Thursday, March 4, 2010

Should you bundle auto and homeowners insurance?

More or less every site offers advice on saving money when buying insurance. One of the standard tips is bundling auto and homeowners policies with the same insurance company. If you check around the companies, the discount varies between 10 and 15% and, if you agree an increase in the deductible from $500 to $1,000 this increases the discount to 25%. At this point, many people are sold on the idea. A saving of up to 25% looks like a good deal and frees up cash in the family budgets for a whole range of other basic necessities. So is it worth it? The first question is whether you are getting the standard auto and homeowners policies. If you are starting off in the same position as the stand-alone policyholders, you have more protection. But there can be problems with limitations and exclusions if the company produces a single policy to cover both home and vehicle. You must read such a policy very carefully before deciding whether it represents good value for money. Secondly, what are the rules about overlaps between the two policies? Suppose, for example, you have a traffic accident while carrying your laptop and other property potentially covered under your homeowners policy. Is all the damage and loss covered under the auto policy or are you expected to file separate claims for damage to the vehicle and loss of household contents? This could make a big difference if there are separate deductibles on the auto and homeowners policies.

So, assuming you do bundle, how should you protect your interests? First off, never assume it's enough just to buy the policies. When it comes to the homeowners policy, always make a full inventory of the contents of your home. You can do this by making a simple list and taking a few pictures using your cellphone. But it's better to take a more professional approach. Go room by room, make a full inventory and record the purchase price and current value. Where you have the original receipts and invoices, put everything together in a file. If you want to store information outside the home, you can use a site like which offers a free and secure service. Why bother? Because it gives you a realistic basis on which to decide how much contents insurance to buy, identifying any individual more expensive items that should be separately insured. More importantly, it saves time and effort should you have to make a claim. The faster you can make a comprehensive claim, the quicker you can rebuild your home and restock it with the "stuff" you have lost. Hopefully, your homeowners insurance pays for alternative accommodation while repairs are underway. Finally, never do any major repairs before the loss adjuster arrives. You bought all this coverage and you want the adjuster to see the full extent of the loss. That said, you should take emergency action to prevent the condition of the property getting worse like sealing broken windows and securing doors. This is the time to use your video camera to record the damage before and during emergency repair.

Homeowners insurance is always a balancing act between buying coverage against the most obvious perils and not making small claims to keep your record clear for the sad day when a big claim comes along. If you have bundled the policies, it's more likely you will have to make a claim and this can produce a premium hike on both policies.


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