Pensive Woman Holds Piggy BankYou may have heard of “bundling” as a way of saving money on your auto insurance. What is “bundling?” Does it really save money on car insurance prices? Are the limits to bundling or times when it would be better to buy separate policies?

Bundling Defined
Bundling is the process of combining several types of insurance into one overall policy group and pricing the group accordingly. Many insurance companies see the benefit in having all of the insurance business for a particular customer, so they offer discounts if the customer will keep all of their policies with a single provider. A “bundle” might consist of home, auto and life insurance with a ten-percent discount on each policy as a benefit of the bundle.

Does Bundling Really Save Money?
Bundling can certain gain discounts for customers who stay with a single company. However, the customer must be aware that the discounts offered may not be as great as the lower prices the customer can get from splitting up policies.

Here is an example: Customer A bundles with a single company. He has an insurance policy on his home, his car, and his life. He gets a ten percent discount on each policy, so his car insurance drops from $1500 every year to $1350; his homeowner’s drops from $1000 to $900; and his life insurance drops from $600 to $540. He has saved a total of $310 on his insurance for the year by bundling.

However, Customer B shops around for prices from different companies. She finds car insurance for $1380 per year; homeowner’s for $850; and life insurance for $520. She has paid a total of $2,750 for the year for her insurance products as opposed to Customer A’s $2,790 total, even without discounts for bundling.

This example may not be typical; it simply illustrates the fact that customers should not be so caught up in bundling discounts that they fail to shop for insurance quotes from several companies. In this example, Customer B actually pays slightly more for her car insurance but overall pays less per year for her insurance products.

Are There Limits to Bundling?
In reality, the only limits placed on bundling are placed by individual insurance companies. Most companies are anxious to bundle because they know that this will attract and keep more customers. Many companies also use bundling as a way of rewarding loyal customers; those who keep their business with a company over time receive even more discounts than those who move to other companies frequently.

However, this does not mean that customers should be blindly loyal to any insurance company. Here are some situations where a long-term customer who bundles with a particular company may decide to explore other auto insurance options:

  • Prices have been creeping up or staying stagnant for some time. While inflation and other factors may raise insurance prices slightly, customers should expect to see their auto insurance premiums drop over time as long as they have no tickets or accidents and keep the same vehicle. As vehicles age, they become less valuable, which should lead to lower insurance premiums. If you are not seeing regular decreases in your premiums, this should be considered something to check into. Some companies practice a bait-and-switch technique in which they incrementally increase prices unless the customer specifically asks for a discount. At the very least, it is vital that you review your insurance policies yearly and chat with your agent about possible discounts you may be missing.
  • You find that other companies are offering the same insurance for much less. It is possible that if you approach your current insurance company with information about other company’s prices your current insurer may offer you a better deal. However, you should be prepared to weigh the benefit of staying with your old company against possible discounts given by other companies. Some companies will offer low “introductory” rates to draw in customers then will raise those prices after six months.
  • You are dissatisfied with your company’s service. It does not matter how cheap your car insurance is if you cannot get your company to pay a valid claim. Check on the reputation of any company you choose to do business with before purchasing their products.

You can save money on your car insurance by bundling and by using common sense when comparing car insurance policies. A little intelligent shopping will go a long way toward helping you decide if you are getting the best deal for your car insurance.