The sea of insurance options makes navigation complicated. With so many choices and so few absolutes, it makes it difficult to know just what is right. Fortunately, using an insurance broker helps you sail in those choppy waters to get to the other shore.
This article examines:
- What is an insurance broker?
- How do you determine if someone is an insurance broker?
- How does someone qualify as an insurance broker?
What is an insurance broker?
The expertise of insurance brokers is more than just about insurance policies. Their training and experience focus on specific types of insurance, but also risk management. An insurance broker helps both individual people and companies to get the right insurance for themselves, their home, businesses and family. Many brokers focus on a niche, working with one kind of insurance or within a specific industry. Many others offer advice on several insurance types. Overall, insurance brokers help you find and buy the right insurance — usually at no cost.
An insurance broker represents you as you search for the right policies for your needs. They work for you, not the insurance company. But because brokers do not represent the insurance company, they cannot bind the coverage on the insurer’s behalf. So, they hand over your account to the insurance company or an agent to complete your transaction.
An insurance broker:
- Listens and understands your insurance coverage requirements.
- Searches the insurance marketplace to find the right policy that suits those requirements.
- Offers objective, impartial advice on the coverage that is appropriate for your needs and fits your budget.
- Helps you understand the policy of your choice. They explain the coverage and exclusions, honestly and clearly.
- Clearly states all costs of your policy, without hidden fees.
- Provide clear information and documentation. And they help you with the paperwork, so there is no delay in your coverage.
- Assist you with preparing a claim, then get you quick, fair, and efficient service from the insurance company.
The definition of an insurance broker is essentially an advisor or negotiator who acts on your behalf. And to dispel the common misconception, it doesn’t cost you anything extra to use a broker.
How Brokers Get Paid
Brokers do receive a commission from the insurance company when they place your business there. So, there is no specific financial incentive for a broker to decide on one insurance provider over another. The only reason your broker has to decide on a specific company is when it is best for your coverage.
So, although your insurance broker works for you, you do not pay them directly. Their commissions are a percentage of your premium costs, and they vary by each state’s laws. When you take a broker’s professional advice to buy any type of insurance, you do not pay a fee for the service they provide.
Brokers hold licenses from the states where they work, and that state license requires them to represent your best interests. This legal duty helps ensure that brokers advise you to purchase the best insurance for you, not a particular company’s policy.
Brokers’ long-term business relies on repeat customers, which motivates them to ensure you have the best coverage possible. And brokers usually receive extra commissions when you renew your policy. So, the brokers have an extra ongoing incentive to help keep you happy with your optimal coverage.
How do you determine if someone is an insurance broker?
The state regulates brokers to have a license. Every state has some differences in the requirements for brokers to get a license in that state.
You have probably worked with insurance agents before. But a broker fills a different role than your agent. Unlike an insurance agent, brokers don’t work for any insurance companies. They work directly for you, so you get the best advice on insurance options. A broker supports your interests.
A broker starts by helping you identify your personal, family, organizational and business liability risks. Knowing this, you can make informed decisions about the insurance you need and how much protection to buy. A broker guides you through these decisions and provides several competing quotes.
The broker is well-informed in every facet of insurance products, especially as it applies to your local market. And they capably support both new and existing clients with coverage for a wide variety of needs and assets.
These include:
- Vehicle Insurance
- Life and Disability Insurance
- Home and Commercial Property Insurance
- Boat and Trailer Insurance
- Farm and Equipment Insurance
- Commercial Inventory and Contents Insurance
- Business Loss of Income and Workers Compensation
- HVAC Business Insurance Plans
- Drone Insurance
- All Sizes of Group Insurance Plans
Then, they clearly explain the terms, conditions, benefits, and exclusions for each policy. As a result, you can choose the most appropriate coverage for your liability risk needs and your budget. Sometimes brokers can negotiate with the insurance companies for a lower rate for you based on your history and how much insurance you purchase.
For example, your broker helping you obtain workers’ compensation insurance first assesses the level and type of coverage you need. Then, they provide several options from different insurers and help you choose the policy with the best coverage and price. Over time, your broker gathers info and presents it to your insurer to show that your company should pay a lower rate. For example, the insurer may consider your workplace safety initiatives lowering the number of claims made against the policy. So, this way, a broker helps reduce your premium costs.
