Bundling your Home and Auto Insurance: Does It Save You Money?
Should you bundle your homeowners insurance and auto insurance? Since everyone’s insurance needs are different, there’s no one answer about which is better. There are some situations in which bundling works and some in which it doesn’t.
Starting With the Pros: Why Bundle?
There are two major reasons why you’d bundle – saving money and time – but different ways in which you’d achieve those savings.
Lower Cost of Coverage
Policyholders save an average of $500 per year or 16.1 percent by bundling their home and auto insurance. Bundle savings do vary significantly by state, however, so it’s wise to see what it’s like in your area.
Bundling generates the most savings in Mississippi, where policyholders save more than 23 percent per year. Nearby in Florida, however, bundling only saves 6.7 percent. Fortunately, you’re more likely to live in a state where savings exceed 20 percent than you are to see savings below 14 percent.
Saving on Multiple Claims
Now that extreme weather events are on the rise everywhere, it’s important to consider what could happen if such an event causes widespread damage to your property.
Imagine that a hurricane causes serious damage to your house and car. If you have policies with separate insurers, you’ll probably find yourself paying two deductibles. But if you bundle, your insurer may waive the lower deductible when you make a claim on both policies.
Two Policies, One Company
If something bad does happen to your property, you’ll have enough to manage without spending hours on the phone with multiple insurance companies. If you bundle, you have one point of contact for all your claims.
Even if you only have single-policy claims, you can still benefit from having one insurance company. It’s often easier to make a claim if you can call an agent that knows your account and situation. And then there’s the ease of remembering only one account number and login information.
Certain factors can make your home riskier to insure. These include:
- A wood frame construction
- A history of hurricanes, earthquakes, or flooding in the area
- Pools, hot tubs, and trampolines on the property.
Issues like these can make it harder for you to find affordable insurance. Some insurers will allow you to make up for the higher risk by paying a higher deductible but if you’re a low-risk auto policyholder, you might be able to avoid that extra cost by bundling home insurance with an auto policy.
The Cons – When Not to Bundle
Sometimes, bundling doesn’t save you enough money to make it worthwhile. Here are some examples.
Rate Increases Go Unnoticed
Bundling your home and auto insurance can be so convenient that you stop shopping around for rates. That’s especially true if your home insurance is in automatic payment through an escrow account, a common situation for those who offered down payments below 20 percent.
An auto-paid account is always less convenient to switch, and it’s even more so when it’s linked to another policy that you would also have to change. But you might be paying for that convenience.
Renewal periods are usually when prices increase but if you auto-renew, you might not be checking those documents. Your rates could be increasing above what you’d pay elsewhere and you wouldn’t even know it.
Cheaper Auto Insurance Elsewhere
Don’t assume that a discount translates to the lowest price.
Let’s say that your car insurance is $4,000 per year – just above the national average, according to a study conducted by US News and World Report. If you get into an accident, that could easily climb to more than $5,300.
You figure that your 20 percent discount is still keeping you competitive, but you’re still paying $4,240 – more than you were paying before your accident. But if there’s an insurer out there who would offer you accident forgiveness and cheaper premiums, they might even be able to bring your premium down below your original insurer’s initial rate.
Unless you need a high level of home insurance coverage, significant savings on car insurance is usually worth breaking the bundle. But usually doesn’t mean always, so make sure you calculate your rates with and without the bundle.
Remember, if you choose not to bundle, you can comparison-shop both policies separately!
Minimum Coverage Requirements
A number of insurance companies will require you to have certain coverage elements before you qualify for bundling. Sometimes what they require is what you need, but sometimes it isn’t.
Example: You live in California and your insurer offers bundling to customers whose auto policies include comprehensive and collision coverage. If you do add that coverage, your policy would cost $1,685 per year, which is average for the state. Bundling would save you 15 percent, which translates to about $252 off your policy.
To get those savings, you’ve paid $980, which is just about average for the state. But you have an older car that is valued around $1,000, so even if you total your car, you won’t even get your premium back after deductible. In your case, it’s not worth it to bundle.
You don’t want to have coverage that you don’t need unless it gets you a lower price.
So should you bundle? It seems that the answer is a resounding “maybe.” Or more accurately, “it depends.” Here’s a quick summary of the factors to consider.
You might want to bundle if:
- Your bundled plan is less than any individual combination
- Your home is high-risk to insurers but you’re a low-risk driver
- There’s a chance you might have to make claims on more than one policy
On the other hand, it’s worth thinking twice about bundling if:
- You know that if you do, you won’t check for price increases on a regular basis
- You don’t need the coverage that you’d need in order to bundle
- Separate policies would mean that you would pay less overall
Do your research, do the math, and then decide what your most cost-effective strategy would be. It’s the best way to find out whether you should bundle.