Life is unpredictable — you can’t prepare for everything. A flooded basement, loss of a family member, failed business, sudden critical illness, or car collision all have the ability to turn your world, and your finances, upside down. Most people aren’t able to financially manage the burden of any of those above scenarios, so insurance helps to give peace of mind. An annual contract, insurance policies entail putting your money into a premium pool, enabling you to make a claim for financial support if any event covered in your policy takes place. Since insurance companies are legally required to have enough money on hand to cover the costs of disastrous events, policy buyers can rest easy knowing they have ample coverage.
Buying insurance can be tricky for many reasons. There are many different kinds – auto, life, business, health, etc. – and within those categories, there are countless different providers and policies that you need to examine for compatibility with your needs. You can look at policies offered from lenders when you apply for a loan, insurance companies, licensed insurance agents, and registered insurance brokers.
Wondering which insurance policy you need? Check out our basic insurance guide.
What is an Insurance Broker
An insurance broker is the middle-man between you (the client) and an insurer. Selling different products from various insurance companies, brokers try to find you the best insurance policy for your personal situation, and at the best price. In most cases, insurance brokers must be legally registered as such in the province or territory that they conduct business and can be found on registered lists of regulators.
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Before choosing a broker, there are a few factors for you to consider. You can ask your broker about their training and qualifications, to provide references, and how much experience they have to assess your comfort with their service. Another popular avenue is to ask trusted friends and family for recommendations on an insurance broker.
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Brokers can save you a lot of time and money overall with their services and more often than do not charge the consumer a fee for their services. Although keep in mind that if you have complex insurance needs such as small business needs, landlord needs, or you require multiple policies, a broker may charge you a type of administration fee. Always make sure you speak with your broker about any potential extra costs before you make your final decision.
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Types of Insurance Brokers
Brokers can have varying specializations, so it’s best to look out for one with specific experience in the policy type you are looking for.
Different provinces have different rules for auto insurance brokers. For example, Ontario has a mandated minimum of uninsured motorist protection and direct compensation property damage (DCPD). BC, on the other hand, has a public system that does not require DCPD or uninsured motorist protection. Auto insurance brokers are well-versed with car issues and risk and are able to help you pick out a policy that works with your car’s features, history, and your lifestyle.
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Home insurance brokers sell homeowner insurance, condo insurance, and tenant and landlord insurance. They can also assess your need for insurance on your possessions (content insurance), like jewellery and art, and can enhance your policy accordingly. Furthermore, they can help you go through other additions that may benefit you, such as insurance for natural disasters, or for floods. Overall, home insurance can be tricky, as there are different policies for your primary dwelling, detached and semi-detached structures, as well as liability requirements.
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Though life insurance brokers sell term and whole life insurance policies, they often also specialize in health insurance, including critical illness and disability. In the event of your death, life insurance brokers help you assess your assets and figure out what you’ll leave to who. It’s important to note that many life insurance policies will request physical exams and samples to evaluate your health. If you have underlying health conditions, unfortunately, this may increase your premium for life insurance.
Insurance Broker vs. Insurance Agent
While broker and agent are often used interchangeably, they are in fact two different jobs. But with that in mind, insurance brokers and insurance agents are similar because they both work with various insurance companies and make money on commission, incentivizing them to upsell you. However, they differ in two main ways:
- Brokers represent the client, while agents represent the insurance company
- Brokers cannot close insurance sales and bind coverage, while agents can.
Since brokers represent the client or the buyer, they are able to find price quotes from various insurance companies, giving the buyer more options for consideration. Agents are sometimes bound by contract to one or a few insurance companies, and cannot offer policies from other companies; however, they are often more knowledgeable about insurance than brokers. When a buyer is ready to purchase a policy, brokers will often work with agents to finalize the deal.
Advantages and Disadvantages of Working With an Insurance Broker
Before deciding to buy an insurance broker’s services, consider the pros and cons:
Brokers represent you, the buyer
Although brokers still make money off commission, they represent the buyer, not the insurance company. This helps assure that they have your best interests in mind before the insurance company. No matter which policy you choose, the broker makes a commission off the sale. So, they don’t have an incentive to market one provider or policy over another.
Brokers have access to many policies
Unlike an insurance agent, insurance brokers are able to access many different policies and providers in order to provide you with an array of options to help narrow down the perfect policy. Brokers do not have any contracts with insurance companies that limit their ability to explore quotes and packages from other companies.
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Brokers are sales driven
Despite representing the policy buyer, brokers are still driven by sales since they make a commission. While you have the advantage of the broker representing you and not the company, brokers are still incentivized to sell you a policy, even though it’s not a particular one.
Brokers have varying levels of expertise
To be an insurance broker, you need to complete a course and take some examinations. Although the training requirements legally certify a broker, some brokers may have only six months of experience while others have six years. Less experienced brokers may not be as knowledgeable about all the policies available, and may not have had the same amount of time as experienced brokers to create relationships with different providers. It’s worth asking your broker about his or her experience before deciding to buy their services.
Insurance Brokers FAQs
Do I need to pay my insurance broker?
Should I use an insurance broker?
Are insurance brokers licensed in Canada?
Insurance can be a costly but necessary investment for your physical and financial health. Choosing the right insurance policy can be stressful, but a broker can help you navigate various providers and policies to help you find the best policy for you.