Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 5 minutes
Bundling insurance isn’t a new concept. Many people are familiar these days with the concept of combining all of your insurance products, from your homeowners’ policy to your auto policies, under the umbrella of a single insurer. This can offer a variety of perks that vary by insurance company, and it can significantly simplify your insurance management experience.
However, there are some reasons that bundling might not actually be in your favor. For many people, insurance is a simple process of protecting their car and their dwelling. However, if you have more complex insurance needs and are looking to bundle your commercial insurance products, it might actually hinder your ability to save money and make your insurance management experience more complex overall. Knowing more about bundling and whether it makes sense for you can help you become an educated insurance consumer who can save a ton of money each year.
Some Real Numbers and How They Add Up
Let’s look at a real-life situation where bundling might not actually add up to a better value.
Say that carrier A offers you access to a bundled price package of:
· $1,200 a year for general liability
· $3,800 a year for workers’ comp coverage
This can sound like the perfect situation, with all your commercial insurance products under one umbrella. Before you accept and sign on the dotted line, however, you should look at the numbers if you split these coverages rather than bundle them. Carriers B and C offer you coverage without a bundle, which comes to:
· $2,500 a year for workers’ comp insurance
· $1,200 for liability insurance
Insuring with B and C will actually save you $1,300. That is a lot of money that you can invest back into your business, so why pay for the privilege of bundling with carrier A?
What is Risk Appetite and How Does it Impact Commercial Insurance?
Risk is a topic bandied about in the insurance world, as everyone understands it perfectly. The reality is, however, risk from an insurance perspective is different from what the average consumer thinks of when they hear the term. Let’s talk about risk appetite and why it impacts commercial insurance products.
Risk appetite is the level of tolerance and comfort an insurer has for specific types of accidents and coverages. Some companies are more comfortable with the risks associated with industrial accidents, while others are happier providing coverage for sole proprietorships.
Risk appetite governs the premiums required for each policy. This is one of the most important factors that is used to determine what a policy should cost. When businesses don’t prefer to insure certain commercial environments and risks, they charge more for the policies they offer to cover these businesses.
Risk appetite can also affect the speed at which claims are paid and the responsiveness of customer care for policies outside the usual coverage parameters each company prefers. This is one of the main reasons that insuring without bundling typically saves a lot of money in the commercial world.
What Makes Workers’ Compensation Insurance Different?
Workers’ compensation is a slightly different insurance product because of the complexity of these policies and the coverage they require. You will need to remember that workers’ compensation covers workers and businesses on these fronts:
· Payroll
· Job class and training costs
· Claims history
· State rules (which can vary a lot)
· Lost wages
· Medical costs related to accidents
Because workers’ compensation varies widely from state to state and because accidents can be incredibly expensive from time to time, premiums for workers’ compensation can be quite costly. States with many industrial entities doing business might charge more for policies that cover this kind of accident because such accidents are so common and so expensive.
Work-related accidents can be very expensive, and insurance companies need to collect enough in premiums each year to cover their costs and have money to pay out on claims.
What to Ask Before You Choose to Bundle
First of all, make sure you shop around before you choose an insurance policy. Rates can vary widely from company to company for the same coverage. You will want to be sure that you comparison shop for every kind of insurance that your business requires.
Here’s what to think about when you are considering bundling:
1. How competitive will this carrier be for workers’ comp policies in my state or my industry?
2. Are there other carriers with superior coverage for the same kinds of policies?
3. How much can I save when bundling, and does it exceed what I can save by splitting?
4. Are there trade-offs to have in mind, such as claims handling slowdowns, billing costs, or auditing processes that might make paying a little extra worth it?
5. What is my exit strategy if I find that the insurer is too expensive or too problematic to deal with long-term?
When Does Bundling Make the Most Sense?
We have looked at lots of reasons not to bundle your coverages. However, there are still cases where bundling makes a ton of sense. You should know about these cases as well so you don’t miss out on good deals.
· Small, low-risk businesses
When you operate a small company, bundling can almost always be the cheapest option. Say you work alone, or you have one person on staff. You are the target audience for bundling with most companies.
Business Owner Policies can be ideal for some companies because they combine liability, property, and comp insurance into a single policy, often at a discounted rate.
· Preferred programs
Some carriers do offer multi-line or multi-policy discounts that do really add up. You will just need to do the math to be sure that you are actually saving money before you commit. This is typically offered by smaller, more boutique insurers, but it can be the perfect solution for your needs.
Shopping Smart Matters
Let’s face it, insurance isn’t cheap. You will be so glad you have it, however, if an accident or loss should occur. You are required to have certain coverages by law, but even if you weren’t, the benefits of having insurance are numerous.
