An insurance broker sells insurance, but doesn’t work for specific insurance carriers.
Instead, they have access to many different insurance companies and look to find the best value for their clients.
They may work independently, or with other brokers within a brokerage firm.
Who Pays the Insurance Broker’s Fee?
Independent brokers are paid a commission when you decide to buy an insurance policy through a company they’ve recommended.
The commission paid to the broker depends on the insurance company and the product sold, but it is usually a percentage of the premium.
As a result, buying through a broker usually does not cost you more than if you bought a policy directly from an insurer yourself.
Using an Insurance Broker vs. Doing It Yourself
It may seem unnecessary to use a broker since there’s so many insurance options available online.
You may feel you do not need an insurance broker if you only want to buy one policy.
However, most people buy several policies such as auto, homeowner, life, or business insurance.
Insurance brokers normally have access to a much wider range of products and insurance companies than most consumers.
They also understand how various policies may work together for greater savings.
Keep in mind though that dealing with so many companies and products can be a disadvantage.
It is impossible for brokers to have in-depth knowledge on so many products.
If the broker doesn’t investigate each option carefully, they may not recommend what is best for you.
Luckily, a good broker has in-depth knowledge across the industry, however you may be best serviced by picking a niche broker, for example someone that only does home and auto if you’re looking for that, or someone that only does business insurance.
A definite advantage of an insurance broker is their expertise.
Insurance is a complex industry.
The more insurance you need, the more likely you’d benefit from expert advice.
Few people have the knowledge and experience necessary to properly compare and evaluate policies.
Insurance brokers are educated industry experts.
They understand the terms, clauses, conditions, and exemptions in policies that could affect your coverage.
This makes them well-positioned to advise you, since they can decipher complex policies and explain everything in plain language.
Moreover, there’s usually no additional fee for their services.
An independent insurance broker has a fiduciary duty to represent your interests.
They gather information on your insurance needs, do all the legwork, compare products, and obtain quotes.
This can save you time and money since a good broker can often find the best possible products at the most reasonable cost.
However, unscrupulous brokers do exist.
These brokers may recommend a particular insurer to receive bonuses or upsell to make a higher profit.
It is important you choose a reputable insurance broker with a proven track record of honesty and integrity.
Did You Know?
Insurance brokers must be licensed in your province or territory. They also need to take accredited continuing education courses to stay on top of regulatory changes and new products.
Canada’s insurance oversight is through the Office of the Superintendent of Financial Institutions (OSFI), with provincial and territorial regulation through specific authorities.
Insurance Broker vs Insurance Agent
The terms insurance broker and insurance agent are often used interchangeably, but they are not the same.
Insurance brokers have a fiduciary duty to act in the best interests of their clients.
They have access to many insurance companies and products, and represent you – the buyer.
On the other hand, an insurance agent has contracts with specific insurance carriers.
This restricts which policies they can sell you.
However, they may also have more in-depth knowledge regarding what they sell, since they deal with fewer options.
Frequently Asked Questions
- Who pays an insurance broker?
Almost all brokers are paid by the insurance company. Their commission comes out of the annual premium paid to your insurer. However, some brokers do charge professional fees for certain services.
- Is it cheaper to get insurance through a broker?
It can be cheaper, since a good broker has relationships and access to many insurance products. Some of these may not be easily found by the consumer which can lead to savings.