With nearly 800 life insurance companies and thousands of policy options on offer in the US, choosing a life insurance policy can be a daunting task. A broker can potentially save you time and money by helping you to navigate the complexities of certain policies and guide you in the right direction. But their services come at a cost.
What is a life insurance broker?
A life insurance broker represents you, the policyholder. They partner with multiple life insurance companies, and present you with the best possible options to suit your coverage needs and budget. Many brokers also help you to complete your life insurance application for a better chance of approval.
Typically, brokers work independently or at life insurance brokerage agencies — and they charge a fee for their services.
What’s the difference between a life insurance agent and broker?
These terms are often used interchangeably, but agents and brokers have different roles. A life insurance agent works for one or more insurance companies with the purpose of selling policies to those who need them. Life insurance agent responsibilities often include meeting a quote for the companies they work for.
In other words, the agent represents the company, not the buyer — while a broker does the opposite.
How do life insurance brokers make money?
Brokers earn money through commission — a fee charged to you when they guide you through securing your life insurance policy.
What are a life insurance broker’s responsibilities?
Since a reputable and licensed insurance broker should be acting in your best interests, these professionals have a number of duties and responsibilities to follow.
Some of the key duties and responsibilities of an insurance broker include:
Source the most suitable policy available for your needs based on the information that you provide
Find competitively priced policies on your behalf
Act in your best interests throughout the process
Advise you whether they’re acting as an agent for an insurer or for you
Act with integrity and honesty at all times when it comes to dealing with clients and insurers
Avoid conflicts of interest or disclose conflicts if and when they do arise
Ensure any fees, commissions or other benefits received are disclosed to the customer
Adhere to client confidentiality regulations and data protection
Ensure all records required by law are maintained
Provide information about the insurance coverage to the customer promptly
Provide necessary documentation for the insurance to the client promptly
Provide details of charges and fees from the insurer in writing and detail any fees charged for the broker service separately
Ensure the accuracy of the insurance documentation is checked
Make sure that no non-disclosure or misrepresentation takes place
Should you find a life insurance policy by yourself or through a broker?
Finding the right coverage requires researching and familiarizing yourself with available plans on the market, which takes time. A broker can help speed up the process, and they have a wealth of knowledge about the insurers they partner with.
To decide whether to enlist a broker to help you get a life insurance policy, consider these factors:
Cost. Finding a policy on your own can save you the the professional fee brokers charge for their services. You can save money by going online and using the services of a comparison site to see potential policies side by side.
Time. Looking around for different policies on the market can be a significant investment of your time, especially if you’re not sure what you are looking for. The help of an insurance broker can get you easy access to information and recommendations that are tailored to your situation.
Effort. Finding a policy by yourself gives you the advantage of making a decision at your own pace. On the other hand, getting some assistance from an expert can save you from being overwhelmed by a sea of information from multiple sources, some of which might be unfamiliar.Expert help can be very valuable in terms of time and quality. A good insurance broker will never insist on a specific policy with a certain provider to get the best commission. Instead, they have a wide portfolio and can help find various solutions to put you at an advantage.
How to find an experienced life insurance broker
Check online review sites.
Read online life insurance brokers reviews, and take the time to check out the brokers’ credentials as well as any case studies. You may even want to schedule a call or appointment with a shortlist of brokers to learn about their services and compare rates.
Get referrals from friends and family.
One of the advantages of finding an insurance broker through your circle of friends is the first-hand information and an honest review. It’s still usually a good idea to look up the broker’s credentials and do a bit of homework on them.
Read up on which certifications are standard.
You can then ask life insurance brokers about the certifications they hold. Many hours of professional training won’t guarantee you the best experience, but it definitely ups the likelihood.
Explore NAIFA and MDRT.
The National Association of Insurance and Financial Advisors (NAIFA) and Million Dollar Round Table (MDRT) are professional associations that require members to uphold a level of quality and follow a strict code of ethics.
Compare alternatives to brokers
Bottom line
Life insurance brokers can typically save you time and money when you’re seeking a policy. By doing a little bit of research to find a reputable broker who will work with your needs, you’ll have a professional by your side working in your best interest.
Frequently asked questions
Usually, no. Providers who have agents typically won’t sell to independent agents or brokers.
Yes, that’s an option. You can do the legwork and compare life insurance companies yourself.
Rhys Subitch is a personal finance editor at Bankrate and former loans editor at Finder, specializing in consumer and business lending. Rhys has nearly a decade of experience researching, editing, and writing for startups, Fortune 500 companies, universities and websites. They hold a BA in sociology and a certificate of editing from the University of Washington.
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