Buying Insurance: Direct vs Brokers – What’s the Difference?

Buying Insurance: Direct vs Brokers Guide

Buying An Insurance?

Buying an insurance is a decision which definitely pays returns. Life is full of uncertainties and in such a situation when you buy an insurance policy, you have a certain degree of confidence.  In the previous blogs, we have stressed about how important it is to buy an insurance plan. Right from personal insurance for individuals to comprehensive risk management plans for businesses, safeguarding your assets is something which should be on everyone’s prime agenda. When you protect what’s important to you with an insurance plan, you can handle all the contingencies that may arise without any added stress.

Once you have made the decision of buying an insurance plan, the next step is shopping for it. How to do this? Whether you should approach the insurance company directly or hire an insurance broker is a question which one comes across every now and then. When it comes to buying insurance direct versus brokers, there are several points which make each approach different from the other.

When you compare both these methods, each one has its plus points. It’s important to weigh them against each other so you can make a decision which takes all points into consideration. So, in the coming sections, let us look at what they are.

Buying Insurance: Broker Vs Direct

While buying an insurance plan, you face two choices: deal with the insurer directly or hire an insurance broker to do the job. When it comes to taking care of your insurance requirements, there are plenty of insurance companies in India you can buy your insurance from. They have a wide range of offerings and based on your needs, you can choose one which has all the features you’re looking for. However, buying an insurance doesn’t merely end with choosing the plan which is the most appropriate for you but involves making claims, renewal, negotiating premiums and a lot more.

Considering all these parameters, one can decide on the approach they wish to take while buying an insurance

A) Buying From An Insurance Broker

An insurance broker is an intermediary between you i.e. the client and the insurance company. Insurance broker can be individuals working independently who are licensed and registered with the authorities or an organisation with employees as trained professionals and know how to handle different aspects of the insurance business. Whatever may be the case, a broker or a broking firm represents you and negotiates the terms on your behalf whenever you buy your insurance from an insurance broker.

What Is An Insurance Broker?

Insurance broker or a broking firm is an entity registered with Insurance Regulatory & Development Authority of India (IRDAI) and are licensed to sell insurance policies to their clients. Insurance brokers are governed by certain code of ethics and work in the best interest of the clients.

When To Consider An Insurance Broker

There are situations which may make you consider buying your insurance policy through an insurance broker. They can be as follows

  • Time: This is one of the major factors to be considered while buying an insurance policy. There are several things which need to be taken care of which can eat up most of your time. Getting an insurance is usually an extensive process and if you’re pressed for time, then it’s best to hire an insurance broker to do the job. They do all the dealings for you, so that you can look after other things which are important to you.
  • Technical Know-How: An insurance document contains plenty of jargons and fine print. Depending on your ability to understand all of this, you may decide to use an insurance broker or not. An expert helps you decipher all the points of your insurance policy so that there is no gap while buying an insurance or during the claim settlement process.
  • Type Of Risk: This is, in general sense, the nature of your requirement. Your profile dictates whether to hire an insurance broker’s services or not. The more complex the risks, the broader the scope of your insurance policy and in this case buying your policy through an insurance broker is definitely a good idea. For e.g. if you are a business with multiple departments, then a specialised firm can guide you through the complexities.

Pros and Cons of Insurance Broker

As with every approach, there are some pros and cons of buying your policy through an insurance broker. Let’s look at what they are

Pros of Insurance Broker:

  • Buying your insurance policy through a broker saves a lot of your time. They’re equipped with all the knowledge which helps speed up the process, which can otherwise take plenty of days or even weeks. Time is of essence when it comes to uncertainties and hence hiring a professional insurance broker ­is always recommended.
  • There is a common myth that placing your business through an insurance broker would mean shelling out extra charges. However, buying your insurance through a broker doesn’t cost you extra as brokers are paid commission by the insurance company.
  • With years of experience and expertise, insurance brokers are completely equipped to handle all the formalities associated with claim settlements. This is a major advantage, as buying your insurance directly can mean a lot of back and forth when it comes to making claims for the damages.
  • You are able to get better deals on premiums when you buy your policy through an insurance broker. Brokers or broking firms have years of strong associations with the insurance companies and are in a better position to negotiate the premiums that you have to pay.
  • Absolute peace of mind is one defining benefit when going through an insurance broker. They handle all the tasks for you which means you are completely free to focus on other tasks at hand.

Read more in detail about the many advantages of hiring a professional insurance broker to take care of your insurance requirement, in below related blog.

Related Blog: Top 12 Reasons: Why You Should Choose An Insurance Broker

Cons of Insurance Broker

When it comes to this, there are hardly any points which can be classified as cons or disadvantages of going through an insurance broker. When you find the right one to do the job for you, everything falls into place.

B) Buying Directly From An Insurance Company

What is buying an insurance directly: This approach suggests buying your insurance directly from an insurance company without any intermediary. You do all the dealings on your own, right from liaising with the insurance providers, administrative tasks to making claims.

When To Consider Buying Your Insurance Directly

Completely opposite to insurance broker, the parameters you should take into account when considering buying your insurance directly are

  • Time: If you can spare time for all that comparison shopping and extensive documentation, then you can buy your insurance directly from the company. Approaching the insurance companies, taking care of the paperwork, putting your case across during the claim settlement process can be a long process and take a lot of your time. 
  • Technical know-how: If you are well versed with the technicalities associated with the insurance process, then buying your insurance directly can be an option. However, most of the times, insurance policy documents have a lot of technical jargons and legal terms which are beyond comprehension.
  • Type of risk: If your requirement isn’t too complex, then you can buy your insurance directly. But there’s a flipside to this: if your needs are complex, then hiring a professional insurance broker can be useful as someone who’s an expert can help build a customised plan which covers all your risks.  

Pros And Cons Of Buying Insurance Directly

Let’s look at the pros and cons of buying your insurance directly in the section to follow      

Pros of Buying Insurance Directly

  • You have the flexibility to work on your own time. Going directly means you can take your own sweet time, looking at various options available, and then finalising the one which matches all your requirements.
  • Another advantage of buying your insurance directly is that the plans are cheaper sometimes, as insurers don’t have to pay commission. However, one needs to have a keen eye to spot a great deal whenever they are buying insurance directly from the company.

Cons of Buying Insurance Directly

  • One major disadvantage of buying your insurance directly is the limited options you have when it comes to products. You have to browse extensively for policies which meet all your requirements and this can often mean spending too much time finding the right one.
  • You are sometimes unable to negotiate the underwriting terms. This is because, as an individual, you are someone who is approaching the insurance company as a new person as opposed to brokers who enjoy strong ties with these insurance companies. This happens to be one significant disadvantage of buying your insurance directly.
  • When you are building your insurance application on your own, there are chances that you might go wrong in some areas, as you’re doing it for the first time. If application is rejected, you have to start over with a different company and hence buying an insurance policy directly can seem like a big task.

Summary

In the end, what matters is your comfort with each type of insurance buying method. While a broker may offer convenience and hassle free experience, going directly lets you explore the options on your own. After reading the above points in detail, one can be sure of analysing both the options correctly and making a decision which suits their needs i.e. whether to buy your insurance through an insurance broker or buying it directly.

At Life & General, an insurance consulting firm in Pune, we help you choose the best plans and products which are in complete alignment with your needs. At the helm of affairs here, is an expert team with a combined experienced of xx years which will walk with you at every step. For an appointment with us, fill out this enquiry form.

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