A Life Insurance Company is the organisation that actually writes your policy and covers the policy risk. It is also their name that appears on your policy documents and it is their duty to make any payouts if you make a claim. Most Life Insurance Companies sell many other products besides life Insurance – E.g. home & contents insurance, car insurance, pensions and investment funds and bonds.
A Life Insurance Broker acts as the intermediary beteen the client and the insurance company. The Brokers role is to find you the policy which best meets your requirements. The Broker will consider the policy’s features, its price and the quality of the insurance company writing the policy. If they are providing you with Life Insurance advice, they will also need to know more about your personal circumstances to enable them to assess what type of policy is suitable for you.
Some Brokers and Supermarkets are tied to only one Insurance Company and, in our view, should be avoided. This is because they are unlikely to be able to offer you the cheapest insurance option. Ideally, you need an Insurance Broker who will search the databases of many UK insurance companies in order to find the most suitable policy at the most competitive price.
Once the insurance policy has been selected, it is up to the Insurance Broker to process your application until the cover is fully in place.
Most Brokers will receive commission for their service direct from the Insurance Companies although some may charge fees per policy as an alternative. This should not affect their selection of which contracts are suitable for you. The Financial Services Authority prefers the concept of fees rather than commission but in practice most protection insurance is sold using commission rather than fees. The problem is that fees attract VAT whereas commission payments are VAT exempt. So on a like for like basis, fees will cost17.5% more than commission.
Discounting life insurance premiums is a common practice on the web. This is because of the high levels of competition and the low operating costs of the Internet. The Broker reduces his commission and passes this over to you in the form of cheaper premiums for the same level of cover.