Why Use A Broker When Buying Insurance?

Is it better to use a broker for insurance?

Confused young man choosing option A or option B with chaotic symbol background

This is a common question people ask when they first buy insurance, which we will answer today. 

People ask questions about the necessity of an insurance broker for several reasons. Not least of these reasons is the perception of an added cost when one decides to buy insurance through a broker. Generally, consumers don’t like to deal with middlemen.

Cost considerations aside, we all are terrified of making bad investments and would welcome any help it would take to avoid it. With that said, let’s answer the question of what an insurance broker actually does:

The Role Of An Insurance Broker

According to the statute book of the Canadian state of Ontario, an insurance broker is anyone who for compensation of any kind works directly with the public doing any or all of the following:

  1. Acts or helps in any manner to solicit, negotiate, or procure any contract of insurance,
  2. Provides risk management services where required,
  3. Consults or advises on insurance or reinsurance,
  4. Evaluates any insurance policy, plan, or program and gives advice or recommendations on it.

From this definition, it is clear that an insurance broker works for the best interests of you – the person looking to buy insurance.

For one to practice as an insurance broker they must register under the applicable act. Unless they are already registered under an associated trade. For example, lawyers, accountants, actuaries, insurance agents and readjusters acting in their professional capacity.

An insurance broker may specialize in one type of insurance or they may offer services for several. Remember, though, an insurance broker does not need to have agreements with insurers to sell insurance products on their behalf.

However, registered insurance brokers have a set of professional standards they must live up to. They may be deregistered if they are found to be incompetent or if a case of misconduct is proven against them.

So, should you use an insurance broker?

Benefits Of Using An Insurance Broker

The common advice is to use a broker if you are buying insurance for a product you have little understanding of. Or when you’re looking to insure something that’s fairly unusual, like your pet.

Brokers are experienced experts professionally trained to assess risk. They will give you qualified advice that you won’t get from comparison sites, to cite one example.

There are other equally relevant reasons why using a broker when buying insurance is a smart idea. Here are some of them:

  1. A wider choice of options. Dealing directly with an insurer will limit your options to only the products the insurer sells. But a broker will give you options from all the insurers they work with,
  2. A broker works for you and is motivated to provide you with the best value. They will make sure you don’t pay for coverage you’re already getting under another policy,
  3. Surprisingly, it’s been found that using a broker is cheaper than buying direct from insurers. The reason is that insurers offer special pricing for brokers because people who buy through them don’t normally underinsure. This ensures profitable premiums and minimizes unnecessary claims for the insurer.
  4. Brokers are far more efficient at evaluating policies than the consumers themselves. Insurers, for their part, aren’t always proactive and are driven more by profit than customer benefit.

Help when making claims. Insurance brokers will liaise with your insurer or loss adjuster when the time to make a claim finally comes. But it is advisable to ask if they will provide this service before you sign up with them.

Why Do Insurance Brokers Charge A Fee?

Registered insurance brokers earn a commission from their sales, which means they are paid by the insurer. In other words, they get a percentage of the premium charged by the insurer with which they place your insurance. The commissions usually set by the insurer and approved by the state.

Some insurance brokers may also charge a broker fee on top of the commissions they get from insurers. The only expectation here is the fee must be reasonable and be disclosed to and signed for by the client.

Get Insured Today

The common theory that buying your insurance directly from the insurer is cheaper than going through a broker doesn’t hold in practice. There is usually no saving in cutting out the middleman in this case.

In fact, an insurance broker will give you more options from different insurers. They also provide more personalized advice and attention than you would get from the insurance company.Able Elite is a top insurance brokerage in Ontario. We place insurance with the top insurers in Canada. Insure through us and we will help you keep your money where it belongs, in your pocket. Get your quote here.

Add Comment

Your email address will not be published. Required fields are marked *