There are many ways to save money on insurance, but one of the most popular options is bundling (otherwise known as a multi-policy discount). Typically, bundling involves insuring your car and home with the same company. While the savings can be significant, they also vary from state to state.
A May 2014 Quadrant Information Services study, commissioned by insuranceQuotes.com, examined the average economic impact of bundling auto insurance with either homeowners, condo or renters insurance. Using a hypothetical 45-year-old married woman with a bachelor's degree, excellent credit score and no lapse in coverage, the study compared the average premium discount for three types of bundling in all 50 states plus Washington, D.C., and the results were intriguing to insurance analysts and experts.
For instance, consumers who bundle auto and homeowners insurance in Oklahoma can expect an average premium discount of 22 percent. However, bundling auto and homeowners insurance in Florida only results in an average premium discount of 5 percent.
"I think consumers, in general, leave a lot of potential insurance discounts on the table, and bundling is one of the biggest," says Mike Barry, spokesman for the nonprofit Insurance Information Institute. "No matter where you live, a multi-policy discount is worth looking into."
Why bundling home and car insurance saves you money
Bundling is one of most popular discounts that insurers offer.
According to Mark Carrasquillo, an insurance agent with the New York City-based E.G. Bowman Co., many insurance companies offer bundling discounts for one simple reason -- it saves them money in the long run.
"Insurance companies want to maximize profits, and the more business they write, the better," Carrasquillo says. "Bundling discounts are a way to entice the consumer, which means more business for the insurer."
What's more, Carrasquillo says, actuarial data (statistical information used to underwrite insurance policies) show annual auto claims exceed claims for either homeowners, condo or renters insurance -- which means insurance companies can maximize their profits if they write as many property insurance policies as they do auto policies.
"It’s possible to for a consumer to own a home for 30 years and never file a claim. But that same individual could conceivably have more than one incident with a car in just one month alone," Carrasquillo says.
Discounts for bundling home and car insurance
The most significant discount comes from bundling an auto policy with a homeowners policy. According to the insuranceQuotes.com study, the national average premium discount for bundling is 15 percent.
According to Troy Thompson, owner of the Minnesota-based Pinnacle Insurance Agency, there are several reasons this discount is more substantial than bundling an auto policy with condo or renters insurance. One reason is home insurance is more expensive than condo or renters, so discounts can be higher without drastically impacting an insurer's bottom line.
"There's another correlation to make here, and that is if you own a home you're probably more financially stable, which means that you’re statistically less likely to file a claim," Thompson says. "The insurer wants your business and it allows the company to offer a more significant discount."
Here are the top five states with the greatest average premium discount for bundling auto and homeowners insurance.
1. Oklahoma — 22 percent discount
2. Missouri — 22 percent discount
3. Iowa — 21 percent discount
4. Nebraska — 21 percent discount
5. Oregon — 20 percent discount
According to Oklahoma Insurance Commissioner John Doak, carriers that write policies in the state want to spread their risk among different kinds of policies because of the large numbers of catastrophic events in Oklahoma. Bundling discounts give consumers an incentive to maintain multiple policies with the same insurance company.
Meanwhile, the following five states showed the smallest percentage premium discount for bundling auto and homeowners insurance.
1. Florida — 5 percent discount.
2. Hawaii — 7 percent discount.
3. New York — 11 percent discount.
4. North Carolina — 11 percent discount.
5. Rhode Island — 12 percent discount.
The reasons for the disparity from state to state are varied and nuanced, Barry says. For instance, Florida has to contend with hurricanes, which makes it an expensive state for residents to insure homes.
It’s also potentially expensive for insurers to cover cars, too. "If a hurricane comes along, it might flood your car or cause a tree to fall on top of it. Because it's so expensive to insure property in that state, it means insurers can only cut rates so much," Barry adds.
Discounts for bundling condo and car insurance
Some condo and homeowners may not realize this, but insuring a condo is different from insuring a home.
Condo owners are usually only responsible for insuring everything within the four walls of the unit (and not the structure itself). The condo association owners generally insure the building and common areas. This means condo insurance typically costs much less than a homeowners policy, and therefore a bundling discount isn't as substantial.
