What Is a Life Insurance Broker?

January 09, 2024
A life insurance broker explains options to her clients

Life insurance is a type of insurance policy where, in exchange for the payment of premiums, the insurance company will provide the insured’s designated beneficiaries a financial benefit upon the insured’s death. This benefit can be used to help cover expenses such as funeral/burial costs and medical bills. It can also be a source of financial security for loved ones and dependents.

Common Types of Life Insurance

The two most common types of life insurance policies are term life insurance and permanent life insurance.

Term life insurance is a policy that provides coverage for a specific term or time period of the policyholder’s life, typically 10-30 years.  Beneficiaries receive a death benefit if the policyholder passes away during the term of the policy;  however, if the policyholder outlives the term, the coverage ends (unless the policy is renewed or converted).

A permanent life insurance policy covers the policyholder’s entire life, features fixed premiums and a guaranteed death benefit, along with a savings component that grows over time. The cash value of a whole life insurance policy can be borrowed against or even withdrawn lifetime of the policyholder as long as premiums are paid.

Choosing the right life insurance policy is important. The decision not only considers the appropriate financial protection for loved ones, but other factors such as pricing, rates, duration and policy type should be explored as well. That’s why many people turn to a life insurance broker to help find the policy that is right for them. But what is a life insurance broker? Read on to learn about life insurance brokers, the difference between an agent and a broker and the benefits of using a broker. 

What Is a Life Insurance Broker? 

A life insurance broker helps customers and clients find the right insurance coverage for their specific needs and circumstances. Since brokers are not typically employed by an insurance company, they can offer policy options from several different insurers and use their expertise to help find the right insurance coverage options and rates.

There are generally two types of life insurance brokers: traditional brokers and online brokers. Traditional brokers will typically meet with their clients in person and walk them through the entire process of buying life insurance. An online broker, on the other hand, will offer virtual life insurance policy quotes and rate comparisons. Making the choice between a traditional broker and an online broker will depend largely on the customer’s goals.

If the goal of using a broker is to learn more about insurance options and discuss policy types, a traditional broker may be the right choice. If, however, the customer has already decided on a policy type and just wants to compare rates, an online broker can be a great option.

Life Insurance Broker vs. Life Insurance Agent

When shopping for insurance, it may be common to hear the terms "insurance agent" and "insurance broker." While these terms are sometimes used interchangeably, they actually have different meanings within the insurance market. Both insurance brokers and insurance agents are required to maintain a state license and both can help make buying insurance easier. One of the key differences, however, is who they work for - insurance agents generally represent insurance companies while insurance brokers represent buyers.

There are two common types of insurance agents: captive and independent. A captive agent works for one insurance company and can only sell insurance on behalf of that company. An independent agent, on the other hand, can work with and sell insurance on behalf of multiple insurance companies. Ultimately, since insurance brokers do not have a contractual obligation to any one insurance company, they may have more flexibility in helping to find the best policy for their clients’ specific needs and may be able to offer more competitive pricing options.

How Does an Insurance Broker Make Money? 

If a life insurance broker isn’t employed by an insurance company, how do they make money? The answer can depend on the state a broker is licensed in, but in general, insurance brokers typically make money on commission. When a policyholder purchases a life insurance policy, the broker usually receives a percentage of the premium from the insurer.  Generally, a broker will continue to earn commission so long as the policyholder maintains their policy, so it’s in the broker’s best interest to help find a policy that is the right fit.

Benefits of an Insurance Broker

What are the benefits of using an insurance broker to buy life insurance? Here are some key benefits of an insurance broker:

  • A personalized experience. Finding the right life insurance policy can be challenging. A broker can offer a personalized experience, helping the client through the process and recommending policies that fit their individual needs.
  • Quick rate comparisons. Comparing rates from different insurers is one key to finding the best price. A broker can do quick rate comparisons to help their clients find the best deals.
  • Guidance. An insurance broker can use experience and knowledge to help provide guidance in selecting the best policy suited for the particular customer.
  • Easier application process. Applying for life insurance can be time consuming and complex. A broker can help make the process easier.

Is a Life Insurance Broker Required to Buy Life Insurance?

No, you are not required to use a broker to buy a life insurance policy. A customer can buy a life insurance policy directly through an insurer or may use the services of an insurance agent.  An insurance broker with life insurance experience, however, can be a great option to help to find the best policy for their clients’ specific needs.

The Bottom Line

Overall, a life insurance broker is a great way to find a life insurance policy that meets your needs. If you are looking to buy life insurance to help protect your family and loved ones, contact us at Acrisure to find a life insurance solution today or request a life insurance quote online now.

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