Bundling Your Insurance: How Homeowners and Renters Can Save
Of the many ways consumers can save money on insurance, there is perhaps no more popular option than bundling your insurance (also known as having a multi-policy discount).
The concept is simple — insure both your home and car with the same company and you’ll probably get a discount. And while the annual savings for bundling your insurance can be quite substantial, the discount will vary depending on the state you call home.
For the third year in a row insuranceQuotes commissioned a Quadrant Information Services study to examine 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.
The results were once again intriguing to insurance analysts and experts.
For instance, consumers who bundle auto and homeowners insurance in Illinois can expect an average premium discount of 23 percent. However, bundling auto and homeowners insurance in Florida only results in an average premium discount of 7 percent.
What’s more, discounts for bundling your insurance will vary depending on what policies are combined. For instance, the average national premium discount for bundling auto and homeowners insurance is 16 percent, but bundling auto with renters insurance will only save consumers an average of 8 percent on an annual premium.
“Insurers, like many businesses, offer discounts to their most loyal customers, and individuals who have multiple policies meet that criterion,” says Michael Barry, vice president of media relations for the nonprofit Insurance Information Institute. “That’s why bundling your insurance is such a common option for discounts.”
Why bundling your insurance is a safe bet for savings
For insurance companies, the bottom line of bundling comes down to two important factors: customer loyalty and money saved.
David Meltzer, owner of East Insurance Group, says insurance companies are constantly looking for ways to retain customers. Offering a discount for bundling your insurance with multiple policies is a simple and effective way to accomplish that goal.
“The more business a customer does with a company, the less likely they are to move to another,” Meltzer says. “No one really enjoys talking to their insurance company or agent, so why deal with two or more of them? Besides, it’s so much easier to have all of one’s accounts in one place. Insurers know this is an appealing prospect for consumers.”
What’s more, Meltzer says bundling your insurance not only makes insurance companies feel more secure that competitors are not “on their turf,” but the substantial discount for bundling your insurance is offset by savings on account turnover.
Eli Lehrer, president of the nonprofit research group The R Street Institute, says insurers also save substantial administrative costs in the long run by offering multi-policy discounts. So bundling your insurance is a two-way savings street.
“The costs of sending a bill or processing an electronic payment, for example, are going to be roughly the same for one policy or two,” Lehrer says. “Having multiple products for one customer also gives insurers multiple streams of risk and claims data to make pricing decisions.”
Bundling discounts for home and auto
Once again, bundling auto and homeowners insurance offers the most substantial discount by far. According to the insuranceQuotes study, the national average premium discount for bundling these two products is 16 percent.
There are many reasons why this discount is more significant than bundling an auto policy with either condo or renters insurance, says Maria Moser, a former property insurance underwriter.
For starters, homeowners are — on average — less risky consumers than those who rent or own a condo. That means they are less likely to file a claim and therefore cheaper to insure. Bundling your insurance as a homeowner often delivers the most savings.
“I imagine the reason claim history for people who own and insure a home are better than those that do not are similar to other rating factors,” Moser says. “For example, a young married male is likely to be more cautious than a single male and less likely to have a car accident. Likewise, someone who owns and insures a home may be less likely to make a claim compared to a renter.”
What’s more, Lehrer points out that homeowners insurance is more expensive than condo or rental, so discounts can be higher without drastically impacting an insurer’s bottom line.
“Also, compared to renters or condo insurance, homeowners insurance is likely to be purchased for a longer period of time,” Lehrer says. “Homeowners are also probably a better market for life insurance and investment products that many insurers would like to cross sell.”
It’s important to note, however, that this discount for bundling your insurance varies from state to state. Here are the top five states with the greatest average premium discount for bundling auto and homeowners insurance.
1. Illinois — 23.31 percent
2. Missouri — 22.39 percent
3. Arkansas — 22.35 percent
4. Oklahoma — 22.34 percent
5. Kansas — 22.07 percent
Meanwhile, the following five states, on average, showed the smallest percentage premium discount for bundling auto and homeowners insurance.
1. Florida — 7.3 percent
2. Hawaii — 11.15 percent
3. New York — 11.18 percent
4. New Jersey — 11.20 percent
5. Virginia — 11.83 percent
As the study’s most extreme outlier, Florida can be a tricky state for consumers looking to save money through bundling.
