Bundling has become one of the most popular and least understood concepts in the world of insurance. A lot of this misunderstanding comes from popular TV ads which seem to misrepresent what bundling is.
Basically, there is no such thing as a “bundled insurance” policy. Instead, the term “bundling” refers to a package of policies sold by one insurer to one customer. Even though there is only one insurance company, one covered individual, and one payment, there are no bundled policies.
What a Bundle Really Is
Instead, there is a package of separate policies. Each of the policies in a “bundle” is different and separate. If you buy a bundled homeowner’s insurance policy and a bundled car insurance policy, you are buying two separate policies.
The insurer can raise the premium of or even cancel one of the policies without affecting the other. A person with a bundled car and home policy might see her auto insurance payment go up after an accident, while her homeowner’s premium stays the same.
Those people who think that their car insurance rates will stay low because they bundle are sadly mistaken. Despite what some insurers try to claim, the rates in a group of bundled policies are entirely separate.
Is Bundling a Good Deal?
The bundling of insurance policies can sometimes be a good deal, but it can also be a lousy one. The big advantage to bundling is less paperwork and only one payment to make.
Bundling can save you time and effort, but not necessarily money. When you bundle, you eliminate the ability to shop for different policies and different rates. In most markets, you can often find lower premiums on the exact same car insurance by checking with several different insurers.
Part of the reason insurers promote bundling is to lock you into a higher rate. Another reason is to be able to provide more commissions for insurance agents, who often push bundling because they can get larger commissions out of it. It goes without saying that bundling is also a very good way for insurance companies to hide price increases, the insurers hope that you won’t see that one of your premiums is going up.
Another problem with bundling is that not every insurer offers every kind of insurance. If you need specialty insurance, such as a policy for a business vehicle, you might be able to get it from an insurance broker.
That means bundling is often not a good deal; it is more convenient, but it may not save you money. The best option for most people is to shop around for insurance and be willing to get policies from different insurers.
Since most insurers offer apps and other means of direct communication, it is fairly easy to get in contact with them and file a claim. Your claim will not be processed any faster with a bundled policy. The reason for this is that the policies are separate and most companies have different processes for filing claims on different kinds of policies.
The bottom line is to be leery of bundling. It can benefit insurance agents and companies, but it isn’t necessarily a good deal for the average consumer.