Every insurance commercial tells you to bundle. "Bundle your home and auto and save!" The gecko says it. The emu says it. Every agent says it. And it's true — you usually save 10-20% by bundling. I saved $312 a year when I bundled my home and auto with the same company. Felt pretty good about it.
Then I reviewed my coverage two years later and realized I was underinsured on both policies.
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Here's how it happened. When I bundled, the agent was focused on the discount. "You'll save 15%!" she said. "That's $300 a year!" I was focused on the savings too. I didn't pay enough attention to the coverage details. The home policy had a coverage limit based on my purchase price, not replacement cost. The auto policy had state minimum liability because "that's what most people choose."
Two years later, construction costs had risen 25%. My home's replacement cost was now $120,000 more than my coverage limit. My auto liability coverage was $25,000 per person — enough to cover a trip to the ER and maybe an X-ray, but not a serious accident.
I was saving $300 a year while being exposed to $120,000 in home risk and unlimited auto liability. That's not saving. That's gambling.
I called a different agent — someone who wasn't trying to sell me a bundle — and asked for a coverage review. She looked at my policies and said, "These are the policies the company uses to acquire customers. Low premiums, low coverage, high discounts. They make money when you never file a claim. If you do file a claim, you'll find out you don't have enough coverage."
That was eye-opening. I didn't know insurance companies had "acquisition policies" designed to get you in the door with low prices, then hope you never look too closely at the coverage.
I ended up splitting my policies. I moved my home insurance to a company that specializes in high-value homes with guaranteed replacement cost coverage. I moved my auto to a company with better liability options. I lost the bundle discount. My total premium went up by $480 a year. But my home coverage increased by $120,000 and my auto liability went from 25/50/15 to 250/500/250.
Was it worth paying $480 more for dramatically better coverage? Absolutely. The bundle discount was a trap. It made me feel like I was getting a deal while actually leaving me exposed.
I'm not saying bundling is always bad. If you have adequate coverage on both policies and the bundle discount is genuine, it's fine. But most people don't know if they have adequate coverage. They just know they're saving money. And that's dangerous.
Here's what I do now: every year, before renewal, I review my coverage limits independently of the premium. I ask three questions: Is my home covered for replacement cost? Is my auto liability at least 100/300/100? Do I have umbrella coverage? If the answer to any of those is no, the bundle discount doesn't matter. I'm underinsured, and being underinsured is more expensive than any premium savings.
Don't let the discount distract you from the coverage. A 15% discount on a policy that doesn't cover your actual risk is not a deal. It's a disaster waiting to happen.
— Marcus, Denver
