Life Insurance is an essential priority in life as it is for the preparation for the final stages of life. It can be quite a sensitive topic as the event for which it shall be utilized would be the ultimate finality of the benefactor it was intended for. It’s a bittersweet investment but one smart move to take.
When you look into different financial strategies, most people think of the expenses- savings strategy without realizing that investing in life insurance should also be prioritized. The reason why it is often overlooked is that unlike savings and other investments, the only way you get the benefit of insurance is upon the demise of the insured. It is used to cover the final expenses and provide a financial inheritance to loved ones. It cannot be used when emergencies arise, and it won’t be withdrawn over the counter when you wish so.
Although life insurance itself is common knowledge, its processes, different terms, and policies are not. In most cases, you may be looking for someone to mediate your need to find the right company to partner with. Since life insurance is a competitive business, the market is riddled with a lot of companies and agencies that promise the best deal for you. You can go ahead and do independent research, although it might take a while and might be difficult to understand, especially if you are not aware of their business jargon.
There might be other information you might miss, or worse, and you may end up getting scammed because of fraudulent companies that are plaguing the market—as such, getting to know an insurance agent or an insurance broker is only proper. You might ask the question, aren’t they one and the same? They appear to be so in some aspects, but they differ in some ways. Let’s get to know them better.
Are They Essential?
You can buy insurance directly from Insurance companies. It can be cheaper and simpler, a hassle-free transaction. You just have to fulfill your obligations thereafter. It is a direct approach that only works for your benefit if, and only if, you have a solid and thorough understanding of the insurance world and its products. As it is complex and has extensive coverage, it probably isn’t the case. You should also remember that insurance is not only for people; you can also get your property and assets insured to protect yourself from loss and damage.
Third parties in the form of brokers and agents are your advisors when it comes to dealing with insurance. Their main agenda is to sell insurance so you can expect that they are well-versed in the language of the business and have mastered the key information about not just their own products but of the system itself. Do you know one important hack of life insurance? Get acquainted with an agent or a broker.
Their job is to lay all the options and all the cards on the table for you. Whatever your question is about- the benefits, costs, coverage, term, and claims, can be explained by them. They will be your advocate because they will campaign for the best policies for you, and they will be there right from the assessment of your needs up until your insurance is delivered. A great life insurance package is arranged by an effective insurance agent or broker.
Who They Represent
We have learned that brokers and agents are both important figures in the world of insurance, but are they of separate professions in the same field? Indeed they are. It’s like they are in the same field but of different teams, which means they represent different parties in the conversations.
Insurance agents represent only one insurance company. Think of them as part of ‘that’ team, and they represent their company as they sell their product/service to you. They know their company very well and would be selling their products/ services exclusively. If you apply for their products/ services, they will handle the paperwork and processing of forms and other premiums.
Insurance brokers do multiple representations of insurance companies. They are the ones who could make insurance shopping with you and help you know different products from different companies. According to Morison Insurance Brokers Inc., brokers will be able to help you with packages that have competitive rates because of their experience as seasoned insurance shoppers. They are on your ‘team,’ they will represent your status and interest in selecting the best package for you. It’s here that you get to see different choices from different brands.
Sales Talk Style
Agents can only work around the products that their company sells and are prohibited from offering from other companies. Thus, you only get to learn about limited information. They could be helpful if you are set to buy from that certain company. The problem is, their recommendations could be biased because their goal is to only capture probable clients. They work around meeting certain sales quotas and company-mandated policies.
A brokers’ main objective is to capture the right insurance for their clients. They will help you identify your needs and match them with suitable insurance plans. They would assess your situation and give you recommendations based on their interpretation and findings of your standing. They are keen on protecting your interests based on your financial ability and situation.
Who Appoints Them
Because agents work directly with companies, they are recruited and appointed to handle different cases by their employers. Most of the time, they are only allowed to handle one type of product based on their qualifications and could only process the sale of that specific product.
Brokers get selected by clients themselves. They are selected by people to direct them to the right company. They are usually found by clients due to recommendations from their previous clients, a product of research, or picked from a pool of numerous brokers. They get selected among others due to their reputation, competence, and self-branding.
