With so many options for insurance today, it can be challenging to understand precisely what you’re buying, and from whom. Direct insurers, brokers, agents-they can all provide you with insurance, but there are key differences between them that you should know when you’re deciding on where to purchase your coverage.
There are three main ways to purchase insurance. Since everyone’s insurance needs vary, you should consider the differences for each one before deciding which to take. Let’s break down each option and understand how they work.
1. Purchasing insurance directly through an insurer.
When you buy insurance from an insurer, normally over the phone or on a website, it’s called a direct insurer, or a direct writer. These companies don’t typically use an intermediary like an agent or broker. Instead, they opt to sell their policies directly to the public through other channels like call centres and websites. When you choose to purchase from a direct insurer, you only have access to the insurance coverage options and pricing offered by that particular company. This applies both at your initial purchase, and each year after that when your policy renews, so your choices may be limited when it comes to a rate increase or if you need additional coverage. While it can be convenient to purchase online or over the phone, it can also be challenging to get the right answers if you have questions or advocate for yourself if you ever need to make a claim.
2. Purchasing insurance through an independent agent.
Similar to a direct insurance provider, an agent will only offer products and services for one insurance company. This business model appoints independent agents to sell insurance products on the company’s behalf exclusively. An agent will have expertise in the offerings of the insurer, but they do not work directly for the company. Instead, they are contracted and paid commissions based on the volume of policies they sell. They can assist with any changes to your policy and provide additional insurance advice. However, they can still only offer rates for products supplied by the company they are contracted to.
3. Purchasing insurance through a licensed insurance broker.
A broker is a licensed insurance professional who works independently of a specific insurer or company; brokers are required to keep up their credentials through regular licencing exams to keep in good standing. Unlike agents or direct insurers, brokers have access to products from several different insurance companies so that they can look around for the best rate and coverage. They focus on understanding your needs and finding the right products to create a customized insurance solution specifically for you. As their client, they will shop around for you at each renewal to ensure that your rates and policy remain competitive. When you use a broker, they represent you, not the insurer, and advocate for you if you ever have to make a claim to ensure that you are treated fairly.
When it comes to buying insurance, not all policies are created equal. That’s why it’s essential to ask questions and thoroughly review your policy to understand your coverage. Whether you buy through a broker, an agent, or direct insurer, depends on your needs and preferences. You may be willing to price-compare across various carriers and do your own research, and if you’re looking for something more complex, are looking for multiple products, or just want the added peace of mind, using a professional can help you navigate the process.