Is a broker right for me?
With the increased popularity of price comparison websites, using a broker to arrange your life insurance may appear to be an act of the past.
However, insurance brokerages are still very prominent within the industry and using the right one could really benefit you.
There are more than 2,000 registered insurance brokers in the UK (British Insurance Brokers’ Association) including both advised and non-advised types.
An advised broker will provide you with a selection of quotes suited to your needs and make recommendations on the best solution for you.
Whereas a non-advised broker will provide you with a selection of quotes and all of the information you need, allowing you to make an informed decision.
When selecting a broker, it is essential to ensure that they are registered with the Financial Conduct Association (FCA). This is a regulating body within the financial industry which ensures the customer is protected and all processes are adhered to in a specific manner.
Let’s take a look at the key benefits of using a broker to arrange your life insurance as opposed to a price comparison website.
1) Compares a wider range of insurers
On the surface, it may appear that a broker and a price comparison website perform exactly the same function.
They take into account your circumstances and provide you with a number of suitable quotes based on the details you have supplied.
However, the panel of insurers compared by comparison sites is usually much smaller in comparison with that of a life insurance broker.
By comparing a large number of insurers, you are in a stronger position to truly receive the best quote rather than just the cheapest one available within a limited sample.
2) Break down jargon
Life insurance terminology can be confusing and sometimes even daunting depending on how familiar you are with the industry.
Being unsure with regards to certain terms can result in you not having in place the necessary level of cover.
This can be a huge issue with regards to using a comparison website as it requires you to decipher what is meant by many important terms and can lead to misinterpretation.
Using a broker allows you to ask any questions you may have, ensuring that when you make a decision regarding your policy, you have all the information you need to make an informed decision.
This will give you the confidence that you have made the right decision for you.
3) Secure the right type of cover
As well as the complicated terminology, the type of life insurance policy you require can also cause confusion.
There are a wide variety of life insurance policies available, each one serving a different purpose and most suited to protecting a different type of asset.
From choosing between life insurance and life assurance to selecting between decreasing term, family income benefit or an over 50s plan, the process can be baffling.
Selecting the wrong type of cover can mean that your loved ones are not receiving the best level of protection available, or adequate cover may not be in place, resulting in a shortfall for your loved ones upon your death.
Price comparison websites can be great for helping you find a cheap price, but what they won’t do is distinguish which type of life insurance will best suit your needs.
Speaking with a life insurance broker allows you to specify your needs and receive guidance towards the right type of policy to select in order to achieve the level of protection you require.
It is important to remember that whilst all brokers will happily explain the different types of cover available, advised brokers will provide guidance on which policy type they think is suitable.
In contrast, a non-advised broker provides you with all of the information regarding the available policies, allowing you to make the decision.
4) Specialist advice when required
Getting accepted for life insurance is not always straightforward, particularly if you suffer from poor health or have a risky career/hobby.
Many brokers have a team of specialists who deal with impaired risk applicants, providing the opportunity for you to still find the best cover at the most cost-effective price.
Being declined for life insurance can show on your record, meaning that when you apply for further policies, it may affect the likelihood of being accepted.
If you are considered an impaired risk, a broker will only submit your application to those insurers most likely to accept your policy to avoid hindering your ability to obtain cover.
When using a price comparison website to make an application, you do not have access to this specialism.
This could result in you applying for a policy with an insurer likely to decline your case.
5) They’re free! (Well sometimes)
Many turn to comparison websites because of a common misconception that obtaining life insurance through a broker involved paying a fee.
However, this is not strictly true.
Advised life insurance brokers do charge a fee for their service because essentially you are paying for the advice you are receiving.
Whereas there is no fee associated with using a non-advised life insurance broker. This is because they make their profit from commission earned directly from the insurer.
Therefore, using a non-advised life insurance broker does not cost any more than if you were to use a comparison site, but it does come with the aforementioned benefits.
Fees associated with advised life insurance brokers will vary and dependant on your preference, this may be a service you wish to pay for if you do not feel confident making your own decision.
6) Writing your policy in trust
The final key benefit of using a broker as opposed to a price comparison website comes after the policy has been arranged.
Writing your life insurance in trust can reduce the amount of inheritance tax your loved ones pay on your estate, allows them to avoid probate and thus gain access to the funds sooner.
However, this process isn’t always easy to understand and the application is lengthy. As a result, only around 6% of policyholders use this feature.
Some life insurance brokers offer a free guidance service, walking you step-by-step through the trust process.
This is something not offered by a price comparison website.
When you consider inheritance tax is 40% of everything over the £325,000 threshold, having the proceeds from your policy not form part of your estate could be hugely beneficial financially.
The final showdown
Generally speaking, comparison websites and brokers serve the same purpose – to save you money on your life insurance.
However, using a broker comes with many additional benefits; specialist advice, information and guidance on policy type and further aftercare services/support.
Both will save you time and money but using a broker will provide you with further clarity along the way.
An obvious benefit with an onsite comparison site is that you can access the service 24/7 and are not tied to standard working hours.
Lastly, there is a misconception that using a broker is somehow complicated. In reality, you are getting them to do all the hard work on your behalf, making the process very simple.