There are two types of agents. An independent agent is someone who is not directly employed by the company but still legally represents them anyhow. Think of them as a franchise. They could franchise different companies and sell you different products, but they don’t have a legal obligation towards you. The only relationship they have that has merit is their relationship with the company. The other type is a Captive agent which are contractors for the insurance company. Think of them as company hunting dogs. They are directly employed; thus, they have to abide by company policies strictly and are deeply immersed in the company culture.
Brokers also have two types. Retail brokers are likely going to interact with you directly. They show you options like how one presents a PowerPoint, as is. Wholesale brokers work quite differently from retailers. They are specialists and consultants in the field, and they take care of unique and demanding cases. If your retail broker can’t find a suitable plan because of the specialized needs of your company or business, they will be the ones who will help you, although they will not get involved with you directly. They work hand in hand with surplus line brokers.
Agents know everything about their company and the product they are selling but will not help you if you want to compare prices, company profiles, and other equivalent products from others. They may not even have full knowledge of the entire insurance business itself. They are only masters within their own house but have no power elsewhere. They will be helpful to you if you are planning to enter their home expertise.
Brokers are like the Jack of all Trades. They are the ones you go fishing with.
They develop special qualifications, and they have amassed a great deal of information through research so they could build a pond from where they could fish out the best policy for you. In terms of experience, they are more in-depth and have more coverage.
Other Pros and Cons
Agents work only with what they have at hand and cannot deliver you the best insurance plan from the entire insurance market. Although this may be the case, they still remain a competitive ally because they plugged into the support system of their company. They get fed with the latest change and updates in policies, laws, and trends. Thus, agents also provide you with services that cover back-office support. When you need to talk to them, you have to meet them at their offices most of the time. You can only transact with them according to the rules prescribed by their company policy. They get to be carried, protected, and taken care of by the company they belong to.
Brokers are more independent, so they have the tendency to become stagnant because they do not have direct information from the companies where they get the insurance they sell. They tend to lag behind when it comes to new updates. They cannot change and upgrade the policy they have on their hands because they have no power to manipulate these. They are still great at giving other options, but they cannot change them. They do this by giving a highly personalized service that is tailored fit to meet your preferences. You can even have meetings with them at cafes and restaurants, where ever you feel comfortable, they can be flexible in this aspect.
Insurance Agents earn a salary, just like any other employee. They are subjected to commissions from their individual sales and are entitled to bonuses and other company perks. They are bound by a contract and have to be working in a symbiotic relationship where both parties should be beneficial to one another. They are focused on profit-making, and most insurance companies have the culture of ranking their agents. A roll of highest earners gains special recognition from the company apart from getting rewarded for being their best agent.
Insurance Brokers almost do not get additional income from the products they sell. This is understandable because it’s as if they are their own bosses. One of their duties is to match a plan suited to the financial capacity of their client. They give them what they afford and what they need.
Agents work as guided by their company. They can fall on their structure, and they are trained by the company to know full well the important data and facts of the company. They are experts in the policy they handle. There’s almost no room for more mistakes because it can get them fired. The company could be held accountable if the transaction encounters problems. They only sell and transact face to face, but the legal and binding process itself is governed by the company. Lastly, agents are not allowed to charge their customers on top of the prices of their products. Financial transactions are completely relayed to the accounting branch. Whatever bonus or commission they get is provided by the company only, and it’s their prerogative to do so. Clients do not have knowledge of this.
A broker is held full accountability and responsibility. They could directly get sued if problems arise. They are in charge of their own development and training and can be appropriately called self-made. When it comes to transactions, they are required to give full disclosure to the client in terms of the percentage they are going to receive, the commission rate that they will earn from the deal. Basically, they have to answer the questions of the clients in every aspect.
The world of life insurance is a complicated business. More so for the people who are working on it. They shouldn’t just possess the qualities of a good agent or broker; they have to spend hours on researching and acquiring knowledge. Aside from those, an incomparable edge is needed for them to flourish and be successful. For people who are choosing between the two, the first thing you should do is self-assessment. If you know who you need and prefer then deciding who to go for will be easy.