What Is a Life Insurance Broker?

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Life insurance can be tricky to navigate — so many options, so much fine print. That’s where a life insurance broker comes in. Think of them as a matchmaker between you and the right policy, searching through multiple insurers to help you find coverage that fits your needs. But before you hand over the reins, it’s worth knowing how brokers work, what they can (and can’t) do for you and whether their services align with what you’re looking for.

What is a life insurance broker?

Instead of being tied to just one company, life insurance brokers are able to sift through multiple insurers to find policies that match your budget, health profile and coverage goals. This can be especially useful if you have a pre-existing condition or other risk factors that might make getting coverage trickier. Unlike agents who work directly for insurance companies, brokers have a fiduciary duty first to their clients — which is a fancy way of saying they’re legally obligated to put your best interests ahead of any commissions or insurer preferences. 

Whether you prefer a traditional broker for hands-on guidance or an online platform for quick comparisons, working with a broker can give you access to a wider range of options and help take the guesswork out of finding the right policy.

Life insurance broker vs. life insurance agent

While both brokers and agents sell life insurance, the key difference is who they work for. A life insurance agent represents the insurance company they’re contracted with, while a broker represents you, the client.

There are two types of agents:

• Captive agents work for a single insurance company and only sell that company’s policies. The upside? They have deep product knowledge and can provide detailed insights about the company’s offerings. The downside? Limited options.
• Independent agents can offer policies from multiple insurance providers, similar to brokers. Their fiduciary duty is to the insurer first, but are still required to act in good faith on behalf of their clients. In practice, the difference between a broker and independent agent is minimal.

A broker works independently on your behalf, helping you compare policies across multiple insurers to find the best fit. They don’t have the power to issue policies themselves, but they can guide you through the process and connect you with the right provider. If you want a range of choices and someone in your corner, a broker may be a better fit. If you already know which insurance company you prefer, working with an agent might be the way to go.

How does an insurance broker make money?

An insurance broker earns a commission on the policy you choose. Usually, it’s a percentage of your premium amount. For each policy renewal thereafter, they earn a smaller percentage. If you terminate the contract, they lose that future stream of income. The more expensive your policy, the larger their commission. You may choose to meet with multiple brokers in order to find the one that best meets your needs.

Should I work with an insurance broker?

Finding the right life insurance policy, whether that’s term life, whole life or universal life insurance, can be challenging, especially since every insurance company evaluates applicants differently, offers unique riders and has varying financial strength rankings. That’s where a life insurance broker can be valuable. They simplify the process by breaking down policy details and comparing options across multiple providers, rather than steering you toward just one.

On the other hand, if you’re already working with a particular insurance agent for a renters, homeowners or auto policy, you may decide to stick with them if they also offer life insurance products. It can be a simple matter of convenience and you may even qualify for a bundling or multi-policy discount.

Pros and cons of an insurance broker

A broker can make shopping for life insurance more efficient and less time-consuming for you, but there are potential trade-offs to consider. Below are some key benefits and drawbacks of working with a life insurance broker.

Frequently asked questions

• Do you have to use an insurance broker to buy life insurance?
  

  No, there are a number of ways to purchase life insurance other than through a broker. A captive insurance agent, for example, works with a specific company and only sells their products. This may be a good option if you already know which company you want to work with. Although some carriers offer direct quoting and buying options online for life insurance, this feature is not as common as it is for auto and home insurance, so comparing quotes on your own may require contacting multiple agents.

• What is the best life insurance company?
  

  The best life insurance company depends on what matters most to you. Some insurers focus on affordability, while others offer flexible coverage options, strong customer service or digital convenience. A good starting point is to look at financially stable providers that offer the policy type you need. And don’t forget that factors like policy riders, customization options and ease of managing your policy can be just as important as price.

• Are life insurance brokers licensed?
  

  Yes; in order for someone to work as a life insurance broker, they must be licensed by their state’s department of insurance. On top of an insurance license, a life insurance broker may also have professional financial services designations from a recognized institution.

• Who do life insurance brokers work for?
  

  A life insurance broker works for you. Unlike a captive insurance agent who works for only one specific insurer, a life insurance broker is not bound to just one carrier. This means that a life insurance broker can offer you quotes from a selection of different life insurance providers.