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Why Bundling Your Insurance Policies Can Get Expensive

home with garage

The endless commercials and the advice from your neighbor makes it clear — bundling your home and auto insurance leads to the best deal, right? Not so fast. Depending on several factors, bundled auto insurance may or may not lead to the least expensive or best option available to you.

Before we discuss whether bundling your policies makes sense for you, let’s first look at why someone would bundle their insurance in the first place.  

Typically, you would either bundle to get the best price, or to simplify your life by dealing with just one company, says Amy Bach, executive director for San Francisco-based consumer advocacy group, United Policyholder.

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Bundling sounds intuitively right  if you buy something in bulk, you tend to get better pricing. And according to a survey done by J.D. Power, customers who have multiple policies with a single home insurer have higher satisfaction and are more likely to advocate on behalf of their carrier.

But that doesn’t mean it is always the right move. In fact, according to that J.D. Power study, about 20 percent of home insurance customers who also have auto insurance do not bundle their auto policy with a home policy.

When to shop for insurance separately

So, why would you chose to shop them separately? There are a lot of reasons. Take for example, some insurers are specialists and are much better at one kind of policy than another. If your insurer is known as a homeowners insurance company, and nobody has ever heard of their auto line, that may spell trouble for you, and vice versa.

Another situation that may give you pause would be if your home insurer uses a partner company to sell you car insurance, which may or may not be as reliable as the company your originally chose, Bach says. You don’t want someone who isn’t specialized in that kind of policy to give you bare bones coverage or skimp on the quality of the protection they are offering.

And speaking of specialization, some insurers compete more aggressively for auto customers than home, Bach says. “So they may give you a great price on your car insurance but a crappy price on your home insurance.”

When you are considering a bundled policy, there are a few steps you should take to ensure your bundle will become a joy.

Obviously, first look for those discounts. Saving money goes a long way, and if wrapping your policies together saves you cash, that might be reason enough to wrap them up.

Next, consider your bill payment preferences. How important is it for you to get all your bills in one place? Do you use an old-fashioned check book to keep track of each bill as it comes in the mail, or are you automating your payments with an online bill pay service? Know your self and your habits. Getting one mailing may not just save you time, it could actually keep some unexpected surprises at bay, Bach says.

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“In today's world where companies are striving to be ‘paper free’ and push people into paperless statements, it's more common for people's insurance to lapse due to non payment because they missed a digital notice or email that they would have caught if it came in the mail,” Bach says. “In theory, bundling could help you catch a lapse/missed payment and avoid gaps in protection.”

But on the other hand, setting up a recurring payment one time and letting it take care of itself may be just as easy. 

Evaluate each insurance policy on its own merit

Next, evaluate each policy on its own. Sure, you are saving 15 percent by bundling, but if that policy started 20 percent more expensive, then are you really benefitting?

If you have to prioritize coverage, make sure your largest assets are protected by the best policy. It makes no sense to skimp on your $250,000 homeowners policy just so your $15,000 car is covered with a less expensive policy.

Finally, make sure to get lots of quotes from many different insurers. Bach recommends shopping for new policies at least annually, and give yourself a little time, and start at least a month before your policy lapses.

“Regardless of your wealth level, the ideal is to work with one trustworthy broker/agent to try and make sure all your assets are insured to value with a reputable company,” Bach says. 

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