“Yet consumers will offer lower willingness-to-pay for and experience less satisfaction from items added to bundles, compared to the same items purchased separately.”
Essentially, bundling items can raise customer expectations and lower customer satisfaction with the bundled items. Customers who bundle are less willing to pay for losses and are more upset by coverage interruptions.
Moreover, customers who bundle their policies with auto-renewal may forget to compare their rates with other companies when something cheaper comes along.
Setting and forgetting your bundled insurance policies can cause you to lose money in the long run rather than save.
Customers should also keep in mind that bundling can be deceiving. If you are offered a 25% reduction on your homeowners insurance policy through a bundle with your auto insurance policy, you may leap at the opportunity to bundle.
But beware: the savings on your expensive homeowners policy may pale in comparison to the savings you’d see by purchasing a cheaper, unbundled auto insurance policy elsewhere.
However, if you’re having trouble getting coverage for a risky home or a high-end car, the bundle might be your only option to get the coverage you need without breaking the bank.
That’s why it’s important to customize your coverage with a professional. Ask your friendly Frontlight insurance broker what policies to bundle so you can get the coverage you want with the money you have.
We learn your story, evaluate your coverage needs, and inform you of the best ways to combine your coverage so you can save money while staying safe.
With Frontlight, you can walk your path confidently knowing that no matter the twists and turns, we’ll light the way.