diff --git a/source/create.js b/source/create.js
index 307e25685..5ff4b1252 100644
--- a/source/create.js
+++ b/source/create.js
@@ -7,7 +7,7 @@ const merge = require('./merge');
 const deepFreeze = require('./deep-freeze');
 const mergeInstances = require('./merge-instances');
 
-const next = options => options.stream ? asStream(options) : asPromise(options);
+const getPromiseOrStream = options => options.stream ? asStream(options) : asPromise(options);
 const mergeOptions = (defaults, options = {}) => merge({}, defaults, options);
 
 const aliases = [
@@ -23,12 +23,14 @@ const create = defaults => {
 	defaults = merge({}, defaults);
 	defaults.options = normalizeArguments.preNormalize(defaults.options);
 	if (!defaults.handler) {
-		defaults.handler = next;
+		// This can't be getPromiseOrStream, because when merging
+		// the chain would stop at this point and no further handlers would be called.
+		defaults.handler = (options, next) => next(options);
 	}
 
 	function got(url, options) {
 		try {
-			return defaults.handler(normalizeArguments(url, options, defaults), next);
+			return defaults.handler(normalizeArguments(url, options, defaults), getPromiseOrStream);
 		} catch (error) {
 			if (options && options.stream) {
 				throw error;
@@ -46,9 +48,7 @@ const create = defaults => {
 
 	got.mergeInstances = (...args) => create(mergeInstances(args));
 
-	got.stream = (url, options) => {
-		return defaults.handler(normalizeArguments(url, {...options, stream: true}, defaults), next);
-	};
+	got.stream = (url, options) => got(url, {...options, stream: true});
 
 	for (const method of aliases) {
 		got[method] = (url, options) => got(url, {...options, method});
diff --git a/test/merge-instances.js b/test/merge-instances.js
index ba9b7b92e..fb00951fc 100644
--- a/test/merge-instances.js
+++ b/test/merge-instances.js
@@ -29,7 +29,38 @@ test('merging instances', async t => {
 	t.not(headers['user-agent'], undefined);
 });
 
-test('merging already merged instances & another instance', async t => {
+test('works even if no default handler in the end', async t => {
+	const instanceA = got.create({
+		options: {},
+		handler: (options, next) => next(options)
+	});
+
+	const instanceB = got.create({
+		options: {},
+		handler: (options, next) => next(options)
+	});
+
+	const merged = got.mergeInstances(instanceA, instanceB);
+	await t.notThrows(() => merged(s.url));
+});
+
+test('merges default handlers & custom handlers', async t => {
+	const instanceA = got.extend({headers: {unicorn: 'rainbow'}});
+	const instanceB = got.create({
+		options: {},
+		handler: (options, next) => {
+			options.headers.cat = 'meow';
+			return next(options);
+		}
+	});
+	const merged = got.mergeInstances(instanceA, instanceB);
+
+	const {body: headers} = await merged(s.url, {json: true});
+	t.is(headers.unicorn, 'rainbow');
+	t.is(headers.cat, 'meow');
+});
+
+test('merging one group & one instance', async t => {
 	const instanceA = got.extend({headers: {dog: 'woof'}});
 	const instanceB = got.extend({headers: {cat: 'meow'}});
 	const instanceC = got.extend({headers: {bird: 'tweet'}});