Most people understand that insurance is a necessary product but, as with other necessary products, that doesn’t mean they won’t try to find a way to save money on it.
Bundling insurance coverage is the process of having several policies issued by one insurance carrier thereby creating a package made up of several different coverage options. This can be done by a single individual purchasing several different lines of coverage with one company or a family bundling several different family members’ policies, such as when parents bundle their teen’s auto policy with their own. While many overlook the benefits of bundling, it’s actually a great way to help you save money on several different levels.
Bundling means discounts: There are many reasons insurance companies want to encourage bundling. First of all, when you have a bundle or several different policies with one insurer, it increases the likelihood that you will remain a loyal customer through the years. Secondly, bundling can give them extra insight on your risk making their underwriting process more efficient. Finally, the more insurance you have with them the more you pay in premiums and the less likely they are to have to pay out claims on all of those various insurance policies–which is just a complicated way of saying it’s another means of spreading the insurance company’s risk. Either way, when you bundle policies, your insurance company is likely to offer discounts on the collective premium. Some insurance companies will offer greater discounts the more you bundle.
Only one insurer: When bundling insurance policies you may end up paying just one premium payment. Even if your insurance company separates the premium payments for each line of coverage, the due dates will generally be the same and you will have one address to send premium payments to. You might not think this is a money-saving move, but actually it is. With this method you run less risk of being late on any individual premium payment which means you’re less likely to lapse an insurance policy. A lapsed insurance policy is one that is canceled for nonpayment and in order to get it re-issued, you likely have to pay a penalty not to mention you leave yourself exposed to tremendous losses during the time it’s lapsed.
Making claims easier: There is a financial concept called the time value of money; basically, this concept shows that today’s dollars lose value over time. The money you have today can be invested to earn more and it has the buying power of today’s costs without inflation. That same money, given to you in the future, will have less buying power thanks to inflation and will have missed out on a chance to earn interest. How does this relate to a bundled insurance policy? When you bundle insurance coverage it makes it easier to submit claims for multiple lines of damage. As an example, after a tornado, a homeowner might need to make both a home insurance claim and an auto insurance claim. When working through only one insurer, that process is much easier and quicker which means you have to wait less time for your money.
Insurance is not a product that should be obtained willy-nilly. Have a plan for the way you want your policies run and consider processes such as bundling to help you accomplish that.
This article is provided by Cathleen Stuart, a writer for buyhomeinsurance.net. This site provides home insurance tips and serves as a guide to saving money on homeowners insurance.