You have various alternatives when it comes to purchasing homes insurance. You can get insurance directly from an insurance company, through a company-sponsored agent, through a multi-company independent agency, or a home insurance broker. This post will explain how house insurance brokers work and when you should use one.
What Is the Function of a Home Insurance Broker?
A house insurance broker, also known as a homeowners insurance broker, is a person or business that works as a middleman between home buyers and insurance carriers. Brokers, unlike "captive" insurance agents, work with several different homeowners insurance firms. They are similar to independent insurance agents in this regard, who arrange for life, house, vehicle, and other types of insurance policies.
What's the Difference Between an Insurance Broker and an Independent Insurance Agent?
The key distinction is that an independent agent represents insurance firms, whereas an insurance broker represents the insurance customer. As a result, independent agents can sell policies, whereas brokers merely connect customers with insurance companies.
Who Needs a Broker for Homeowners Insurance?
If a house buyer or owner is seeking the greatest deal on a policy or if the property they want to insure has a unique feature, they may wish to consult with an insurance broker. Some insurance firms, for example, would refuse to sell coverage for certain types of homes or those located in specific places, such as hurricane or tornado zones. A house insurance broker should be familiar with each company's rules so that the client does not waste time applying to the wrong companies.
What a Home Insurance Broker Would Want to Know.
Before offering a policy that meets your needs, a home insurance broker should ask you similar questions as an insurance agent would. Before you meet, consider the following factors.
The fundamentals of policy
According to the Insurance Information Institute, an industry-sponsored organization, a typical homeowner's insurance policy has four basic components.
1. The Structure of the House is Insured.
If your home is damaged by any of the risks named in the policy (for example, fire), this coverage should pay to restore or replace it. You'll need supplemental coverage for non-listed risks (such as flooding or earthquakes) if your house is at risk. That insurance may also be available through your broker. If you have a mortgage, your lender will almost certainly demand you to buy a certain amount of coverage.
2. Personal Belongings are Covered.
This section of the policy insures your furniture, clothing, and other everyday items. The coverage's dollar value is normally determined by the amount of coverage you have on the structure; for example, it could be equal to 50% to 70% of the total coverage on the structure. If you have extremely costly objects, such as jewellery or artwork, you may wish to purchase a specific policy endorsement, rider, or floater to ensure you have adequate coverage in case something goes wrong.
3. Coverage for legal liability.
If someone gets wounded on your property and sues you, this section will cover you. It may also cover you if you are sued for bodily injury or property damage at a location other than your home. Liability coverage is usually included in homeowner's insurance policies, and it is usually at least $100,000. Inquire with your broker about getting a separate umbrella policy if you require greater liability coverage than your policy provides.
You'll also want to tell the insurance broker whether you have a home office or run a business from your home. The National Association of Insurance Commissioners warns that failure to do so could result in your policy being cancelled.
4. Living costs are increased.
If a covered catastrophe renders your house uninhabitable, this coverage may be able to assist you in covering your hotel and restaurant expenses until your life returns to normal.
What Is the Compensation Structure for Home Insurance Brokers?
Typically, the insurance company with which the homeowner is connected pays the house insurance broker. Their fee could be based on a percentage of the premium.
How Do I Find a Home Insurance Broker?
Your real estate agent may be able to recommend a broker to you if you're buying a home. If you're getting a mortgage, your lender will almost always need you to present evidence of insurance at or before the closing date. If you're pressed for time, a broker could be able to help you out. If you're not happy with that insurer, you can look for another one later, either on your own or with the help of a broker, when you're in a better financial position.
Is there any regulation for home insurance brokers?
The states issue licenses to insurance agents and brokers. They must typically complete a set of pre-licensing courses, pass an exam, and meet future continuing education requirements to become and remain licensed. Fingerprinting and a criminal background check are also required in some states.
The Bottom Line:
A home insurance broker acts as a go-between between you, the house buyer or homeowner, and the firms that market homeowners insurance. Unlike so-called captive insurance agents, who work for only one insurer, brokers operate with a variety of them. A broker may be able to offer you a better deal or save you time when it comes to looking for insurance on your own.