When you have an insurance claim and realize you aren’t covered properly to fully replace a personal asset or business loss, it’s too late to correct things. Instead, you are confronted with the prospect of covering all or part of the loss on your own if you can.
Experiences like this often lead people to look for a new insurance company, vowing to get it right this time. However, navigating the multitude of options can be confusing and frustrating. And of course, every provider promises to be the best option for you. So how do you make the right choice? It starts by understanding the difference between insurance brokers and insurance companies.
Direct market insurance companies (such as GEICO, State Farm, Allstate, or Progressive to name a few) are providers that allow you to get a quote directly from them. They often claim to be a one-stop-shop that makes it easy to get a quote, and they tout insurance as a commodity, where all that matters is price.
Insurance companies know the language in their policies is often hard to understand for most people. While it may be accurate that they offer ease of use and lower prices, you are often getting a policy that is standardized and not built for complex needs. These providers are not interested in negotiating coverages or price.
In addition, since these companies are taking on the risk of the insurance they offer, there are types of coverage they are unable or unwilling to offer, like waterfront property for a vacation home or certain types of business interruption. These are often deemed higher risk categories; and in the interest of making things easy, the insurance company just doesn’t offer coverage for them. Your only alternative is to find another provider that will provide the coverage you need or decide not to insure that risk at all.
For people with fewer assets of lower value, a direct market insurance company might be the right choice. They make it easy to sign up, get your policy started, and set up monthly payments online for automatic deduction from your bank account, so you never have to think about it. However, for people with higher-value assets or business insurance needs, choosing a direct market insurance company may turn out to be a decision you regret later.
If you have a claim, you will quickly find out that direct insurance companies focus on protecting themselves, not you. While some may be pleasant to deal with during the claims process, the company’s claims representative has a goal of minimizing the amount of money they pay out across all the claims they manage. So, their customer is the insurance company they work for—not you.
Insurance brokers don’t work for an insurance company, nor do they take on any risk with your policy. Instead, they work for their customers. Brokers are responsible for working with their customers to learn about their unique or complex risks and needs and scan the insurance landscape for the best coverages—giving customers access to the full insurance market available to them. Sometimes this means more than one company could be the right solution to provide comprehensive coverage that protects all your assets in the event of a loss.
Insurance brokers directly contact various insurance companies on your behalf and negotiate the options that will give you the best coverage. In fact, some policies can have 40-50 endorsements or additions designed to make certain you are adequately covered. While this may not be the fastest or cheapest option, it will ensure you are covered in any situation.
If you are looking for business insurance, brokers can be just as valuable. For example:
Brokers offer another important advantage: They learn about your business, so they can help you find the most relevant coverage for the risks you have and prepare you for many different situations that can include risk. For example, rather than waiting for a cybersecurity breach to occur, a broker will work with you to ensure you are ready for and protected from these types of incidents. A broker can help you develop a crisis management plan, identify legal and compliance partners to help manage the crisis, and make sure you are covered if you need to claim any losses resulting from a cybersecurity incident.
Since insurance brokers work for their customers (not an insurance company), they serve as a claims advocate that works for you to ensure you get the most out of your policy. Their goal is to get the payment you need that results in the least interruption to your business. The experience they bring from working with many customers in this capacity, allows them to add a multitude of experiences to the claims process and can help maximize your payout by negotiating for you with the insurance company. And they help you navigate the entire process, so you don’t have to spend time filling out forms and calling claims representatives.
While brokers are not the best answer if your insurance needs are simple or typical, customers with complex assets or business insurance needs may regret relying on a standardized policy rather than enlisting the help of a broker. In the worst-case scenario, it could mean you’re unable to replace a valuable asset or could even risk losing your business. By taking the time to speak to a broker whose job is to understand your needs and present the best options for your specific situation, you will ensure you are covered properly in the long run.
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