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Life insurance can be difficult to navigate. There are so many options, very fine print. That’s where life insurance brokers come into play. Think of them as matchmakers between you and the right policy and search multiple insurance companies to help you find coverage that suits your needs. But before handing over the reins it is worth knowing how the brokers work, what they can do for you, and whether their services match what you’re looking for.
What is a life insurance broker?
Instead of being tied to one company, life insurance brokers can sift through multiple insurance companies to find a policy that matches their budget, health profile and coverage goals. This is especially useful when there are other risk factors that could make your existing state or coverage more tricky. Unlike agents who work directly at insurance companies, brokers are initially fiduciary obligations to clients. This is a flashy way to say you have an obligation to move your best interests ahead of your commission or the preferences of the insurance company.
Whether you prefer traditional brokers for hands-on guidance or online platforms for quick comparisons, working with brokers can help you get access to a wider range of options and remove guesses from finding the right policies.
Life Insurance Broker vs Life Insurance Agent
Both brokers and agents sell life insurance, but the key difference is who they work for. A life insurance agent represents the insurance company you are contracting with, and a broker represents the client.
There are two types of agents:
- POW agent Work for a single insurance company and sells only those companies’ policies. advantage? They have deep product knowledge and can provide detailed insight into the company’s offerings. A drawback? Limited options.
- Independent Agent Just like brokers, insurance can be provided by multiple insurance providers. Their fiduciary duties are first to the insurance company, but they must act in good faith on behalf of their clients. In reality, the difference between a broker and an independent agent is minimal.
Brokers work independently on your behalf and help you compare policies from multiple insurance companies to find the best one. They don’t have the power to issue policies themselves, but they can guide them through the process and connect with the right provider. If you need someone in the various options and corners, a broker may be better suited. If you already know which insurance company you prefer, working with an agent might be the way to go.
How do insurance brokers make money?
Insurance brokers earn fees for the insurance contract of your choice. Usually, that’s a percentage of your premium amount. Then, with each policy update, they get a smaller percentage. Once they have finished their contract, they lose their future revenue stream. The more expensive your policy, the bigger their committee will be. You may choose to meet multiple brokers to find the one that best meets your needs.
Do I need to work with an insurance broker?
In particular, it is difficult to find the right life insurance, whether it is life, lifetime, or universal life insurance, as all insurers evaluate applicants differently, provide unique riders and have a ranking of various financial strengths. That’s where life insurance brokers are worth it. Simplify the process by breaking down policy details and comparing options across multiple providers.
On the other hand, if you are already working with a tenant, homeowner, or a specific insurance agent for car insurance, you can also choose to stick to them if you also offer life insurance products. It could be a convenient simple question and you might even qualify for a bundle or multi-politician discount.
Pros and Cons of Insurance Brokers
Brokers can make shopping for life insurance more efficient and reduce time spent, but there are potential trade-offs to consider. Below are the key advantages and disadvantages of working with a life insurance broker.
