3 Reasons You Definitely Don't Want to Bundle Your Insurance Policies

Most people need multiple insurance policies, such as auto insurance and home insurance. Insurance companies know this and they typically encourage people to bundle coverage. Bundling means buying several policies from the same carrier.

Bundling insurance policies can seem attractive because doing so often comes with a discount. And it may just feel like it's easier to have only one insurer to deal with instead of several. But, the reality is, bundling is not necessarily always the right choice.

In fact, here are three reasons why consumers may want to steer clear of bundled coverage.

1. Bundled policies still may not be the cheapest options

Many people choose to bundle their policies together because they feel like doing so will be the cheapest way to get covered. And this can sometimes be the case, since discounts for buying multiple policies are typically between 5% and 25% depending on the carrier and the types of coverage being purchased.

But, just because bundling can be cheaper doesn't mean it always is. Sometimes, a consumer may be able to get really low-priced car insurance from one carrier and really low-priced home insurance from another -- and the combined cost of those two separate policies may be less than the total cost of buying a bundled policy. That's because insurers price risk differently and the company that offers a consumer the cheapest car insurance isn't necessarily the same one that will offer that person the cheapest home coverage.

Consumers who bundle coverage may also not shop around as much with different carriers when it comes time to renew their policy. It can seem like a real hassle to get quotes from different companies for different policies. But, not shopping around and sticking with the status quo can lead to higher rates because those consumers will miss new options that become available and because insurers often charge elevated premiums to people who they don't think will do price comparisons.

Ultimately, it is important to get quotes for both bundled and separate policies each year to make sure the best deal is truly being offered.

2. All of the desired coverage may not be available

Another downside to bundling coverage is that a single insurer may not offer all of the different kinds of protections that a consumer might want.

For example, some insurers have better protection for new car owners than others, offering new car replacement for longer periods. And others may offer better coverage for home insurers, such as offering building code upgrade insurance that provides extra money to bring a building up to code if repairs must be made.

Bundling policies with one insurer could mean giving up the chance to get the best, most comprehensive insurance for each different asset. This could leave consumers facing more out-of-pocket costs in the event of a disaster.

3. There's a risk of poor customer service

Finally, there's a risk that consumers could experience worse service from their insurer if they bundle coverage. That's because one company may be really great at handling auto insurance claims, but not the best at handling home insurance claims, or vice versa.

It's important to check customer satisfaction ratings and complaints for each specific type of insurance policy and ensure that an insurer chosen to cover a particular asset has a good reputation for those particular kinds of policies.

For all of these reasons, consumers should think twice about bundling and should really do their research to make certain it makes sense in their situation.