5 Things You Need to Know Before Working With an Insurance Broker
You need to know important facts about insurance brokers if you’re new to the insurance industry. Knowing these essential facts will help you decide if you truly need an insurance broker. Working with one comes at a price and you need to know what you’re getting into.
Fact # 1: An insurance broker is an intermediary.
An intermediary is a middleman. An insurance broker will be the one to help you sort things out with an insurer. An insurance broker will not provide you with an insurance policy per se, he or she will only help you find the best one. As they are experts in the industry, they know all kinds of policies and work with multiple insurance companies. Working with an insurance broker will simplify your search for an insurance policy. They will evaluate your need and provide you with the best possible options.
As they will do all the work for you, you will need to pay broker fees. Some insurance brokers don’t get paid broker fees if they directly represent an insurance company.
Working with an insurance broker will cost you but it will ultimately result in savings as they could find the best-priced insurance policies for you. You will end up saving hundreds of dollars if you’d work with an insurance broker.
Fact # 2: You don’t necessarily need an insurance broker. You will only need one if you
have complex insurance needs.
There is no need to look for a broker if you have simple insurance needs. If you have basic insurance needs, you can simply choose a reliable insurance company and work with the insurance policies that they offer. With such a move, you won’t need to pay any broker fees. If you have no idea as to which insurance companies are reliable, you should check with the Insurance Commission of Western Australia at https://www.wa.gov.au/organisation/insurance-commission-of-western-australia.
If you have complicated insurance needs and you have no idea where to begin, you should work with an insurance broker. Working with an insurance broker will be beneficial if you are any of the following:
- You own multiple homes
- You own multiple cars
- You want to fully know everything about your insurance policy
- You run multiple businesses
- You need to know insurance policy options from different insurance companies without reaching out to different people or representatives
- You want to build a long professional relationship with a broker who will fully know the ins and outs of your business needs
Working with a fee-only financial advisor will be best for you if you’re simply opting to buy permanent life insurance.
Fact # 3: Insurance brokers are paid differently.
Insurance brokers in Perth, Western Australia are paid in two ways: via broker fees and commissions. If you’d work with an insurance broker, the first thing you need to know is their payment policy.
An insurance broker can:
- Only require broker fees
- Only require a commission
- Requires both broker fee and commission
Your insurance broker should disclose his or her broker fee and commission payable before working with you. If needed, your insurance broker should also duly inform you about:
- non-monetary benefits
- indirect benefits from insurers
- contingent fees
You should also ensure that your insurance broker complies with all standard industry policies and regulations. If you think that an insurance broker is not being transparent with you, you should consult with a lawyer.
Fact # 4: Insurance brokers receive commissions.
Your insurance broker will receive money or commission, for every successfully closed deal from an insurance company. The rate will vary depending on the insurer and the amount of a policy. It is determined on a percentage basis. Your insurance broker should fully inform you regarding this matter. This will ensure that no conflict of interest is present. Transparency should be observed at all times.
Some insurance brokers can even earn as much as a 100% commission on a newly signed policy. They don’t receive high commissions on policy renewals. This is why it can be tricky working with one. They may push to sell certain policies to earn targeted commission rates. This is why commission disclosure is important.
Receiving a commission from an insurer will bind an insurance broker to your policy. Should you choose to cancel your policy or fail to pay premiums, your insurance broker will have to return the commission they received.
If you choose to work with an insurance broker that requires broker fees, he or she should be completely neutral and unbiased. He or she should not be partial to any insurance company.
Fact # 5: Broker fees are non-refundable.
You cannot have broker fees refunded. This is important to remember if you’d choose to work with one who’d require you to pay broker fees.
You cannot get your money back even if you’d cancel your policy. Broker fees will only be refundable if your insurance broker was dishonest or fraudulent.
PRO TIPS: You can choose to not work with an insurance broker if you’d do the following:
- Work with an independent agent who represents insurance companies.
- Work directly with an insurance company. Reach out via phone or email.
- Work with a captive agent. A captive agent only works with one insurer.
- Ask around. Talk to family and friends. Ask if they could recommend an insurance company.
- Check out insurance companies online. Do extensive research by reading customer reviews.