From the game console, popular game, and controller bundle to a smartphone, headset, and phone case bundle, much of what we purchase is packaged together.
As consumers, we’re familiar with heaps of bundles (bundles of bundles?) of products we’re looking to buy.
It makes sense, after all. If you’re buying an Xbox One, chances are high that you’ll also want to purchase the newest and most popular game. And if you’re buying a new phone, you’re definitely not leaving the store before encasing it in some military-grade armor.
So why not bundle insurance, too?
Bundling promises a lot. In general, the idea is that you’re usually getting more bang for your buck. Discounts are always great, of course! But when it comes to life insurance, does an upfront discount make sense on a long-term basis? And if it does, are there any other opportunity costs?
Don’t bumble about with bundling anymore. Let’s talk about the practicality and impact of bundling life insurance.
Should You Bundle Life Insurance?
While convenient, bundling life insurance with a home, auto, or other insurance policy isn’t always the best choice for your wallet. Bundling life insurance often results in a discount on premiums, but it can become substantially harder to shop around — and save — on a long-term basis. Worse yet, bundling life insurance could lead to inconvenience and headaches further down the line.
When Does Bundling Life Insurance Make Sense?
Insurance companies wouldn’t offer bundles if there was no market for them. That’s Business 101. So, there have to be good reasons for consumers to buy them, right?
Let’s look at why you might consider buying a life insurance bundle.
You Could Save Money
Sometimes bundling life insurance makes sense, especially when it comes to saving cents. The biggest draw of bundling is the potential for receiving a discount on all the insurance policies you’re buying. (Sweet, sweet discounts.)
You’re likely wondering how insurance companies can afford giving customers discounts for bundling. What’s the catch?
There isn’t one, really. Essentially, when you apply for an insurance policy, the insurance company will go through the underwriting process. During this process, the company determines what your risk factor is — how likely (and how soon) you’ll file a claim.
It costs insurers time and money each time they underwrite a policy. But when you apply for multiple policies (or a bundle) from the same insurer, they’ve already done most (if not all) of the underwriting for you. It’s much cheaper to sell you an additional policy than for them to sell that same policy to a new customer.
Those savings, then, are passed on to you. Aw yeah.
You’re Less Risky a Customer
Let’s say you’re bundling home, auto, and life insurance with one insurer and getting a kickass discount on all three policies. Your home’s in tip-top shape, your driving record is impeccable, and you’re fit and athletic enough to participate in American Ninja Warrior if you wanted.
Sadly, misfortune can find us all, no matter how hard we work to hold it off. Weather can often damage your home and car at the same time, for example. With separate policies from different insurers, you’d be looking at paying two deductibles before your coverage pays out for either.
In some cases, your insurer may only require you to pay one deductible for events that would trigger multiple claims — like a hailstorm that damages both your home and car.
On top of that, insurers are also less likely to drop you for filing claims if you maintain multiple insurance lines with them. Sure, you may cost them a little upfront, but they’ll still come out ahead long-term as you pay the premiums of your bundle.
One Company, One Bill (Maybe)
How many times have you opened your mailbox and groaned as you pulled out a stack of bills? It sucks, and each additional bill is all the more reason to imagine yourself packing your bags and living your life off the grid.
In many cases, bundling your life insurance is a way to reduce how many bills you’ve got to pay. If you take out multiple insurance policies at the same time, it’s very likely their premiums will be due on the same day of each billing period. That means you’re taking care of multiple bills all in one fell swoop (and, if you’re still getting paper bills, helping save the planet too).
It is worth noting, however, that this isn’t always guaranteed. If you take out an additional insurance policy at a later time, its payment date might not align with your existing policies, even if you’ve bundled them together. If this happens, contact your insurer’s customer service department to see if they can combine the separate bills into one.
Why Shouldn’t You Bundle Life Insurance?
The apparent benefits of bundling life insurance don’t often outweigh the sacrifices you’d have to make in order to do so. Though it’s hard to deny the feeling of getting a discount, you actually might end up spending more money on a long-term basis because…
Bundling Life Insurance Makes It Hard to Comparison Shop
When you bundle insurance together, you’re essentially committing to the entire package. Insurers love this because you’ll be less likely to drop a policy and lose your discount.
Except one insurer’s bundle is nothing like another’s. Comparison shopping bundle to bundle can feel like comparing apples to oranges, costing you time and leaving you frustrated. And maybe you’re even paying for coverage and riders that don’t make sense for your situation at all.
You’ve likely had that happen before. How many families still pay for landline service they never use simply because it gets them a discount on their internet and cable bill?
It’s the same way when it comes to bundling life insurance. If you bundle term life insurance together with home and auto insurance, your life insurance premiums may remain level. However, your home and auto insurance premiums are hardly guaranteed, especially if you happen to file a claim.
And you’re likely going to start shopping around when your policies’ premiums get more expensive.
One Size Doesn’t Fit All
It’s easy to fall into the trap of bundling life insurance based purely on the low price and discount, especially compared to alternative options. What you could be overlooking, however, is exactly how much (or how little) coverage you’re getting.
One insurer may include a term life policy in its bundle, while a competitor includes whole life insurance in its offering. Not only will you need to compare the cost and coverage of home and auto insurance, but the type of life insurance policy being offered, to boot.
You Might Not Be Dealing With Just One Company
When you have a problem with your TV, internet, or landline (haha!), who do you call? Your service provider, of course.
If you bundle your home, auto, and life insurance together, who do you call when you have a question about your policies? The insurance company you bundled with, right?
Well… not always.
Some insurers specialize in a particular type of insurance. That’s not to say their other lines of insurance are ineffective or untrustworthy, but they may be underwritten by a third-party insurance company.
Though you’re still receiving the bundle discount, what happens when you have a problem? Well, it’s very likely you’ll have to deal with both companies to resolve it or file a claim.
Does Bundling Life Insurance Save You Money?
The biggest reason buyers choose to bundle life insurance is the promise of discounts and savings. In spite of the potential inconvenience and frustration of bundling, it’s an uphill battle to argue against a lower bill than if you hadn’t bundled.
But just how much money does bundling save you?
Your mileage may vary, though.
That’s because home and auto insurance, especially, are more expensive in states with more risk factors, like those under the constant threat of hurricanes. Bundling insurance in states with fewer risks often results in a better discount.
In the end, what matters most is doing your due diligence before signing on the dotted line. Shop around to compare life insurance bundles vs. separate policies. Will you save more with a bundle, or does the potential for inconvenience or lackluster customer service make that $322 difference a little easier to deal with?
By shopping around and comparing insurance prices (and products), you might actually end up saving more without even needing to bundle!