Tying – Untying the Insurance Bundle

Tired of hassles connected with buying multiple products, opening extra mails, maintaining separate records, making separate payments for each policy and possibly overpaying for your combined insurance premiums? Bundled products are what you need.


A bundled insurance product (combinations such as term plans and critical insurance policies, disability covers with regular health plans, motor policies and personal accident covers, etc) has lower price tag and convenience of tracking thus catching the eyes of customers. It’s also a standard marketing strategy of insurers as it helps to reduce distribution costs and apply economies to scale.


Price  Bundling  and  Product  Bundling  are  the prominent types. Inseparable  and  dependent supplementary benefits such as accelerated death  benefit  or  premium  waiver  represent  Product Bundling offering increased value to the base insurance component,  whereas  additional  Riders  like  accidental death  benefit  and  critical  illness  represent Price Bundling offering multiple related products at a lesser price.
Packaged covers can help not only reduce your insurance bill like the health insurance floaters but also get some uncommon covers which the insurance company may not be willing to underwrite as a standalone policy. For e.g. A personal accident policy of Rs 1 lakh for your driver or a cover for your exclusive music system will merely cost you around Rs 100 annually, however, the insurance company may not be interested in issuing a policy with that small a premium. In a bundled insurance, you can buy it along with your home insurance.


Due to the added cost associated with customer turnover, insurance companies wish to have customers who carry multiple lines of insurance and keep these policies in place for years. Moreover, bringing all of the insurance from a particular household slightly diversifies the company's risk. For customers, when one company is handling all of your insurance policies, that's less time that you must spend sorting through and paying each policy.


The no. of customers who bundle insurance products keeps increasing. Insurers are thus seen to continuously revamp their product offerings and leverage opportunities through innovative bundling. Bundling is no more a choice for the insurer, but inevitable to survive in the competitive market.


Caveat: While bundled products offer enhanced coverage, they may not suit everyone’s needs. We may also not be able to customize the size or features of the cover. Further, there may be limitations on renewal and cancellation of riders. Usually, standalone policies offer a more comprehensive protection than riders. Take the case of an accidental death and disability benefit rider. The maximum insurance benefit that one can choose is restricted to the amount allowed under that specific policy, even if you would like to have a higher cover. Moreover, a rider may not provide for loss of income due to temporary disablement. In contrast, a standalone personal accident policy will pay a weekly allowance, linked to the insured’s income.
Do not bundle if you want to customize and desire flexibility, when it complicates the product structure and when it does not give you adequate protection leading to compromising on the quality of cover.


The Bottom Line: Bundle only if it gels with your insurance requirements. When buying, be clear about your goals; otherwise, you may end up paying for unnecessary covers just because they can be easily embedded into other products. Also, do a price comparison before deciding for or against bundled products.