What’s the difference between a broker and an insurer?
It’s that time again. You’ve gotten an insurance renewal letter in the mail and you aren’t sure if your policy is still the best deal out there. You know you should shop around, but you can’t find the time. A friend suggests using an insurance broker to compare quote, but you’ve never heard of it and wonder “What’s the difference between a broker and an insurer?”
An insurance broker
An insurance broker is like a department store. You visit the broker who offers many different types of insurance products (aka, departments) and, within each category, offers a selection of different brands (insurance companies) and styles (insurance policies). In this department store analogy, the broker is your personal shopper.
When you visit an insurance broker, you can talk to him or her about purchasing only auto insurance, only home insurance or a combination of a variety of insurance products. The broker takes down all of your information, looks around to find insurance products that matches your needs and budget, and presents them to you.
In this situation, the insurance broker is paid by the insurance companies, based on the product you purchase, not by you. If this makes you nervous, don’t be. In Canada, insurance brokers must have your best interests at heart, even though they’re being paid by someone else. This means that they should present options that are right for you, even if it means earning a bit less money in the process.
An insurer
An insurer is a bit different. An insurer is the one that holds your insurance policy, decides how much to charge you for insurance and, if they worst should happen, ultimately decides whether or not you should receive payment for your insurance claim.
Some insurance companies will work directly with you, allowing you to submit your information directly to them and buy an insurance policy. Although this is one way to gather quotes and buy insurance, it’s not very efficient since you’ll have to submit your information a half dozen times to different companies in order to get a variety of quotes to choose from.
Claim time
If you ever get into a situation where you need to make an insurance claim, your insurance broker can become invaluable. Insurance brokers work with insurance companies on a day-to-day basis. They know what forms you need to fill out to make a claim, and the steps you need to take to verify your damages and receive payment from a claim.
When you file a claim, having an insurance broker means getting an experienced person who working for you. You won’t need to worry about not understanding or not trusting your insurance company.
The difference between a broker and an insurer is that an insurer sets policies, prices, and decides whether or not to pay you if you file a claim. A broker works with you to find the best insurance policy for your budget and then acts as your representative if you need to file a claim.