For example, when Tampa-based writer Roxanne Gilmore asked her insurance agent if bundling her home and auto policies would save her money, the agent ran the numbers. What came back was shocking.
“The quote came back saying that bundling these policies would actually cause my auto insurance to increase by more than $200 a year,” Gilmore says. “Needless to say, I decided to keep my auto policy with one insurer and my homeowners’ with another.”
Gilmore’s failed attempt at bundling is emblematic of Florida’s unique insurance landscape, which is a result of constantly contending with the threat of possible hurricanes. Because of the state’s unusually high risk for natural disasters, both auto and homeowners insurance are more expensive, preventing insurers from providing a lot of multi-policy discount flexibility.
That makes bundling your insurance not as attractive.
“Because of its natural disaster situation Florida is a very unusual case,” Lehrer says.
Every sizeable company that sells homeowners insurance in almost any other state also sells auto insurance, Lehrer says. In Florida, however, about 35 percent of the market is written by either the Florida Citizens Property Insurance Corp. — a state entity that doesn’t sell auto insurance — or small state and regional insurers that write homeowners insurance but not auto insurance.
“So Florida isn’t comparable to the rest of the country since many of the multi-line discounts are not what they seem to be,” Lehrer says.
Bundling discounts for condo and auto
According to the insuranceQuotes study, the national average premium discount for bundling your condo and car insurance is 11 percent. The savings are significant, but not as dramatic as homeowners insurance.
One of the reasons for the variation is that insuring a condo is different from insuring a home. If you own a condo you are only responsible for insuring whatever is contained from the walls in (not the structure itself). More often than not, the condo association is responsible for insuring the building, making condo insurance less expensive than homeowners insurance and the discounts less significant.
Nonetheless, discounts still differ between states. The following five states show the greatest average premium discount for bundling auto and condo insurance.
1. Illinois — 16.11 percent
2. Wisconsin — 15.48 percent
3. Missouri — 15.41 percent
4. South Dakota — 15.07 percent
5. Arkansas — 14.37 percent
Meanwhile, the following five states, on average, showed the smallest percentage premium discount for bundling auto and condo insurance.
1. Florida — 6.58 percent
2. Virginia — 6.83 percent
3. North Carolina — 6.84 percent
4. Connecticut — 8.05 percent
5. New Jersey — 8.14 percent
Bundling discounts for renters and auto
Even less expensive than homeowners and condo insurance, renters insurance typically covers nothing more than personal possessions, liability, and, in some cases, additional living expenses if a tenant has to relocate. And because it is the cheapest of the three, the discounts offered for bundling your insurance are fairly low.
According to the study, the national average premium discount for bundling auto and renters insurance is just 8 percent.
The following five states show the greatest average premium discount for bundling auto and renters insurance.
1. Minnesota — 13.29 percent
2. Indiana — 11.73 percent
3. Massachusetts — 10.75 percent
4. Wisconsin — 10.61 percent
5. Illinois — 10.49 percent
Meanwhile, the following five states, on average, showed the smallest percentage premium discount for bundling auto and renters insurance.
1. New Jersey — 4.54 percent
2. Virginia — 5.62 percent
3. North Carolina — 5.83 percent
4. Washington, D.C. — 5.89 percent
5. Florida — 5.96 percent
Will bundling discounts continue to grow?
According to the study, the national average discount for bundling homeowners and auto insurance has increased slightly during the past three years. What’s more, certain states have shown noteworthy increases in the amount consumers can save through bundling your insurance.
For instance, the average premium discount for bundling auto and homeowners insurance in West Virginia jumped from 11 percent in 2015 to 16 percent in 2016.
Meltzer says this increase for bundling your insurance can be attributed to growing competitiveness within the insurance industry. However, he suspects that insurance companies are perhaps reaching a peak of competitive pricing, which means discounts for bundling your insurance may start leveling off.
“I attribute the trend of increasing discounts to competition, and it seems like insurance companies have become dramatically more competitive in the last few years,” Meltzer says. “All the carriers watch each other very carefully. One thing I’m willing to bet on, eventually, is that the increasing discounts will recede. In other words, what goes up must come down. But for now, it’s a solid way to save money.”
Quadrant Information Services and insuranceQuotes 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 percent 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 1976 and the following limits: $140,000 (dwelling), $70,000 (personal property), $300,000 (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.