Should you bundle your life insurance?

Cars. Homes. Motorcycles. Boats. Lives. Insurance is an important step in taking care of the things that matter to us and the people we love.

But making sure you have the right insurance can be tricky, especially if you're juggling multiple policies and, potentially, multiple insurance companies. It might be easier and more affordable to bundle your policies.

So when you see an ad that encourages you to buy multiple types of insurance policies with the same insurance company, how does that apply to life insurance?

Bundling and multi-product discounts

Let's start with a few definitions.

• Bundling means using the same insurance company for some or all your insurance needs.
• A multi-product discount is the potential discount or premium savings you may receive when bundling.

Bundling doesn't always equate to a multi-product discount. Because multi-product discounts are regulated by state-specific laws and don't apply to all products, some insurance companies can't even offer them. Those insurance companies that do, however, can help their customers save on premiums by packaging policies together.

When it comes to establishing your financial plan, choosing a life insurance company is a crucial aspect and it's important not to make a decision solely based on multi-product discounts. This is especially true because life insurance can be hard to get and has longer terms than auto insurance or homeowners insurance.

What does bundling life insurance mean?

We've already determined that bundling insurance policies means purchasing multiple types of insurance from the same insurer. For example, buying both auto insurance and homeowners insurance from the same insurance company could be thought of as bundling. But how does that work for life insurance?

Life insurance may allow you the opportunity to apply multi-product discounts to auto and property insurance policy premiums. Life insurance regulations prohibit the discount from being applied to a life insurance policy.

So if you're looking to reduce your overall insurance costs, it could be beneficial to purchase your life insurance plan with the company that provides your auto or property insurance. Since everybody's situation is unique, you should get a life insurance quote and evaluate your overall premium costs.

For example, imagine you're shopping for life insurance from your auto insurer and the expected premium is $50 per month. If your auto insurance premium is $100 per month, that brings your total anticipated premium to $150 per month.

If you're eligible for the company's multi-product discount, they would apply it to your auto insurance premium, resulting in an overall savings.

What types of insurance can I bundle with my life insurance?

Most insurance companies offer these insurance products that can be bundled with life insurance.

• Auto
• Homeowners
• Renters
• Umbrella

Why bundle life insurance?

Besides the money you could save by bundling, what are some of the other benefits?

Convenience

Multi-product discounts can simplify the insurance-buying process. When you bundle your policies, you'll have just one insurer to deal with and potentially one monthly bill to pay. Signing up for new policies can be easier because the paperwork and evaluation processes will be streamlined.

Multiple needs

Given that insurance is the foundation of a solid financial plan, having a single insurance company responsible for your defensive strategy can make planning and annual reviews much easier. In addition, if you have complex life insurance needs, having combinations of term life insurance and permanent life insurance with the same insurance company can create a consistent plan.

Cons of bundling insurance

Even though bundling seems like a smart financial move, consider the following drawbacks.

Fewer options

If your focus is on bundling, you may not get the best coverage or rates for each type of policy you're shopping for. For example, though your auto insurance company may also offer life insurance, that life insurance may not be the best product for your needs.

Also, if you're shopping for insurance based on the ability to bundle, you might not have as many companies to choose from — and you may end up paying higher rates even with a discount. It can also be hard to compare rates between companies when your policies are bundled because it's not always clear how much you're saving.

Limited customization

Everyone has different needs when it comes to insurance — especially life insurance. Finding a policy that best fits your needs^{See note1} should be the most important factor, not the ability to bundle. Be sure the policy you buy is customized to fit your lifestyle.

Is bundling insurance worth it?

Whether it makes sense to bundle your insurance policies — especially when purchasing life insurance — depends on your situation and your specific needs. But if you're looking for a way to save money on your overall insurance portfolio, it can be a helpful tool.

As you consider whether the benefits of bundling outweigh the cons, work with a licensed insurance agent. They can help you ensure you have the coverage you need at a price you can afford.