According to the study, the national average premium savings for bundling auto and condo insurance is 11 percent.
The following five states show the greatest average premium discount for bundling auto and condo insurance.
1. Illinois — 17 percent discount.
2. Missouri — 16 percent discount.
3. Wisconsin — 16 percent discount.
4. Iowa — 16 percent discount.
5. Oregon — 15 percent discount.
Meanwhile, the following five states, on average, showed the smallest percentage premium discount for bundling auto and condo insurance.
1. Florida — 7 percent discount.
2. Rhode Island — 7 percent discount.
3. Virginia — 8 percent discount.
4. New York — 8 percent discount.
5. Connecticut — 8 percent discount.
According to Eli Lehrer, president of the nonprofit research group The R Street Institute, another reason for the state-by-state variation comes down to differences between individual regulatory environments across the country.
"Most of the states near the bottom have very strict regulation for either auto or homeowners insurance, which gives carriers less flexibility and thus little ability to offer savings," Lehrer says.
Discounts for bundling renters and car insurance
Like condo insurance, renters insurance is less expensive than a typical homeowners policy. That's because a renters policy only covers personal possessions, liability and, in some cases, additional living expenses if a tenant suddenly has to relocate.
Because it's less expensive than homeowners and condo insurance, bundling auto and renters insurance results in the least amount of savings. According to the study, the national average premium discount for bundling auto and renters insurance is just 8 percent.
"Homeowners and condo insurance are also just more complicated than renters insurance," Lehrer says. "This may provide more wiggle room (for insurers) to play with prices."
The difference in discounts might also be linked to the demographic differences between homeowners and renters.
"Statistics that show that a traditional homeowner has fewer claims than either a condo owner or a renter," says Keith Balsiger, owner of the Nevada-based Balsiger Insurance Agency. "A homeowner has a vested interest in the property and is more likely to maintain it."
The following five states show the greatest average premium discount for bundling auto and renters insurance.
1. Minnesota — 13 percent discount.
2. Indiana — 12 percent discount.
3. Missouri — 11 percent discount.
4. Wisconsin — 11 percent discount.
5. Iowa — 11 percent discount.
Meanwhile, the following five states, on average, showed the smallest percentage premium discount for bundling auto and renters insurance.
1. New Jersey — 5 percent discount.
2. Connecticut — 6 percent discount.
3. Florida — 6 percent discount.
4. Rhode Island — 6 percent discount.
5. Virginia — 6 percent discount.
<h2>How to save money bundling your insurance
Here are three tips on how to save money by bundling auto and home coverages.
1. Pay attention to policy details.
According to Thompson, it's important to find the best policy for your situation, which means looking at more than the multi-policy discount. Getting the best coverage for your situation should be your top priority.
2. Consider the net price.
Most of the time, bundling insurance is a smart choice for consumers. However, there are exceptions when purchasing policies from different carriers may be less expensive. So be sure to shop for insurance both ways before making a decision.
3. Shop different companies.
"Don't go with the first company that offers you a multi-policy discount," Thompson says. Since quotes from different companies vary considerably, savvy consumers always get multiple quotes. Comparing at least three different carriers is the best way to make sure you never overpay for insurance.
Study methodology: insuranceQuotes.com and Quadrant Information Services calculated the average economic impact of purchasing auto insurance with either home, condo or renters insurance using data from the largest carriers (representing 60-70% of market share) in each U.S. state and the District of Columbia.
Averages are based on a 45-year-old married, employed female with a clean driving record. The hypothetical driver has a bachelor’s degree, an excellent credit score, no lapses in coverage and the following limits: $100,000/$300,000 (bodily injury), $100,000 (property damage), $100,000/$300,000 (UI/UIM), $10,000 (PIP) and a $500 deductible.
Home: based on single family, 2-story, 1800 square foot, frame home, built in 1978 and the following limits: $144,000 (dwelling), $72,000 (personal property), $100,000 (liability), $5,000 (medical), and a $500 deductible.
Condo: based on $50,000 (personal property), $100,000 (liability), $5,000 (medical), and a $500 deductible.
Renters: based on $20,000 (personal property), $100,000 (liability), $5,000 (medical), and a $500 deductible.
View the press release here.