But ultimately, the quickest way to be sure someone is an insurance broker and not an agent is to ask. Chances are their website, business cards, and other correspondences all say, “insurance broker.”
How does someone qualify as an insurance broker?
Insurance brokers take courses and pass an exam to get their license. They don’t need any formal education beyond targeted short-term courses to prepare for state licensure exams. Insurance brokers can have just a high school diploma. Still, a bachelor’s degree in subjects like insurance, economics, or finance helps. Plus, each broker holds multiple licenses to offer more than one kind of insurance.
An insurance broker is an independent agent who helps you purchase insurance policies. And they represent several insurance companies at once. Many specialize in specific types of insurance, industries, or personal situations.
According to the US Bureau of Labor Statistics (BLS), brokers need specific software technical skills. They create documents, conduct online research, complete reports, and communicate by e-mail. Many insurance brokers use company-specific software to generate price quotes or cross-reference policy packages.
Most states require ongoing continuing education courses to maintain a broker’s license. So, brokers stay current on legal issues, policy structures and new technology.
Training, Experience and Knowledge
Through the educational requirements and some experience in the insurance field, brokers gain significant knowledge in the insurance industry. They stay well informed about particular types of insurance, and they know how to cover specific claims.
For example, your broker can explain to you exactly what type of risks your homeowner’s insurance policy covers and the exclusions. They explain acts of god, negligent acts, intentional acts, slip and falls, and loss or theft of your valuable items. Armed with this knowledge, you make better-informed decisions about what kinds and amounts of insurance you need.
This is your broker’s job. They help you understand the risks and liabilities that you have. And they outline how to manage those through insurance. Your brokers can then help you review several insurance options to choose the policies and premiums that best fit your needs and budget.
Most of the time, consumers and business owners find using a broker preferable to purchasing insurance with an agent or directly from the company. Working with an insurance broker has many benefits, and ultimately can result in better coverage.
Insurance brokers are literally licensed to offer advice. Insurance companies and agents are only allowed to provide general advice based on their specific products. Brokers’ extensive training and experience allow them to provide specific advice for your situation. So, you have peace of mind that you really get expert, objective, impartial advice. They know what they are talking about when it comes to insurance policies to provide you with adequate coverage.
8 Benefits of Using an Insurance Broker
The 8 benefits of using an insurance broker examined in this article are:
- Objective Risk Assessments
- Impartiality
- Range of Insurer Options
- Accurate Policy Comparisons
- Cost Savings on Your Premiums
- Claim Assistance
- Time Savings
- The Right Advice
Objective Risk Assessments
Using a broker simplifies the process of choosing insurance. There are many options, with various limits, coverage, and exclusions for each policy. It’s hard to know what types and levels of coverage are right for your situation. This is how insurance brokers help.
Firstly, based on experience and training, your broker analyzes the risks and liabilities you face. Then, with this objective risk assessment, you can decide logically what coverage you need. Independent brokers endeavor to understand each aspect of your coverage needs before recommending any coverage solutions.
Plus, with private access to technology-based tools, your broker makes it easy to compare your options. You determine which policy best fits your situation, logically and simply. A broker eliminates stress because you don’t need to learn all about the different kinds of insurance. And they make it easy to see what insurance works for you.
Knowing you have adequate insurance against every potential liability gives great peace of mind. Whether your company might be sued for selling defective products or your house might catch fire, a broker addresses each issue. Then, they build you a comprehensive plan to address all of your potential liability concerns.
The Broker’s Duty is to Help You
When it is time to get insurance for your business, vehicle, home, or family, a broker’s duty is to help you. They work with you to determine your insurance needs. Because they work for you, not insurance companies, you know your broker selects the right solutions at the best possible prices.
Their experience means that the objective risk assessment brings out your requirements, even if you are unfamiliar with the risks. Business owners specifically seldom realize the exposure risks of their company because that is not your focus.
A professionally licensed insurance broker informs you about business exposure risks you may never even consider like:
- Public liability
- Product liability
- Employers’ liability
- Business interruption
- Key-man
- Professional indemnity
- Business property coverage
- Credit risk insurance
So, your broker implements risk mitigation planning to address any and all risks.
