Packaging your insurance policies doesn't always help you save: Here’s why

Dubai: Insurance is often bought in the hopes of never having to be burdened when major expenses arise in the future. In reality, however, you would likely end up having to buy different insurance policies to meet different needs. But what if you could buy all your policies from one provider?

If all potential issues can be taken care of by the same insurance provider and save you money in the process, wouldn’t that be easier for you? “Having our car, health, and home insurance with the same provider does sound like a great idea,” said Lawrence Shilling, a health insurance analyst based in Dubai.

“It saves time when filing a claim, your full record is with the same company, with discounted prices available too. Insurance providers love to bundle products, and for a good reason, bundling encourages consumers to buy more and who does not like a one-stop-shop.”

When an insurance company offers multiple insurance policies, it is often advertised as a ‘bundle policy’. For instance, if you are buying your car, health, and home insurance from the same insurance provider, you will be bundling or packaging your policy.

How packaging insurance policies saves you time, money

“How you can typically receive significant discounts when packaging multiple policies through one insurance carrier is you may even be able to get a single deductible for both your home and auto insurance policies,” added Shilling.

“So packaging insurance policies can ideally help you save in the long run while maintaining the coverage you need to keep your loved ones and assets safe. Globally, it is estimated that eight out of 10 people bundle their insurance and save, on average, roughly $750 or Dh3,000 per year.”

With one carrier serving as a one-stop-shop for home and auto insurance, packaging them can potentially save you time in addition to money. Packaging policies can also give you several options for coverage, making it easier to obtain more coverage from that carrier.

“However, while the ‘bundle policy’ offer may be compelling and can give you peace of mind, what happens when that does not suit your needs? Also, such policies could lead to potential problems if you are not careful,” UAE-based insurance consultant Ian Bagley noted. Let’s look into those widely-flagged problems and solutions.

Cheap, convenient but the packaged policy may not still suffice

“A packaged or bundled policy can be cheap and convenient but still may not meet your need. Each time you pay your monthly premium, you’re paying to keep the coverage in place and available, not actually to use it. But when you are not using it, you will not get to know about the quality of the coverage.”

What this means is that you won’t be prompted to purchase supplemental coverage or get an entirely different policy when you are regularly paying premiums. Instead, you get feedback from the insurance provider comes when you file a claim.

But then getting the feedback mid-cycle may be too late to fix any problems that may exist in your coverage. “So if you bought a bundled policy based on its price and convenience and not because it met your specific coverage needs, you could be in real trouble if disaster strikes,” said Shilling.

For instance, instead of getting a car upgrade, you may be scrambling to pay for expensive repairs to your car or home. You might get stuck with the same insurance provider long after you decide you want to take your business elsewhere.

Changing a packaged policy mid-cycle on potential savings is hard

“Regardless of the discounts and convenience packaging or bundling insurance policies might bring, there can be disadvantages to this model. The major one being some insurers might make it difficult for you to change insurance companies,” said Bagley.

“Nobody wants to lose a client a few years later. You might realise that you are stuck with a bundle that only represented savings for a couple of years but suddenly increased after some time. When you decide you want to try a different insurance provider, it will get difficult for you.”

This is why Shilling and Bagley recommend that it’s crucial to weigh your options even though having the convenience of having all your policies with just one company might make you miss other discounts, promotions or special prices with other companies.

“While the main reason why consumers go for packaged policies is so that they can save money, this isn’t the only way to save money on monthly insurance premiums,” added Bagley. “It may not even be the best way, depending on individual needs.”

Verdict: Know how to save on insurance premiums instead of opting a ‘bundle policy’

Insurance experts often reiterate that insurance is not a one size fits all product. “If your policy is too small, you could have problems like replacing your property with property insurance, or if the policy is too big, you could end up paying too much every month,” said Bagley.

“So you really need to be smart in determining whether you need the insurance in the first place. Another thing is the cost. For instance, with property insurance, if your property cost a third getting two thirds in insurance means you are paying for insurance you couldn’t likely ever use.”

With cars, up-to-date safety features cost less to insure for one reason, added Bagley, “you are less likely to be in an accident that requires a claim. The same holds true for your house or any other property. Even though you are insured, better care of your valuables helps you save money.”

A key risk to remember is that while bundling insurance policies can save you money up front, it might mean unknowingly signing up for a new policy with lesser coverage that can cost you more out of pocket when it comes time to file a claim.

For instance, your auto insurer may encourage you to bundle car and renters insurance, but it could mean cancelling a perfectly good renters insurance policy with good rates for a packaged plan that doesn’t match the protection of your original insurance. This is why Shilling advises to routinely check your insurance contract to see if premiums or deductibles have risen, or if limits have lowered.

“Bundling your insurance policies doesn’t necessarily mean saving on them, so compare what you’re currently paying for coverage versus what you might pay after combining plans. As you configure your costs, remember that health insurance isn’t usually available to bundle with other insurance policies.”