Life insurance brokers and life insurance agents are very different. Agents are hired by, and work for, one company. Because they work for a specific company, they push products for that business. Consequently, an insurance agent does not sell products for a rival insurance company.

In contrast, life insurance brokers operate between the customer and the insurance companies, in general. They do not tie their wagon to a specific company, but look at all companies, seeking the cheapest life insurance policy, which still matches the specifications you have set.

Choosing a life insurance policy is much easier when you have the right broker. They do the research for you, seeking out the best options available. Brokers normally receive their commission from an insurance company if they pass on a customer, but some may charge fees as an alternative. For the most part, however, insurance brokers earn their money through commissions, and insurance companies set those. The insurance broker’s commission percentage is already included in the cost of the premium, and each insurance company sets that amount. However, should you opt to procure that same policy yourself, directly from the insurance company, you would still pay the same price.

Rebating is a practice that is prohibited in most places, although some brokers still use it. With rebating, an insurance broker will lower their commissions, and then pass that savings on to the customer. Although the saving may be quite tempting for some people, it is probably not a smart idea to use an insurance broker that rebates. The main reason is that it is illegal. On top of that, the rebated amount is taxable income, and you would have to declare it as such.

It is really very important to find a good insurance broker. The fact that a good broker will have developed working relations with a wide range of companies, allows you to have a wider range of options. They can also help you understand all those options. When deciding on your broker, make sure to ask questions.

Determine the broker’s level of experience. The more experience they have, the better it will be for you. Newer brokers just do not have the same level of experience, and they haven’t developed the same contact depth. Inexperience can be costly. A less experienced broker’s relationship portfolio will not be as extensive, which means you might not receive the best option available. Inexperience often results in misinformation and misdirection. That is something you could end up paying for.

Determine what your broker’s qualifications are, and find out how many companies they work with. This can help give you an idea how comprehensive their policy search will be. The more companies they deal with, the more options they can offer you. Your broker should know the tendencies of each company. In essence, the better your broker knows the market, the more money you save.

Susan Reynolds is the content coordinator for a leading South African Insurance Provider who specialises in Life Insurance.