Insurance Brokers start by analyzing the business you’re in and your personal situation. It is their responsibility to examine both your business and personal situation for risk. Then they determine adequate coverage levels. And only then do they endeavor to find policies that provide the right coverage at the right price. Without a broker, you see many options, but it is up to you to figure out what coverage should be adequate for your risks. Only brokers have a fiduciary responsibility to ensure you won’t lose your house if you make a mistake at work and get sued.
Impartiality
It is essential that insurance brokers remain impartial. They tell you about loopholes and advise you on the coverage. You get honest advice and opinions you can trust. So, your broker works as an extension of your business.
So, working with an impartial insurance broker offers a multitude of benefits over self-directed searches. These advantages include increased access to or availability of:
- A more extensive range of insurance companies
- A greater assortment of insurance policy products
- Exclusive insurance products offered only by brokers
- Lower rates with a better return on your investment
- More appropriate insurance coverage for your needs
- An in-depth, objective risk assessment to determine coverage needs
- Skilled negotiations asking the right questions of you and your insurer
- Extensive knowledge, training, and experience in different marketplaces
- A single contact for your claims, any policy changes, and ongoing advice
An insurance broker plays a critical role in saving time, effort, and loads of frustration for any property or asset owner. They simultaneously help you to secure ideal insurance coverage solutions to best meet your risk and liability needs.
Communications often dwindle as soon as an insurance company signs you up. You probably won’t even hear from them until it’s renewal time. But brokers are with you for the long-term. They want to build a long-lasting relationship with you. So, this means mid-term reviews or the offer of assistance if you need anything. For example, your broker watches out for ways your insurance needs may change. And they walk you through the process of getting the right coverage, even if it means smaller policies.
Range of Insurer Options
Insurance companies can only sell policies of their own. Yet, when buyers look for insurance, the assumption is that because the most direct approach must be cheaper. While this works when you buy clothing direct from the manufacturer’s warehouse, it seldom works with insurance. Usually, working with a broker gives you more options, takes less time, and your premiums are comparable, or lower.
By reviewing many options, you may find you are in better control as you research all your options. Plus, a broker provides access to the specialist markets where going direct to the insurance company isn’t always an option. Then, when you can go direct, there is only one option.
Because brokers are not tied to a single insurer, after they consider your needs, they search leading insurers. That way, they find the best coverage for you at the best price. When you have specialized needs or a unique risk that you want to cover, brokers act on your behalf. Then, they negotiate with the insurance company for the most suitable policies.
Business Coverage from a Broker
Having the right business coverage is critical. And shopping involves evaluations, research, and comparisons. When you work with your insurance broker, you take advantage of expert knowledge and experience. This expertise makes shopping around and selecting easier, and it helps you avoid unnecessary extra costs.
Insurance brokers handle every aspect of your insurance coverage. Their experience and knowledge mean they evaluate your business and have access to a variety of policies. After comparison shopping looking at a wide range of insurer options, you finally have real peace of mind.
Accurate Policy Comparisons
Firstly, researching and comparing insurance plans without an insurance broker’s help is tedious, at best. It requires significant time to analyze every option to decide whether they fit what you need. Without expert assistance, there’s always a higher risk of getting the wrong coverage. And of course, this can be very costly in the long-term, especially if you need to make a claim. A good broker advises you accurately, without costing more.
Cost Savings on Your Premiums
How do insurance brokers provide this expert advice without it costing you extra? Brokers can get lower rates on insurance for you. The insurance companies offer brokers lower rates because the companies know brokers guide their clients to purchase the right policy with proper coverage.
Policyholders using insurance brokers make fewer unnecessary claims. And are more likely to be insured for the right amounts. So, ultimately this saves insurance companies money. As a result, as a broker’s client, you have lower premium cost options.
Your broker offers you a range of different insurers’ quotes for more options to fit your needs and your budget. The ability to shop around for the best price from several carriers usually saves you money when you use a broker.
Negotiating Premiums
You have probably seen ads where the big insurance companies encourage you to buy direct from them. They even suggest you save money by eliminating the middleman.
Firstly, cutting out the middleman does not actually save money in most situations. Because broker “wholesale” is lower than direct “retail” pricing, you usually get a better deal using a broker. Brokers’ professional training in accurate risk assessment presents a lower risk, so insurance companies discount the premiums.
