Bundling Insurance Is Billed As A Great Way to Save Money, But Is It?
You might have seen those ads on TV by companies that offer more than one type of insurance stating that you could save a ton of money by using them for all your insurance needs.
Combining insurance, or "bundling" as it's very often called, is often thought of as a "no-brainer" when it comes to getting enough coverage, but is it really always the best choice?
What Exactly Is Bundling?
A lot of times, when people have multiple insurance policies, they're with completely separate companies, meaning they have to pay bills to different providers, contact different providers when they have questions, and are subject to different kinds of policy conditions.
This can be a real hassle from a practical perspective, so people are often inclined to get all their insurance from one company if at all possible. As this decision maximizes the revenue of insurance companies, those companies offer bundling options, which provide a discount on insurance rates that increase as the number of policies someone has with a company also increases.
For instance, a couple might have auto and life insurance policies with two separate companies; both costing $100 a month. They can then have the options of "bundling" those policies together with one company at a 10% discount, meaning they now end up having to pay $90 a month for each policy.
Why Do People Consider Bundling A Good Idea?
Bundling tends to be incredibly popular because you always know what you're getting when you buy insurance. You don't need to go through the hassle of figuring out the trustworthiness of your insurance provider and it's always possible you can deal with a single insurance agent instead of multiple ones.
Bundling also reduces the prevalence of certain mishaps relating to making payments. Especially if you have a lot of policies stretched across several companies, it can be really easy to mix things up; you might have thought you already paid a bill or maybe you sent a company the wrong amount. When bundled, you usually have to pay for each policy separately, but it becomes much easier to keep track of everything and bills tend to be much more straightforward.
And, there is of course, the added benefit of a discount when everything is bundled. It's incredibly common for people to keep onto a lot of their money over the years through bundling as thousands of dollars worth of savings start to rack up.
Why Is Bundling A Bad Idea Sometimes?
While the benefits of bundling are relatively straightforward, the downsides are less so, which is an issue, because there are actually quite a few ways in which bundling can be a really bad decision.
To begin with, savings aren't necessarily super important when it comes to insurance as the point of insurance is to avoid massive expenditures in the event of financial catastrophe. You might save on your monthly premium, but if you have a substandard policy with a lot of tricky exemptions and limited coverage, then that completely defeats the purpose of having insurance in the first place, making any savings kind of pointless. If bundling means that you have to switch to a less than ideal set of policies, then give it a pass.
It's also important to note that some policies are only really available under certain circumstances. This is especially the case with life insurance, where policy rates can be locked in for decades, starting when you're really young. These kinds of policies can save you a ton of money and potentially compromising them for the sake of bundling might be a terrible idea.
Additionally, there's the issue of a lack of assurance. Just because you're getting a good deal at the present moment with bundling doesn't mean it's going to stay that way. It's entirely possible that an insurance bundle could cost you more than an alternative series of options over time if you're not super diligent about changes made in policies.
What Should You Go With?
Whether or not you should bundle your insurance policies is a pretty context-dependent question. It's going to come down to how much convenience is worth to you, whether you place a great deal of trust in a company, and what kinds of policies you already have access to.