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Bundling Life Insurance: Actual Savings, or Just Smart Marketing?

Clifford PendellWritten by Clifford Pendell, Managing Partner and Co-founder

A “bundle” deal is always an attractive offer. In TV, radio, and print advertisements all over the country, big insurance companies will tell you to combine your home and auto insurance for more savings.

And if you talk to an agent, they might even suggest adding a third item to the package: life insurance.

While there are certainly deals to be had in terms of packaging home and auto insurance, it’s usually best to keep life insurance separate. This guide will to help you understand, compare, and evaluate insurance bundles involving life insurance.

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Why Insurance Companies Offer Bundles

For insurance companies, customer retention is crucial. Sure, they’re always seeking to acquire new customers. But retaining current customers for longer periods of time is a much less consuming initiative that yields the overarching end goal: revenue. By bundling different products, they’re able to bring prices down while still keeping revenues up over the long term.

Think of it this way: would you rather someone give you $50 once, or $20 three times? The same principle applies to your bundled insurance premium. Your insurance company would rather keep you for a longer period of time (if not your entire life) at a lower price than lose your business after a year or two. There’s also an element of commitment at play: leaving your insurance company is a bigger decision when you have all of your insurance coverage through them.

Lastly, it costs the insurance company less to assess a customer who has already been underwritten for another policy, thus increasing their profit margins.

Is an insurance bundle a scam? Not at all—you’re still getting a guaranteed product at a guaranteed rate. Is it part of a marketing strategy that benefits the insurance company? Absolutely.

Benefits of Bundling

Bundling your insurance certainly offers its fair share of benefits, such as:

  • Keeping everything under one roof.
  • Dealing with one designated local agent.
  • Not having to keep track of multiple bills.
  • Not having to shop around.

Drawbacks of Bundling

Of course, bundling also has its drawbacks. Consider the following:

  • You’re working with a captive agent, meaning they can only shop offers from their company.
  • If you’re not in great health, you might not qualify for the best life insurance rates, even in a bundle.
  • Your agent might know a little about a lot, without any true expertise.
  • You’ll probably have to make a long-term commitment.

Why Life Insurance Doesn’t Quite Fit the Bill

So, why isn’t life insurance a bundle bargain? For one, it’s generally more complex than home, auto, or even health insurance. It takes a true life insurance agent to navigate the industry nuances and find the best deals, and few captive agents have that capability.

Second, there’s no such thing as “discounted” life insurance. The government regulates life insurance so that rates are always based on age, health, and lifestyle.

Lastly, and most importantly, bundling life insurance simply doesn’t always equate to savings. Even when you might think you’re saving, there’s a good chance you could get better coverage at a better price by keeping life insurance out of your bundle.

Example

Steve is a 63-year-old entrepreneur who took out a loan to get his business off the ground. He is required by the U.S. Small Business Administration to carry a $250,000 life insurance policy over the next 10 years (the life of the loan).

Steve has his personal home and auto insurance with the same company, and figures he might as well add life insurance to the bundle. He has seen the commercials, and bundling seems easier than shopping around.

So he calls his agent, who says she can add life insurance for $98 per month based on Steve’s age and health standing. She says she was able to save him $25 per month on his auto policy—a notable $300 per year.

Once approved for the policy, Steve’s rate nearly doubles due to his sleep apnea. Despite explaining that he has had the issue for a number of years and it is under control with a CPAP machine, Steve is not able to make any adjustments to his policy and is now stuck with $190 per month life insurance premium.

Had Steve called an independent life insurance agent, they would have assessed his health and lifestyle, and then recommended providers that were lenient on controlled sleep apnea. He could have gotten perhaps a $94 per month policy, along with better coverage.

In the end, bundling was only saving Steve $300 per year, and his annual life insurance coverage ended up costing $2,200 per year, resulting in net savings of $1,900 per year. The policy his life insurance agent found would have cost Steve $1,128 per year—$772 less than the bundle.

Shop Around

The example above illustrates just how intricate life insurance can be. You would be doing yourself a disservice to pick the first option that your captive agent presents.

An independent life insurance agent like JRC can help you to find the best coverage at the best rates. So before you bite on that bundle offer, click here to get a free quote in less than a minute!

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Clifford Pendell

Clifford Pendell

Managing Partner and Co-founder

Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.

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