Claim Assistance
Your broker can act as your advocate during any claim settlement process. There is great peace of mind in knowing your advocate and what options you have if a claim goes awry. If you deal with insurers directly, you may need to get the court and your lawyer involved.
A professional, qualified, licensed insurance broker acts for you to settle claims on your insurance policy. So, it is in their best interests to promote a quick, accurate settlement of any claim. This helps avoid further legal costs of any future negative repercussions.
Time Savings
Sometimes brokers specialize in a particular type of products. They may focus on group health insurance, vehicle insurance or general business coverage. And they may even offer other services based on that area of expertise. Business owners, in particular, find comprehensive insurance brokers save them significant time. From basic claim analyses to employee education programs, full-service brokers do the legwork, so you save time.
Ultimately, everybody wants to pay as little as possible for insurance, but you need to spend some time researching, too. A suitable policy that doesn’t exclude what you need is you make a claim, gives you a solid policy at a reasonable premium. All without spending too much time shopping around.
Shopping around for insurance with a broker gives you a smooth, easy process. With additional online and phone support, your broker proactively engages with you, even your initial purchase.
In addition, getting a quote quickly after the initial consultation and assessment is consistent with an insurance broker. And mid-term changes get speedy responses.
Finally, be sure your policies are up to date. A professional broker stays on top of legislation changes and tax reform. So, you update policies to ensure your coverage for unexpected legal and tax issues.
Brokers make suggestions based on knowledge and experience, so you save time in the decision-making process.
Insurance Shopping Fatigue
While shopping might be a favorite activity for many, shopping for insurance is not. Usually, there is a time limit when trying to choose a policy. Current coverage is about to expire, so new coverage is needed quickly.
Unfortunately, that limited time to shop, adds undue stress and pressure into the decision-making process. Then, the details all sort of start to blur after a time. So, the entire process gets even more exasperating. Consequently, you might settle for adequate coverage that seems “good enough.” But often the best policy or the best value gets lost in the shopping fatigue.
The Right Advice
So, the bottom line is that an insurance broker trains to become a specialist in insurance practice and management. Once they know your situation, a broker provides balanced, objective advice and options for solutions. Each choice specifically tailored for your individual risk and liability need coverage.
A broker begins by asking you about your specific circumstances personally and in your business to find the right policy. Then, they examine your current policies to see if you are already covered under your existing policies, so there is no overlap. And only then do they work at getting you a great deal by comparing different prices and policy product features. In addition, they offer some flexibility on premium prices.
By providing the right advice, insurance brokers equip you to save money on your insurance. Even once you purchase your policies, brokers offer peace of mind from their knowledge, breadth of experience, and trustworthiness. Shopping for all types of insurance coverage, and the management afterward, is generally a more positive experience when you use an insurance broker.
Summary
In summary, your insurance needs are best met by a broker who specifically works for you and not an insurance company. Working with an insurance broker offers more advice, with more choice, and a lower price. And if you need to make a claim, you have an advocate, too.
Searching for the right insurance coverage can end up being time-consuming. If you want a better deal, or you are unsure of exactly what coverage you require, an insurance broker nearby is right for you. Then, free up your precious time to focus on your business and your family.
How Insurance Brokers Help
- Their expertise in the insurance market brings a talent for finding the best coverage at the best prices!
- If you have specialized or unique insurance needs, especially with limited knowledge, brokers can advise you on the suitable levels of coverage.
- Independent brokers work with a select group of carefully chosen insurers. They maintain regular contact with these companies, so they can often secure exclusive premium discounts.
- Using the services of a broker does not cost extra. Brokers earn a commission from insurance providers. You won’t need to pay any additional fees over your base premium rate.
- Your broker ensures you clearly understand any optional extras or exclusions in your policy. So, you are never surprised when you go to make a claim.
- Specialist providers offer niche insurance coverage. Comparisons without a broker make identifying exclusions more difficult. Ask your broker to outline the similarities and differences between each policy. This includes custom coverage for collectable items. But your broker likely has a relationship in place to get you a personalized quote.
- Claims dealt with by your broker save you hassle and stress, through a difficult and typically frustrating process.
Brokers make sure you purchase the appropriate insurance policies. They support you with free impartial advice and ultimately chase any insurance claims for you. An insurance broker’s professional impartiality allows them to match your insurance needs with the right policies, the right companies, and the right premiums.
