It is a common desire to see that your family is well looked after after your death. Life insurance is an important planning tool to prepare your family financially for your loss. However, navigating the life insurance process can be confusing and deciding to work with a professional to choose the best policy can help you avoid that confusion and ensure you have the right type of insurance coverage.
What is a life insurance broker?
Instead of being employed by a specific company and working to do the best for them, a life insurance broker will work for you to find what you need at the best price. They do this by helping you assess your life insurance needs and then comparing multiple coverage offers to help you find the best one, be it based on price, coverage, or both.
You can either work with a traditional life insurance broker or an online broker. If you’re looking for personal advice and an easy way to ask questions, a traditional broker might be your best bet. However, if you know what type of policy you are looking for and just want to compare prices, an online broker might be more convenient.
Life Insurance Broker vs. Life Insurance Broker
Both brokers and agents need one state life insurance license, but their services are different. Brokers are usually independent, which means they are not tied to a single insurer. Using a broker gives you the opportunity to buy from several insurance carriers.
A captive agent, on the other hand, typically sells policies from the insurance agency they work for. This means you have fewer choices as you are limited to the policies and tariffs offered by a company.
Why should I work with an insurance broker?
There are a number of advantages associated with using an insurance broker to choose a life insurance policy. Instead of trying it alone, consider the advantages of being a broker.
- Advice on the best type of policy. Life insurance can be complex, from the choice of the term or the entire lifetime to the choice of the amount of coverage. An insurance broker will study your personal and financial situation to help you choose the best plan.
- Compare offers quickly. Instead of checking with multiple insurance companies yourself, an insurance broker will do the work for you.
- Optimized application process. A broker also stores your application information while you compare quotes from different insurers. You can save time by getting updates from your broker during the application process instead of checking with the insurance company yourself.
How does an insurance broker make money?
An insurance broker earns a commission on the policy you ultimately choose. Usually it is a percentage of your premium amount. You may be wondering if they have your best on mind as they will make more if you buy a more expensive premium. On the other hand, they usually continue to receive a commission every year the policy remains active. If they promote an expensive policy and you end up canceling the contract, they lose that future stream of income.
If you are concerned that commissions are a conflict of interest with your life insurance broker, just ask them how they make their money. Every state has its own rules about what it must disclose to its customers. They will likely have to tell you they are receiving a commission, and some states even let them disclose how much. Don’t be afraid to interview multiple life insurance brokers to compare how they answer these compensation questions.
Advantages and disadvantages of an insurance broker
As with anything, working with an insurance broker has advantages and disadvantages.
| advantages | disadvantage |
|---|---|
| Personalized service | Commission-based sales |
| Easy comparison shopping | Knowledge may vary |
| Negotiation with preconditions |
advantages
Personalized service
A life insurance broker usually takes the time to get to know you in order to find the best policy for you. They will ask about your family, finances, and health. These questions will help you determine the right amount of insurance so that you don’t overpay, but also to make sure you have enough death benefit to support your family.
Easy comparison shopping
When you have this one conversation with a broker, you have access to several policy options. Otherwise you would have to submit the application to each individual insurance company separately.
Negotiation with preconditions
If your application has problems such as pre-existing conditions, an insurance company may offer an expensive premium or reject your application altogether. A life insurance broker can find an insurer willing to deal with various types of applications.
disadvantage
Commission-based sales
Ultimately, a life insurance broker is a seller. You need to do your own analysis on their advice as they will make more money selling you a more expensive policy.
Knowledge may vary
Some types of life insurance can be complex. A less experienced insurance broker may not understand the intricacies very well. Be sure to ask detailed questions so that you can judge the quality of the answers.
frequently asked Questions
Do you need to use an insurance broker to get life insurance?
No, there are a number of ways you can get life insurance, except through a broker. For example, an insurance agent works with a specific company and only sells their products. This can be a good option if you have some sort of brand loyalty or want to bundle multiple types of insurance with the same carrier for a discount.
Which life insurance is the best?
There is no clear answer to that best life insurance because everyone has their own needs. However, you can first review companies with strong financial ratings. That means the business is being run efficiently and they have the capital to pay off receivables. You can evaluate customer service in addition Compare prices for the type of coverage you are looking for.
How Much Life Insurance Do I Need?
Depends on. Think about the people who depend on you financially and how your death would affect them. Your life insurance could be enough to cover debts such as mortgages and car payments. It could also cover the final expenses and provide some financial cushion to make up for your lost income.
