You have a variety of options when looking to buy a homeowners insurance policy. You can purchase insurance directly from an insurance provider, through an agent who represents that provider, through an independent agent who represents a number of providers, or through a home insurance broker.
How home insurance brokers operate and when you might want to use one are covered in this article.
Those who arrange for life, home, auto, and other types of insurance policies are known as home insurance brokers, and they are similar to independent insurance agents.
What Is a Broker in Home Insurance?
A person or company that acts as an intermediary between homebuyers or homeowners and insurance companies is known as a home insurance broker, also known as a homeowners insurance broker. Brokers work with numerous homeowners insurance companies, as opposed to captive insurance agents. They are similar to independent insurance agents in this regard because they also set up policies for various insurance types, including life, home, auto, and other types.
- An insurance shopper and various insurance companies are connected through a home insurance broker.
- If your home is unusual or difficult to insure or if you don’t have the time to shop around on your own, a home insurance broker may be helpful.
- Brokers who connect you find home insurance are typically compensated by the insurance company.
What Sets an Independent Insurance Agent Apart from an Insurance Broker?
The primary distinction is that while the insurance broker represents the insurance consumer, the independent agent represents the insurance companies. Independent agents can therefore sell policies, whereas brokers only connect as a conduit between the company and the insurance provider.
A Home Insurance Broker Is Not Necessary.
If a homeowner or prospective homeowner wants to get the best price on a policy or if the property they want to insure has an unusual feature, they may want to use an insurance broker. For instance, some insurance providers won’t issue policies for particular residences or those located in specific regions, like those affected by hurricanes or tornadoes. A home insurance broker should be familiar with the policies of each company, which can save the client time that would otherwise be lost applying to the wrong companies.
How to Prepare for a Home Insurance Broker
Before recommending a policy that will meet your needs, a home insurance broker should ask you many of the same questions that an insurance agent would. Before your meeting, consider the following.
Basics of Policy
The Insurance Information Institute, a group supported by the industry, states that the typical homeowners insurance policy is composed of four main components.
- coverage for the home’s structure. If your home is damaged by one of the perils (like fire) listed in the policy, this coverage should pay for the necessary repairs or replacements. You’ll need separate coverage if your home is vulnerable to other, unlisted perils (like flooding or earthquakes). That insurance may also be something your broker can arrange. If you have a mortgage, your lender probably wants you to buy a certain amount of coverage.
- coverage for your personal property. Your furniture, clothing, and other common possessions are covered by this portion of the policy. The amount of the coverage is typically determined by the amount of coverage you have on the structure; for instance, it might be equal to 50% to 70% of that coverage. You may want to buy a special policy endorsement, rider, or floater to make sure you have adequate coverage on any particularly valuable items you may own, such as jewelry or works of art.
- coverage for liability. This section protects you in the event that, for instance, someone gets hurt on your property and sues you. If you are sued for property damage or bodily injury outside of your home, it may also offer coverage. Liability coverage of at least $100,000 is typically included with homeowner policies. Ask the broker about getting a separate umbrella policy if you need more liability coverage than what your current policy offers. You should also let the insurance broker know if you operate a business out of your home or have a home office. The National Association of Insurance Commissioners warns that failure to do so could result in the termination of your insurance coverage.
- Additional costs of living. This coverage can pay you in covering your hotel and dining expenses while your home is uninhabitable due to a covered life.
- Also keep in mind that you might have a choice between various levels of coverage:
- Only after taking into account the depreciation of your home and possessions over time will actual value coverage pay to repair or replace them.
- Without deducting for depreciation, replacement cost coverage will pay to repair or replace them.
- Even if the insurer has to pay out more than the coverage limits on your policy, guaranteed replacement cost coverage will pay to repair or replace them.
- Up to a predetermined percentage (like 20% or 25%) over the coverage limits, extended replacement cost coverage will pay.
The size of the deductible you are okay with should also be discussed with your home insurance broker. It will depend on how much you could afford to pay after an incident out of your own pocket. Like other types of insurance, your insurance premiums should be lower the higher your deductibles are. When settling your claim, homeowners insurance companies will typically deduct your deductible from the amount they pay you.
Homeowners insurance deductibles are frequently stated as a percentage of the insured value of the home or as a fixed dollar amount, like $500 or $1,000. For instance, if you have $100,000 in insurance and a $2,000 deductible, you would be responsible for that amount.
Some policies in some states will have a variety of deductibles depending on the nature of your claim, which adds a little complexity. For instance, if a hurricane, tornado, or other natural disaster damages your home instead of fire, you might be damaged to pay a different deductible. All of this should be covered in detail in the policy, and any questions you may have can be answered by your insurance broker.
How are brokers for home insurance paid?
Typically, the insurance company they connect to the homeowner for their home insurance pays the brokers. The percentage they charge could be deducted from the insurance premium.
How do I locate a broker for home insurance?
Your real estate agent might be able to suggest a broker to you if you’re buying a home. Keep in mind that if you’re getting a mortgage, your lender will typically demand that you present proof of insurance at the time of your real estate closing or earlier. A broker might be useful in accelerating the process if time is of the essence. If you end up not liking that particular insurer, you can look around for another one later, when you don’t have as much of a time crunch, either on your own or with a broker.
Brokers of home insurance are they governed?
State-issued licenses are required for insurance brokers and agents. They typically need to complete a specific set of prerequisite courses, pass an exam, and continue to meet continuing education requirements in order to obtain and maintain a license. In some states, a criminal background check and fingerprinting are additionally required. Generally speaking, using the look-up tool on the website of your state’s insurance department, you can determine whether a specific broker is licensed in your state.
There are additional ways you can research home insurance brokers. In some cases, they are listed on the Better Business Bureau website along with their letter grade. Home insurance brokers are also listed on review websites like Yelp.
An intermediary between you, the homebuyer or homeowner, and the companies that offer homeowners insurance policies is a home insurance broker. Contrary to so-called captive insurance agents, who work for just one, brokers have relationships with a number of insurers. If you shop for a policy on your own, a broker might be able to save you time or get you a better price.