Pros and Cons of Bundling Insurance Coverage

Bundling may not always be the best choice.

Most insurance companies provide a discount for bundling coverage. Essentially, that means it's possible to save money on insurance by purchasing multiple different policies from the same insurance company. This could be home and auto policies, or renters and life insurance policies, or any combination of different kinds of coverage.

Before deciding to bundle, though, it's important to consider both the pros and cons of taking this approach.

Benefits of bundling insurance coverage

Here are some of the biggest advantages of bundling different insurance policies by buying them from the same company.

• Cost savings: The savings from getting several different policies from the same insurer can often be substantial. While the specific discounts provided will depend on the insurer and the types and number of policies purchased, it's possible to save more than 15% on premiums in many cases. This can sometimes mean buying coverage costs a whole lot less.
• Convenience: Buying multiple policies from the same insurer can be easier than getting many separate policies from different companies. Often, multiple policies can be managed from the same online account or purchased from the same insurance agent. And if something goes wrong and there's a lack of clarity as to which type of insurance will cover it, then there's no need to get multiple insurers involved to work out the issue.

Downsides of bundling insurance coverage

Unfortunately, there could also be some downsides to bundling. Here's what they are

• Policies may not always be the cheapest: Although insurers offer discounts for bundled policies, that doesn't necessarily mean the combined total cost of coverage will always be cheaper. Say, for example, that one company offers very affordable auto insurance coverage but very expensive homeowners insurance. Bundling the two policies may still not provide enough of a discount to make up for the high home insurance premiums. It might be cheaper to get the auto insurance only, and to buy an inexpensive homeowner's policy from a different insurer -- even after accounting for the bundling discount.
• The quality of coverage could suffer: In some cases, insurers are great at handling claims and providing comprehensive coverage with certain policy types -- but aren't as good with others. For example, an insurer might have an amazing reputation for fast handling of homeowner's insurance claims but a very poor one for handling boat insurance claims. In that case, it may not make sense to bundle these types of coverage with that insurer.

Is bundling the best choice?

Although it may be tempting to bundle policies by default due to the discounts that result, consumers who are shopping for insurance shouldn't necessarily take this approach. Instead, it's best to get quotes for individual policies as well as bundled coverage from a variety of different insurers to see which options provide the lowest overall rates.

It's also important to compare customer reviews and data on claims handling from different insurers to make sure that using the coverage won't prove too difficult. If an insurance company doesn't have a good reputation for providing a specific type of coverage, don't buy it from them just to bundle. After all, while saving money on insurance premiums is a good thing, the purpose of insurance is to provide protection -- and finding an insurer that executes on that should be the primary goal.