There is a huge variety (and a wide price range) of choices when dealing with insurance. Selecting the right  solutions, concepts, and products (based on thorough, unbiased need assessment and cost-benefit analysis) starts with selecting the right partners / helpers.

AGENTS - BROKERS: WHO IS WHO?


Let's start with things that are common. Both agents and brokers need to be licensed by the Financial Services Commission of Ontario (in this province), a government body, to sell life insurance. Both work on commission; in other words, both are financially interested in selling insurance policies. This latter thing is the main reason why you shouldn't trust them blindly.

The important difference is that while an agent generally represents one company, a broker knows well, and is on contractual terms with, several insurance companies. As a consequence, /s/he can select from a much wider choice of possible policies that can be offered to you. In principle, while an agent generally represents one company in dealing with you, a broker represents you in dealing with several companies.

You should be careful with how people hold themselves out. The advantage of dealing with a broker is obvious in that agents who actually deal with only one or very few companies (and they have good reasons for doing that) may be inclined to declare themselves as brokers. It's not to say that agents are necessarily to be avoided, but I would not suggest to buy an insurance product from an agent without consulting a broker as well. And because of this unreliable nature of self-labelling (made possible by not strict government regulation of the matter), I think you should rely on the actual conduct of anyone introducing himself or herself as a broker. A real broker should be able and willing to present to you a selection of insurance choices prepared by computer, and provide sensible comparison of prices and features, including the use of special comparison software. The same is true of people who introduce themselves as financial planners or advisors, while actually being trained, licensed, and selling insurance. Creating false impression of independence and objectivity is a serious offense; life insurance agents must hold themselves out publicly as life insurance agents, by disclosing this on all business letterhead, business cards, and advertising. Such agents themselves may not see the real need for, and opportunities in insurance as a powerful financial tool for the client. Though I do not endorse this kind of conduct, I think it is important for you to read the next paragraph as well...

There is one more thing that is common to agents and brokers. It is true that they are obliged to be your helpers, still at the same time they have their own separate interest in dealing with you. Nevertheless, frequently, either of them can also represent the best interest of the children, or a spouse, or someone else financially dependent on you. Many people, even the most loving ones and with the best intentions in general, need some gentle prodding so that they consider their chances for mishap, and the consequences of those to their loved ones. In real life, and in this sense, the integrity and professionalism of the person is more important than his/her being an agent or a broker. It is a fact of life that for many people the real problem is not that they have not bought a very good policy, but rather that they have no or not enough coverage of any kind, while actually they would need a portfolio of various coverages (life, disability, critical illness, etc.).

 

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