Home Insurance Broker: If you want to purchase a homeowners insurance policy, there are different ways to do so. You can buy directly from an insurance company, go through an agent who represents a single company, opt for an independent agent who works with multiple companies, or choose a home insurance broker. This article will clarify how home insurance brokers operate and help you decide when using one could be beneficial.
Home Insurance Broker
What Is a Home Insurance Broker?
A home insurance broker, sometimes known as a homeowners insurance broker, is a person or a business that helps connect people looking for home insurance with insurance companies. Unlike a dedicated insurance agent, brokers work with different homeowners insurance companies. They are similar to independent insurance agents who arrange various insurance policies like life, home, and auto insurance.
What Is the Difference Between an Independent Insurance Agent and an Insurance Broker?
The main difference is that the independent agent represents the insurance companies, while the insurance broker represents the insurance consumer. As such, independent agents can sell policies, while brokers simply connect the consumer to the insurance company.
Who Needs a Home Insurance Broker?
If you’re buying a home or already own one, you might consider using an insurance broker when you want to find the best price for your insurance policy or if there’s something unique about the property you want to insure. For instance, some insurance companies might not offer policies for certain kinds of homes or properties located in specific areas prone to hurricanes or tornadoes. A home insurance broker is knowledgeable about the rules of each insurance company, which can save you time by preventing you from applying to companies that wouldn’t work for your situation.
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What a Home Insurance Broker Will Want to Know
A home insurance broker should ask you much the same questions as an insurance agent would before recommending a policy to fit your needs. Here are some things to think about before you meet.
Policy Basics
The usual homeowners insurance policy is made up of four main parts, as explained by the Insurance Information Institute, a group supported by the industry.
- Coverage for the home’s structure: This part helps pay for fixing or replacing your home if it gets damaged by certain dangers (like fire) listed in the policy. If your home could be affected by other dangers not listed (such as floods or earthquakes), you’ll need separate coverage for those. Your broker might be able to set up that insurance for you. If you have a mortgage, your lender will likely ask you to get a certain amount of coverage.
- Coverage for your belongings: This section of the policy covers things like your furniture, clothes, and regular belongings. The amount of money you get if something happens is often linked to the coverage you have for the home’s structure. For example, it could be 50% to 70% of that coverage. If you own things that are worth a lot, like jewelry or art, you might want to get extra coverage for them, just in case. You might hear this called a special policy endorsement, rider, or floater.
- Liability coverage: This part helps you if someone gets hurt on your property and decides to sue you. It can also give you help if you’re sued for hurting someone or damaging their property somewhere else. Homeowners insurance often includes at least $100,000 in liability coverage. If you want more than that, you can talk to your broker about buying a separate umbrella policy. If you work from home or run a business there, tell the broker about it. Not mentioning this could make your policy get canceled, says the National Association of Insurance Commissioners.
- Coverage for extra living costs: If your home can’t be lived in because of a covered problem, this part helps you pay for staying in a hotel and eating out until things go back to normal.
Levels of Coverage
Also, remember that you might get to pick from various levels of coverage:
- Actual value coverage: This kind of coverage helps with fixing or replacing your home and belongings, but it considers how much they’ve gone down in value over time.
- Replacement cost coverage: With this coverage, you get help fixing or replacing things without thinking about how much their value has gone down.
- Guaranteed replacement cost coverage: This type of coverage pays for fixing or replacing things even if the insurance company needs to pay more than your policy’s coverage limits.
- Extended replacement cost coverage: This coverage can pay up to a specific percentage (like 20% or 25%) more than the coverage limits.
Understanding Deductibles
Furthermore, you and your home insurance broker should talk about how much you’re okay with paying as a deductible. This depends on how much money you could manage to pay yourself after something happens. Just like other types of insurance, if you choose higher deductibles, your insurance costs should go down. When insurance companies settle your claim, they usually subtract the deductible amount.
Homeowners insurance deductibles are often explained in two ways: a specific dollar amount, like $500 or $1,000, or as a percentage of how much your home is insured for. For instance, if your insurance is $100,000 and you have a 2% deductible, you’d need to cover $2,000 yourself.
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It can get a bit more complicated in certain states where policies might have different deductibles based on why you’re making a claim. For example, the deductible could be different if your home is damaged by wind, hail, or a hurricane compared to if it’s damaged by fire. The policy should provide all this information, and your insurance broker should be able to answer any questions you might have.
How are home insurance brokers paid?
Usually, home insurance brokers are compensated by the insurance company they link the homeowner with. They might receive a portion of the insurance premium as their fee.
How can I find a home insurance broker?
When you’re purchasing a home, your real estate agent might suggest a broker to help you. Remember, if you’re getting a mortgage, your lender usually needs to see proof of insurance either during or before the real estate closing. If time is limited, a broker might assist in speeding up the procedure. If you find yourself unhappy with the insurance company you initially chose, you have the option to look for a different company later. This can be done on your own or with a broker, when you’re not rushed for time.
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Are home insurance brokers regulated?
Insurance agents and brokers get permission from the state to do their job. To get and keep this permission, they usually need to take specific courses before they’re licensed. They also have to pass a test and keep learning even after they’re licensed. In some states, they might need to give their fingerprints and do a background check. You can usually find out if a broker is licensed in your state by using the tool on your state insurance department’s website.
You can also find out about home insurance brokers in other ways. Some of them are listed on the Better Business Bureau website, sometimes with a letter grade rating from the BBB. Review sites like Yelp also have listings for home insurance brokers.
The Bottom Line
A home insurance broker is like a middleman between you, the person buying or owning a home, and the companies that offer home insurance plans. Brokers deal with different insurance companies, unlike captive insurance agents who only work for one company. A broker might be able to help you find a better price or make it easier for you to find a policy without spending a lot of time looking on your own.
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