Allstate Home and Auto Insurance: Is Bundling Policies the Best Option?

Allstate saving money by dropping non-bundled insurance buyers

Recently, Allstate Insurance announced it would take steps to drop all policyholders in North Carolina who did not agree to carry both homeowners and auto insurance policies. This is a major move for the insurance company–while most insurers encourage bundling multiple policies under their umbrella of coverage, it isn’t typically required.

This new requirement poses a question that policyholders often wonder: Is it really better to bundle insurance policies? The insurer has clearly decided it is, but does it make life easier or harder for the policyholders?

Allstate Saving Money by Dropping Non-Bundled Insurance Buyers

In late November, North Carolina residents were surprised with the headline “Allstate Drops Homeowner Policyholders” in their local news. They were probably even more shocked to learn that this would only apply to customers of the company living within the state who did not quickly decide to bundle homeowners insurance coverage with auto insurance from the company by Dec. 15.

The company announced days before Thanksgiving that it would not renew the policies of 45,000 homeowners if they did not take steps to bundle their policies by its December deadline.

Tracey Owens, a spokesperson for the company, stated the company was taking this step to make certain it could manage its risk while protecting the other 400,000 households it insures. In other words, the decision was based on financial reasons.

The legality of this action emerged shortly after the company’s announcement. According to the North Carolina Department of Insurance, not only is it legal, but the company is not even required to alert the department of its decision, though it did so as a courtesy.

To make sure that current customers who choose not to bundle are not left out in the cold, Allstate asked that Universal North America Insurance Co. provide quotes for 26,150 affected homeowners. Individuals who owned mobile homes would receive quotes from American Modern Insurance Group.

The Basics of Bundling Policies

The case of Allstate’s requirement for North Carolina customers to bundle policies makes one wonder whether bundling policies is as good  for the policyholder as it is the insurance company.

Bundling policies is not a new concept. The ability to carry more than one insurance policy with a single insurance carrier has existed for a long time. However, it is just in recent years that insurers have advertised the benefits of “bundling” with their company as opposed to carrying various policies with different insurers.

There are definite benefits to taking this approach to buying insurance, the most obvious being that companies provide you with discounts for doing so. Most companies offer price reductions on monthly premiums and some even allow for one deductible to apply to more than one policy type if multiple assets were damaged in a single incident.

But the benefits don’t stop there. For policyholders who don’t like to have multiple bill payments due at various times throughout the month, they can have at least two insurance policies billed simultaneously, ensuring they’re paid on time.

Another benefit is if you have to file a home insurance claim, you might be familiar with the company if you’ve already filed an auto claim–or vice versa. There is much to gain from  having the familiarity of working with one company, though this doesn’t mean there is no downside to the approach.

For instance, if you don’t like your current insurance company and have multiple policies, you will have to do more work to find replacement companies. It may also be easier for you to spread bill payments out over the course of a month, but after bundling, at least two bills will be due simultaneously.

However, probably the biggest downside to bundling is that you cut out the possibility of finding more affordable or better-quality coverage by shopping around when you stick with one company for home and auto insurance.

Is Bundling Insurance Policies the Better Approach?

So which approach to buying coverage is actually the right one? As with the company and types of coverage you purchase, this is a personal decision.

According to the 2011 U.S. National Auto Insurance Study conducted by J.D. Power and Associates, individuals who do choose to bundle their policies can save up to 35 percent on their coverage overall. However, the study did note that the actual discount granted will depend on how many products are bundled.

The study also revealed that 58 percent of customers currently bundle auto and home insurance policies, which means that most people actually do feel the pros of bundling outweigh the cons. With less paperwork to file, fewer checks to write and only one agent to interact with, adding or changing policies is usually easier.

But the bundling experience is typically not a mandatory one, which makes the Allstate home and auto insurance bundling rule unique. Because the process of purchasing insurance is personal and relies solely on each policyholder’s financial capabilities and property coverage needs, deciding whether to bundle or not should be left to the customer to decide.