If the insurance is being offered by an insurance company, why seek a broker who will sell me the policy once I have established my need and intention to go for a cover? Many of us get bewildered with how these two distinct organizations work and their roles are different.
Well, what about you? Do you know exactly what is the difference between a broker and an insurance company? We’ll be explaining it in simple terms, so if you are considering getting insured, it is very important that you continue reading. Stay tuned!
What is an insurance company?
Each industry within business has something to be offered to the public in the nature of a product or service. Thus, a car manufacturer is a company supplying vehicles, its product, while the case of an insurance company providing insurance plans.
An insurance company is an entity licensed by the government to undertake risks that may be exposed by the insured. It is also an entity permitted by the government to compensate the insured in case he or she suffers any type of loss or causes it.
Insurance, therefore is the product sanctioned by the government and availed by an insurance company. It is the company that avails car , motorcycle, home, life, health insurance among many others and also their varied coverages.
Therefore, when we purchase an insurance policy we are acquiring the product from an insurance company just like how, when we purchase a car, we are acquiring a vehicle from a specific manufacturer.
However, as when purchasing a car we don’t go directly to the car manufacturer, so too when purchasing insurance we do not look for the insurance company but rather for a broker-a firm that sells the products of several insurance companies, as you will see below.
What is a broker?
A broker does not insure, but acts as a representative of the insured person when buying an insurance policy. It can be a legal entity or an individual.
A broker is an independent organization with permission to sell insurances. Being independent, an insurance broker works with different products from different insurance companies and offers the client several options.
It is the broker, represented by a professional broker, who is responsible for enforcing what is determined in the contracted policy.
When the insured needs to make a claim, he will contact his broker, who will take legal action to ensure he receives his compensation. All of this will always be in accordance with the terms of the contract.
When taking out insurance, should I look for a broker or an insurance company?
An insurance policy has several clauses and conditions that can be complicated to understand. There are details and variations, situations that need to be observed so that the insured is aware of their real rights according to the policy and the coverage they have contracted.
Insurance is a contract with legal value that is signed between an insurance company and an individual or legal entity and, therefore, the ideal is that the contracting of the service is carried out through the intermediation of a qualified professional, the broker, whether an authorized representative or a company.
Their role is to observe the needs of the person interested in insurance and help in the interpretation of the products offered by the insurer. They are the ones who help the person interested in finding the best insurer that has the coverage for what they need.
There are several insurance companies that offer products that seem the same, however, some details may make this or that company not the most interesting to serve someone.
A broker will assist you in this involved process of seeking the best company, the best package, and the best coverage for each case. Therefore, when taking insurance cover, seek a broker and not an insurance company.
Advantages of Brokerage
When we are buying a product to fulfill some particular need, but we don’t know which would be best for us, don’t we turn to the aid of some special salesperson? The same goes for buying insurance.
There are so many different products on the market that to know exactly which one best suits us we need someone who understands the subject, in this case, a broker. And there are many advantages to having them, such as:
Clarity
The broker will observe all the details of the contract clauses and maintain clarity so that the interested party can take out insurance with certainty about the product they are purchasing.
Practicality
The broker is responsible for legal issues and the policy contracting process, minimizing the concerns of those interested in the insurance.
Security
With the support of a good broker, the interested party is sure that they are truly protected by the insurer and that their interests will be observed when they need to activate the insurance.
Options
The broker also presents the interested party with different product options and can even provide different solutions for each case, as there are many variations for the same product and those that are more suitable for certain situations.
The broker presents these options and explains to the interested party how each one can benefit them, making it easier to choose what really suits them, whether in terms of coverage or cost-benefit.
Can I take out insurance without the help of a broker?
It isn’t prohibited by means of law for someone to take out coverage without the help of a broker, but, this exercise does now not convey any advantage, at the opposite. There are individuals who trust that with out a dealer or a brokerage enterprise, insurance may be inexpensive, however this isn’t real.
The price of the insurance does not range although it’s miles reduced in size with out a dealer and, although the insured does no longer must pay the brokerage fee, he’s going to want to pay the tariff value referring to the fee that is forwarded to the Insurance Educational Development Fund.
In addition to not implying lower values, taking out insurance without the help of a broker can result in the insured acquiring a product that does not suit them, or, when looking for better prices, they can be deceived by pirated insurance.
Therefore, it is best to opt for the security of a broker’s services to avoid future problems and unnecessary expenses.
Although brokers and insurance companies are different companies, they work together and need each other. Brokers depend on the insurance company’s product to serve their customers, and insurance companies need brokers to sell their products. But when it comes to hiring an insurance company, it’s best to look for a broker !