A multiline insurance contract is a type of insurance policy that bundles together exposures to risk and covers them under a single contract. These contracts provide additional income for providers and convenience and premium discounts for the insured.
For the insured, a multiline contract is attractive because a common aggregate deductible is offered on a policy portfolio that covers several risk types. For the providers, this type of policy is preferable because they can reduce their risk by spreading it among several factors, which helps them avoid a huge financial burden if a catastrophic event were to occur.
Bundling in Practice
With bundling, the purchaser buys two or more types of insurance products from one company. The practice has become more widespread in recent years. A J.D. Power 2015 U.S. Household Insurance Study found that 78 percent of customers bundle multiple policies with insurers.
A multiline insurer is a one-stop shop for businesses or individuals seeking coverage for all of their insurance needs. For example, for personal insurance, many large insurers offer individual policies for automobile, homeowner, long-term care, life, and health insurance needs. For commercial insurance, multiline insurance can cover internal and external risks such as loss of property, loss of life, and physical and intellectual property theft.
The Advantages for the Insurers
Bundling allows insurance companies to maximize their offerings. First, instead of selling one type of insurance to a client, such as automobile insurance, they can include homeowner or another type of insurance also and increase the premium. Second, by writing multiple insurance contracts for a customer, the company improves client retention by keeping competitors away. Third, the additional information that bundling provides also gives insurance companies a better idea of who their clients are and what type of risk they represent.
Advantages for the Insured
Discounts are the most significant benefit of insurance bundling for consumers, particularly discounts on auto insurance. Bundling is also convenient because one insurance policy with one monthly bill and one representative is less hassle than individual policies.
According to a 2017 survey by InsuranceQuotes, the average savings from insurance bundling are around 16%, but the amount saved varies from state to state depending on the cost of insurance in each state. The survey finds that savings from auto and home insurance bundling could be close to $600 a year while in Vermont the annual savings would be only $175.
One disadvantage to bundling for the insured, however, is that they may not have the best company on board for a specific type of insurance if that is not their specialty. For example, a customer might bundle their auto and homeowners insurance with a company that specializes in auto insurance. While the company might be the best to handle the client's car accidents, it might not be the best when it comes to protecting their home.