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Advantages and Disadvantages of using Insurance Brokers

Using Insurance Brokers

In the contemporary world, the insurance market has seen a steep rise in citizens’ interest in financial support services. Customers nowadays are watchful when it comes to selecting offers from insurance companies and agents or using insurance brokers. You may have been familiar with terms like insurance companies, agents, etc, but there may be little awareness about the term insurance broker. In this article, we shall cover the practical aspects of using Insurance brokers i.e., their advantages and disadvantages, but before that, let’s have a brief understanding of insurance brokers.

Who is an Insurance Broker?

An insurance broker is a person who, on behalf of Insurance Company, sells the insurance policy to a person. The insurance broker works as an intermediary between the person buying the insurance and the insurance company. The prime objective of an insurance broker is to gratify the interests of his customer. The insurance broker is someone who has an in-depth knowledge of the insurance and the insurance market. They offer a variety of offers from which a customer can choose the best policy for him, and the broker may assist you in finding one.

Insurance Broker License

What is the need of using Insurance Brokers?

Insurance may be a complex term for many, and one may require the assistance of an expert who shall guide them in finding the best policy as per their need. Insurance brokers are persons who are abreast and updated about the latest changes and developments in the insurance market; therefore, they play a vital role in determining which policy is best for an individual as per their needs.

Difference between Insurance Agents and Insurance Brokers- Using Insurance Brokers

The basic difference between an Insurance Agent and an Insurance Broker is specified below.

  • Insurance agents may represent only one company, and they aim to work for the betterment of the company that they represent, whereas Insurance broker sells insurance policies of a variety of companies as they don’t have a commitment to a particular company.
  • As insurance agents represent a company, they are trained by their companies before selling their products but brokers are not trained by any particular company because they are involved in selling many products.
  • Insurance agents get higher commissions than what an insurance broker may get and their income is also stable as they serve one company. The commissions for insurance brokers are dependent on the amount of sales they make.
  • The amount of business for an insurance agent may be limited as they deal with the product of only one company. On the contrary, an insurance broker deal with many insurance products in the market and have a bigger amount of business at their repository.

Advantages of using Insurance brokers

Advantages of Insurance brokers

Following are the advantages of Insurance brokers:

  • Less cost

An Insurance broker is paid a commission by the insurance company for selling their policies and products hence one doesn’t need to pay for their time and in the future also there is not much that you need to dish out.

  • Expertise of insurance brokers

The expertise of insurance brokers may come in handy for you while selecting an insurance policy. As they have worked in this field all day long, therefore, they have a much better understanding of which policy suits you best.

  • Tailor-made policies

An insurance company may sell you policies that could be like a “one size for all” kind of product where you may not have a variety to choose from but with an insurance broker, he shall ensure that you may get the best policy suited for you.

  • Making claim

One of the most significant advantages of using an insurance broker is that your claims are taken care of. Your insurance broker can help you make a claim and deal with any challenges posed thereto. In case of buying insurance directly, one may face a lot of hassle as one may be required to encircle the insurance company for making a claim.

  • Saves time

Buying insurance from an insurance broker may assist you to save your time and effort by finishing the task on his own without overloading you.

  • Accurate Information

When you consult an insurance broker it may take a little time but it is to be noted that he shall help you get accurate information which you can choose and finalize the policy thereon.

Disadvantages of using Insurance Brokers

Disadvantages of using Insurance Brokers

Following are the disadvantages of using Insurance brokers:

  • Lack of professionalism

Sometimes the insurance brokers may show a lack of professionalism. They may pose as specialists and look to scam others and make money. They may even work without a valid license or work using a fake license. Therefore one must ask for a license prior to using an intermediary service.

  • Lack of experience among brokers
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A novice broker who may be new to the field may not be aware of the discounts and all. It may disorientate the applicant.

  • Limitation of offers

It may be noted that all brokers don’t work with every insurance company hence there may be limited offers.

  • Additional charges

One may be required to pay additional charges apart from the premium. This additional charge pertains to the broker fee.

  • Insurance broker aiming to close the sale

It may be difficult to presume whether he is a good insurance broker or a salesperson. It is due to the fact that some brokers may be aiming to close the sale rather than understanding what you actually need.

Takeaway

Just as every aspect has its advantages as well as disadvantages, the insurance brokers also have theirs. One must always vary while using insurance brokers to choose appropriate brokers. Always choose a professional in these matters to have the best result.

FAQs

  1. What is the difference between Nidhi Company and a bank?

    While NBFCs are required to open current accounts, The Nidhi Company is classified as a mutual benefit organisation rather than a for-profit business. No brokerage fees can be paid by Nidhi Companies. Nidhi Companies are not permitted to offer any brokerage services or incentives to move a member's funds.

  2. What are the other names of the chit fund?

    “Chit” refers to a transaction in which a person enters into an agreement with a specific number of people that each of them will subscribe to a particular amount of money (or an exact amount of grain in place of money) through periodic instalments. This transaction may be called a chit, chit fund, chitty, puree, or by any other name.

  3. What is the difference between Nidhi Company and a cooperative society?

    The Ministry of Corporate Affairs has regulations that apply to Nidhi Companies. A Co-operative Society, on the other hand, is governed by the State Government, which appoints a Registrar of Co-operative Societies. The primary goal of a Nidhi Company is to offer financial services to its members.

  4. What is the other name of Nidhi Company?

    Permanent Funds, Benefit Funds, Quasi Bank, Mutual Benefit Funds, and Mutual Benefit Company are other names for them. They are governed by the Ministry of Corporate Affairs, which has the authority to provide them with instructions about their deposit acceptance operations.

  5. Who controls chit funds?

    The Chit Funds Act of 1982 mandates that state governments alone register and oversee chit funds. The state appoints the Registrar of Chits for regulation in accordance with Section 61 of the Chit Funds Act.

  6. What is an example of a chit-fund?

    Consider a 50-member chit fund system where each member contributes Rs 10,000 per month to a Rs 5,000,000 pot over the course of 50 months. The member who placed the greatest discount bid at the time the auction was advertised won the bid. According to the law, the most discount someone may provide is 40%.

  7. Which is the largest chit fund in India?

    It is the largest chit fund in the nation and is presumably entirely secure. This company, which has operations in the states of Maharashtra, Tamil Nadu, Karnataka, and Andhra Pradesh, employs close to 6,000 people. If someone wants to save money for anything, they can invest in its plans.

  8. Can a Nidhi Company become a bank?

    Because it is neither advantageous nor tenable, a Nidhi Company cannot be turned into an NBFC or Non-Banking Financial Company. We have described how to transform your company into a full-fledged NBFC Company in this article.

  9. Is Nidhi Company private or government?

    A privately held small business entity is a private limited corporation. It prohibits the transfer of shares and caps membership at fifty. Nidhi corporation, on the other hand, is a kind of public corporation with no cap on the total number of members.

  10. Is Nidhi Company a chit fund?

    A Nidhi Company is an NBFC that can only lend money or accept deposits, whereas a Chit Fund is also a committee like a Nidhi Company but only accepts payments made in instalments over a set period of time by its members. This is the main distinction between the two.

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