February 18, 2015

The Discount Dilemma – Your Auto Home and Life Discounts Applied – Does it All Add Up?

How do you buy Cheap Auto and Cheap Home Insurance using discounts?  Should you choose an Auto insurance carrier that gives you the most discounts?

Do all of those discounts really add up?  How to think about getting insurance discounts?

Should I get my life insurance with the same company that writes my home and Auto Insurance?

Shopping for Home and Car insurance should be real simple, but it is not.  Somewhere between the Insurance companies, the media, the various regulatory bodies, and the state insurance departments, it all gets very confusing out there.   It almost seems like the insurance carriers want to sell you discounts more than just get the correct automobile and home policy.

Commercials and Auto Discounts:

The Car Insurance commercials love to tell you about their discounts, discounts for this, discounts for that.  They share this information with you almost like it’s a war of giving and getting discounts and the more discounts a prospect receives the more money they will save.  Maybe… For Automobile discounts – You know you have heard them all before: Safe Driver, Good Student, Green Car Discount, multi policy, anti-theft, new auto, anti-lock brake, daytime running lights, defensive driver, mileage, distant student, early signing, loyalty, paperless, one pay, military, passive restraint / active restraint, use of car, advance renewal, homeowners, life insurance, days per week and commute mileage, ownership, education, and even what is broadly painted and defined as Affinity discounts.  Those are some of the ones that I know of and others that I added from looking on line.  Affinity discounts is often a discount given for certain careers, education types, and a variety of other groups.

Home Discounts:

Home discounts include: Water Shutoff, Earthquake Shutoff, local security, connected security, manned security, local fire detection, connected fire detection, roofing material, professional discount, affinity group, nonsmoker, various renovation age(s), LEED, Auto, Life and many more.   Sometimes there is an additional discount for full pay, meaning paying all at once.  Many of the pricing portions of home insurance seem to be baked into specific build qualities of the house that may seem to function like discounts, but often are not really.

Do more discounts help?

So does getting more discounts mean that you should buy from company A vs company B? In other words should you just choose the insurance company that gives you the most discounts? As an insurance broker, I find this question to be almost comical, however, it is a rather common question that insurance brokers get. Yes making sure you get all of the discounts that you deserve can help, but the far more important thing to do is to find the Right Insurance Policy with the lowest BASE price with the coverage form that you need.   There are two basic things to focus on here, one, rather obviously being the price and the second, much less obvious is the correct coverage.  This article will primarily focus on the pricing side of it and not on getting the right coverage for you as we will take that up in another post and leave it for another day.

The Answer and How to Think About Getting Discounts:

Think about it this way, if you went to the grocery store to buy cookies and Brand A was discounted 25% off and Brand B was 50% off – which brand would be cheaper?  The answer is you need to know the base price first. The only way to find out the final price, is to Run an Insurance Quote, Check the Underwriting Guidelines, add in the discounts and then you can review them for the best policy   This is why it is not all that possible for consumers to shop around (truly) for home insurance by themselves.  Auto Insurance, because it is more competitive and there are possibly more players involved and because it is more understandable to the average consumer is probably easier for them to shop around by themselves for. On the home insurance front, in my opinion this is why you need an Insurance Broker, preferably one based by where your house is.

A professionals opinion:

My professional opinion on procuring cheap auto insurance is that if you ONLY have auto insurance and do not have a home, then you can probably go out, even online, and procure cheap auto insurance by yourself with some basic knowledge.  If you are worth more than about half a million dollars, or you own a home, or have a ‘special’ situation concerning your auto insurance you should probably sit down with an independent agent or an insurance broker to discuss it.

With Home Insurance seeking the counsel of a licensed professional where you live is strongly encouraged.  From my standpoint, the way I get and keep good clients is to lock them into a solid home insurance coverage form (HO3 or HO5) max out the legitimate discounts, add in the endorsements needed, and get the price as low as possible.   Then I review with the client my professional recommendations and let the client make the decision. This way even if a client did want to leave my brokerage (which they rarely do) they would have a difficult time finding a better price elsewhere.

The Auto Home and Life Discounts Applied:

The other discount consideration to …well consider is the Company Level discounts.  This is my term for it, as  I have never really found an industry wide phrase for them.   The Insurance company level discounts are the Auto – Home – Life discounts available.   Basically they give you a discount for getting more than one line of insurance from them.  They range from a paltry low amount to a few percentage points, which can be a really good deal.  In my experience with a normal situation – it does make financial sense to keep the Auto and the Home together because of the price and some rather obscure coverage standpoints. There are however situations, where I do explore breaking them apart, but this is not the norm.  Splitting up the home and car insurance policies can get complicated , but it can be done if attention to detail is a priority.

One of things to ask when buying Auto Insurance is what is the discount for getting and adding home insurance with them?  Some Insurance companies treat renters insurance as the same discount amount as home owners plan- assuming that all other things are equal that can, in some rare situations lead you to get a very small renters insurance plan for less than the discount of the auto insurance.  Although clearly not free insurance (as that could be considered illegal by the State Insurance body – IE the California Department of Insurance or otherwise) it sure has the look and feel of an insurance symbiosis that works rather well together.   This is a classic example of why it may make sense to speak with a licensed broker rather than just going online to procure your product yourself.

Onto your life insurance discount – Do you need a life insurance discount tacked onto your home and auto?

The Life Insurance discount added to your home and auto is a slightly odd selling point – attraction to me.  The answer to exactly why I will dedicate to another blog post/article at another time, but suffice it to say that the numbers do not typically add up for it to be a real consideration.  I almost always prefer that the numbers and coverage make the case.

The other major selling point against it is this:  Your Life Insurer should be an insurer that you choose for 10+ years at a minimum and since I am a big fan of the 20 year level term policy, you should really think of it as a 20 year marriage.  But … you should treat your Home and Auto insurer as a free agent type arrangement as I usually suggest shopping for it every 3-4 years with your broker.  If you end up staying with the same auto and home insurer for ten years because their prices and policies are the best, than great.  It does often happen as I’ve said I have many clients that I have locked into solid home coverage forms at great prices and they do not seem willing to move. But- Why would you want to lock yourself in with your Home and Car insurer this way?   I can certainly see the benefit to the Insurance Company, but not the insured.

Summation of Auto Home and Life Discounts Applied:

In Summation of The Discount Dilemma – Your Auto Home Life Discounts Applied, we have reviewed the various auto and home discounts that you may be able to get when you buy your Auto and Home Insurance either together or separately.  We have reviewed that the crazed: discounts, discounts, discounts mentality does not necessarily lead you to the lowest price.  We have given you a brief overview of the types of discounts available to consumers such as safe driving, safety devices, automatic water shutoff, and we have demonstrated why it may be beneficial for you to keep your home and auto together, but perhaps not to worry about getting the life insurance discount tacked on.   Hopefully we have solved the discount dilemma for you and helped you on your search and through your journey.

 

Please also consider learning and reading about:  Umbrella Insurance in The Case for the Umbrella

If you have any questions about Auto Home and Life Discounts Applied, please feel free to contact us anytime.  As with all insurance information and blog posts, reading about insurance online is no replacement from seeking the counsel of a licensed insurance broker or agent in your state.  Please visit my disclosure.

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Marindependent Insurance Services LLC – 0K10734

Independent in Marin County, USA
Auto, Home, Umbrella, Small Business, Term Life

 

Scott W Johnson
Marindependent Insurance Services LLC
Independent Insurance in the San Francisco area
Independent Broker Agent

 

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