Searching for the best insurance quotes can put your head in a bit of a spin – but even if you’re a newcomer to the whole idea, you may have noticed that prices will vary enormously.
And whilst it may seem strange, buying directly from the insurer is actually one of the more expensive options. Now, I know what you’re thinking – surely a product “straight from the source” is going to be cheapest? Well, actually, no, and this is mostly down to the insurance market and how it’s constructed.
Insurers sell through brokers and other entities, such as comparison sites, as a means of reaching a greater proportion of the market and ultimately gaining more sales. The relationship they have with these groups and the agreement that binds them together mean that the insurer can’t undercut the broker in price on the same product, otherwise savvy customers would of course flock straight to the insurer.
Whilst we’ve established that brokers are best, it’s important to remember that not every broker is created equal. To take life insurance as an example, the traditional brokerage makes its money by taking a little bit of your policy premium every month – what’s better known as commission. It’s not a hefty amount, but over the period of a year or two – and especially over the full term of your policy – that extra charge can mount up to hundreds of pounds. It comes as a surprise to most people to learn that they are paying commission twenty years after purchasing their plan. On recent trip to Canada, I was invited to a dinner for insurance brokers in Toronto, where I had the opportunity to speak to peers who confirmed their clients and loved ones express the same disbelief and to some extend bewilderment. Let us take a a closer look how a discount broker functions.
In comparison, a discount insurance broker will charge you a one-off fee for that life insurance policy. By stripping away any commission they’d usually receive for selling you the policy, they can provide you with the cheapest insurance quotes possible. The difference, of course, is that you will have to pay a fee upfront, but when this is as little as £20 then it’s worth it for cheaper monthly rate you’ll pay afterwards.
To really show you the value of a discount insurance broker, here’s an example of a life insurance quote:
– £200,000 guaranteed payout
– 30-year old male non-smoker
– 25-year term
– £7.36 (with £20 fee)
– £7.89 (incl. commission)
Even for a cheap life insurance quote, buying a policy with no commission works out £138 cheaper overall, and that’s after factoring in the £20 fee upfront.
When it all comes down to it, this new way of purchasing makes a lot more sense. After all, if you’re not receiving an ongoing service from your broker – such as advice or support – then why should you have to pay them the ongoing fee of commission?
This is exactly why we at Best Price Financial Services offer a commission-free option for life insurance and income protection. Visit About Us to find out more about what we do, or see our discount insurance page for all the protection we have to offer.