What do Life Insurance Brokers Do for You?

February 4th, 2012 | Author: Mitch Reynolds

What Are Your Benefits To Working With A Life Insurance Broker?

Life Insurance Brokers are your gateway to the Canadian insurance market

Life Insurance Broker Canada When choosing where to buy the life insurance you need, you have probably considered speaking with a life insurance broker. There are many ways to buy life insurance in Canada, including captive agents from one particular life insurance company, a call centre from a bank owned life insurance company, or even signing up for coverage from a mail-out offer you received.

In this article I will describe how a life insurance broker can provide a lot more benefit to you than the other sales channels, and important things you need to know, like how they get paid and the level of service you should expect from a professional life insurance broker.

What extra value do life insurance brokers bring?

A life insurance broker first and foremost represents all the life insurance companies in Canada equally, and holds no particular loyalty to one company over another. Their first priority and loyalty is to their clients. Your life insurance broker can shop the entire Canadian life insurance marketplace to find you the best value on insurance. By best value I mean there is a balance between low cost premiums, high cash values, length of term required, certain attached benefits to the plan or valuable optional riders than can be added to customize your insurance. For life, health, disability, critical illness and long term care insurance, your life insurance broker can go shopping to find you some real value, and design a customized plan just for you.

There is another very valuable piece of the puzzle. Because a life insurance broker has access to all life insurance companies in Canada, they know which companies are willing to take on certain risks. Height and weight can be treated more strictly by insurance company X (resulting in a premium increase for the policy) while insurance company Y might take the same person as a standard rate for insurance. Many medical conditions, like high blood pressure and cholesterol, diabetes, prior injuries to parts of the body (could result in an exclusion for disability insurance), or many other medical conditions will be viewed differently by different insurance companies. You life insurance broker will know, or can enquire, which insurance company will treat your medical condition more favourably. This knowledge alone, and the ability to shop around, could save you thousands of dollars over the years.

How do insurance brokers get paid?

I think this is an important question. Your life insurance broker will not ask for payment for the advice they are giving you. When they collect money from you, it is for the life insurance company that they are placing your life and/or health insurance policy with (all cheques should be made out to the life insurance company and never be payable to the broker directly). So, if you aren’t paying them for the service then the insurance company must be. Life insurance brokers earn commissions from the insurance company they sell you a policy with. These commissions are proportional to the size of the life insurance policy you are buying and the amount of premium you pay. So, if you are buying a large life insurance policy that is costing a lot, the life insurance broker will be making a large commission on the sale.

The amount of commission varies between companies and between insurance products. Usually permanent life insurance has a higher commission rate than term life insurance. Some health insurance policies, like prescription drug and dental plans, pay a very small up front commission but pay higher, steady renewal commission each year so long as the client (you) keep the insurance in force. Most life and health insurance policies pay the life insurance broker a “heaped” commission in the first year and then a small renewal each year afterwards (usually between 3 – 5% of your annual premiums) to provide ongoing service to you for the policy.

So, your life insurance broker does get paid more to sell you a big policy. If this is a concern for you then you need to make sure you are speaking with a life insurance broker you can trust. Here are some warning signs to look for when any insurance broker or agent is more interested in their commission than in your needs:

Do they start talking about products and solutions before they get to know you?
Is the first thing they want to tell you about a permanent life insurance policy with a big investment and high cash values?
Do they conduct an insurance needs analysis to make sure you have the right amount of insurance, or do they pull numbers out of the air and start quoting you prices?
Do they take the time to get to know you and your situation before talking about product, or do they launch directly into a sales pitch and give you quotes and illustrations?

I think you get the idea. A good life insurance broker will get to know you, your needs, the financial risks you face, etc. From a good understanding of you and the needs you have, they can recommend solutions that make sense to you and are the right fit for:

your immediate risks
your long term goals
your investment and savings plan
your need for tax planning
your estate and legacy giving plans

You’ll know if it’s the right advice for you, because you’ll say, “he/she gets me and this will solve my needs.”

Ongoing service from your life insurance broker

You should expect to be able to reach your life insurance broker anytime, either via email or phone. They might not be available to talk after working hours, but just leave a message and they will get back in contact with you the next day. Remember, your life insurance broker is being paid ongoing renewal premiums to take care of you. These premiums plus and future life and/or health insurance you might need will all pay your life insurance broker some money.

A happy client is very valuable to a life insurance broker’s business because they will buy their future life insurance from the same broker and they might refer their friends and family to the broker to also become new clients. I shake my head when I hear of independent life insurance brokers providing poor ongoing service to their clients, because in the end it is only the broker and their business that is being hurt. You can always move your insurance policies to a new broker who is willing to provide good ongoing customer service.

Life Guard Insurance can find you the best life insurance broker

Life Guard Insurance is partnered with independent life insurance brokers across Canada who are ready to help you. We only partner with the best advisors, who are highly trained, experienced and have a strong track record of providing excellent customer service to their clients. Contact us today, and we will connect you with a local broker in your area you can trust.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about what a life insurance broker does for you would be very much appreciated.

ken:

March 6, 2012 at 10:30 am

The only other item I would mention is to be sure the broker candidates have achieved the CLU designation. (Chartered Life Underwriter) This is equivalent to a “Ph.D” in life insurance!

Then you can be well, “almost” sure they really do know what they are talking about.

Mitch Reynolds:

March 7, 2012 at 8:43 am

Thanks for your comment, Ken. Many of our brokers have their CLU and other designations, like CFP (Certified Financial Planner), RHU (Registered Health Underwriter) and more. Our clients can be assured they are getting advice from the most experienced and professional life insurance brokers in Canada.