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Home and Auto Insurance: Does Packaging it Really Save Money?

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“Packaging your home and auto insurance” refers to obtaining both insurance policies from the same company. Of course, as with most other insurance options, there are potential positives and negatives to doing so.

Depending on which type of insurance company and/or agent you work with, you could ultimately save or lose money. The one certain thing is that the insurance company will benefit.

Benefits to the Insurer

The insurance company wants to package your home and auto insurance for a few reasons:

1. No brainer; they get more insurance premium dollars per household for doing so.

2. The insurer (or agent) has a lower acquisition cost in obtaining the policies, i.e. they don’t have to necessarily advertise for both to sell you both.

3. Insurance company statistics show that they tend to retain your business longer when they have both policies (it’s harder to leave).

4. Actuarial data (actuaries are insurance numbers geeks) shows that individuals with a homeowner’s policy or renter’s insurance policy tend to have fewer insurance claims.

5. Insurers can offer a discount to individuals who package, which makes them more competitive and allows them to sell more insurance overall.

Benefits to the Insured (You)

There are also some benefits to you as the consumer…

1. Similar to #5 above, the discounts offered will potentially save you some money by qualifying for a so-called “combo discount.”

2. Packaging means you only receive one bill each month, which can save you time and cut your payment processing fees (if applicable) and chances of making a missed payment.

3. Some insurers will allow you to pay a single deductible for property damage claims that affect both your home and auto at one time. For example, a hail storm that damages your home and car while it’s in the driveway.

4. Insurers are more likely to make pricing and underwriting exceptions for a customer that has more than one in-force policy with them. For example, they may be willing to lower your auto premium to keep your business if you threaten to move both policies to another insurer to get a better deal.

Downside to Packaging Insurance with One Company

You still need to be a savvy insurance consumer to make sure you’re not getting the short end of the stick on your packaged insurance.

Insurance companies whose insured are not as prone to comparison shop their insurance (State Farm, Farmers) can sometimes get the better of a consumer.

Insurance isn’t much different than any other financial service – you’re susceptible to paying too much if you don’t shop around from time to time.

This is much more likely to be a concern if you use a captive agent versus an independent agent.

Here’s how it can go wrong:

Your insurer may be very competitive on one line of insurance, auto for example, and then sell you a homeowner’s policy that is 25% more expensive than what is available in the marketplace.

Essentially, they get you in the door by advertising a low auto premium, and then sell you the package with an overpriced home policy.

It is recommended that you use an independent agent who can shop several companies to determine which insurer is competitive on both policies at any given time.

Remember, brand loyalty does little to help the average insurance consumer. Just ask one of your neighbors who made one claim after 15 years and were non-renewed!

Read more: Progressive Bundling

(photo: LancerE)

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