4 Times When Bundling Insurance Doesn't Make Sense

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Insurance companies offer a host of ways to reduce the premiums you pay for auto, life, home, and health insurance. If you have a clean driving record, you might qualify for a discount on your auto insurance rates. If you install a security system to protect your single-family home, you might have to pay less for your homeowners insurance. And if you don't smoke, you'll certainly pay a lot less for life insurance.

One of the most popular ways to qualify for a discount is to bundle different insurance policies together — say, your homeowners and auto policies — from the same insurer. Insurers will give you a discount as a reward for buying more than one policy from them.

Bundling is popular. A 2016 story by InsuranceQuotes.com cited a U.S. National Auto Insurance study by J.D. Power and Associates saying that 58% of policyholders bundle their homeowners and auto insurance policies. InsuranceQuotes.com also reported that bundling insurance can save policyholders about 10% off their annual rates, if they land the best bundling deals available.

But, there is a catch here, and sometimes taking out life, auto, and homeowners policies with different companies makes the most sense. Even though bundling might sound like the obvious choice for consumers hoping to save money on insurance coverage, there are a few times when bundling actually doesn't result in the biggest financial savings.

You Didn't Shop Around

The best way to nab the lowest rates on insurance is to take the time to shop around with different companies. This is far easier today, with insurers providing online quotes to potential customers.

It can be tempting to skip the shopping phase if, for example, your auto insurer offers to provide a bundling discount for your homeowners insurance, too. But resist the temptation to take your insurer's offer until you've shopped around. You might find another insurer that will provide you a policy with a premium low enough to outweigh your first insurer's bundling discount. Armed with a lower quote from a competing insurer, you might even be able to convince your current insurance company to provide you an even bigger discount.

You Have a History of Health Problems

You'll pay far less for life insurance coverage if you have a history of good health. If your past is dotted with serious health issues, you can unfortunately expect your life insurance premiums to be higher. This spotty health history might also make it less financially sound to bundle your life insurance coverage with auto or homeowners insurance. Again, it's especially important to shop around with life insurance providers, especially when you have a complicated health history — including if you smoke or have a chronic condition.

It's also worth noting that you may not want something as important as your life insurance coverage bundled through a company that specializes in say, auto insurance. In that case, it may be worth having it be its own separate policy.

Your Driving Record Isn't Exactly Flawless

Claim an accident on your auto insurance, and you can expect your premiums to soar. Again, it makes sense to shop around with different insurers to find the lowest rates when you are stuck with a spotty driving record.

If you instead simply bundle your auto policy with the company that provides your homeowners insurance, you might miss out on lower premiums that will outweigh the bundling discount. Do your homework — even if it takes time — to discover if there are other insurers out there willing to give you a bigger break for your past driving mistakes.

You Need Specialized Homeowners Coverage

What if you need your homeowners insurance policy to cover an expensive jewelry collection? What if you need to insure solar panels on your home's roof? This coverage can be complicated, and cost more. Again, when you have such specific needs, if often makes more sense to talk to different insurers than blindly accept your provider's bundling offer.

The main point here is that often, bundling will save you the most money. But there are exceptions, and you won't know the savings you might enjoy if you don't first shop around with other providers — even if your current insurer is promising a bundling discount.