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Life Insurance Broker

Mitch Ramsbotham

Financial Expert Updated on June 20, 2023

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Buying any type of insurance can be not only confusing but also frustrating. This is why so many Australians choose to work with a trusted Insurance Broker.

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You have many options to choose from if you are in the market for a quality life insurance policy. You can buy life insurance directly from an insurance company, or decide to work with either a Financial Planner, an Insurance Agent or an Insurance Broker.

An insurance broker is different from an agent. In Australia, both agents and brokers must be licensed, and both can legally sell insurance. The primary difference is whom each one works for. An insurance agent works for a single insurance provider.

On the other hand, an insurance broker works independently so they can compare many different policies to find the right one for your circumstances.

What Is a Life Insurance Broker?

A life insurance broker works independently. They are not a “captive agent” that works for one insurance agency or provider. Instead, a life insurance broker works for you. They look at your needs and try to find specific policies that will give you the peace of mind you need.

A life insurance broker will put together the type of policy that will allow you to build a solid financial future.

An Australian life insurance broker must have an Australian Financial Services License to sell any type of insurance policy. No matter which one of the four types of life insurance you are after (income protection, TPD insurance, trauma cover or life cover), a quality life insurance policy will protect both you and your family during a very difficult time.

Your broker will work with you and your family to provide personal advice, secure the right product for you and can even help you determine how much cover you can get within your preferred price range.

What Do Life Insurance Brokers Do?

An Australian life insurance broker has one job, and that is to work for their clients to secure the best life insurance policies.

Some brokers may work hand in hand with financial advisers to help each client get the best possible life insurance policy for their current situation. Your financial situation will change over time. It is up to your broker to continually monitor your needs. An experienced broker will help you adjust your cover based on your life stage.

A life insurance broker looks at many different factors that determine what type of policy and what level of cover is most beneficial. Every client has different financial obligations. While you may have a mortgage and one child to care for, your neighbour may own a business, have multiple loans, and have a large family to financially support.

The same policy will not be sufficient for both of you. A licensed life insurance broker’s job is to look at your needs and evaluate the amount of coverage you need to fulfil all of your financial obligations.

Pros and Cons of Using Life Insurance Brokers

Not everyone will need or want a life insurance broker to help them secure their policies. But in making your decision, here are the pros and cons of using a life insurance broker:

Pros:

  • A broker will independently source the right policy from multiple providers
  • They can help you find cover that is personalised for your personal needs, family’s lifestyle and current circumstances (this could help you avoid the disappointment of your claim being denied).
  • Brokers have access to special discounts and deals
  • They can help you understand policy T&Cs and explain the relevant product disclosure statement
  • They can help identify your insurance needs and walk you through the application process

Cons:

  • Insurance brokers are paid based on what they sell
  • Using a broker may be more expensive than other options
  • Some brokers may not be as knowledgable as a financial adviser
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How Do Life Insurance Brokers Make Money?

Life insurance brokers make their money by selling policies to their clients.

They will earn a percentage of each premium paid for as long as the policies are in place. If a policy is cancelled or the premiums aren’t paid, the broker will not make any money.

Their goal is to keep policies that have already been sold in place and to continue to sell new policies to people who need them.

Life insurance brokers make money because they sell many other types of insurance other than just life cover including:

  • Total and Permanent disability
  • Trauma coverage
  • Income protection insurance

Your financial situation will determine what type of insurance you need. The amount of cover you need and any exclusions will all be determined as you begin the application process.

Key Responsibilities of a Life Insurance Broker

A life insurance broker has many responsibilities to both their clients as well as to the insurance providers they use.

Insurance brokers have a duty of care to you as the customer. Their key responsibilities include:

  • Acting with integrity and honesty at all times when it comes to dealing with clients and insurers.
  • Avoiding conflicts of interest, and disclosing any partnerships or fee/commission structures
  • Adhering to client confidentiality regulations and data protection rules.
  • Complying with the Insurance (Agents & Brokers) Act 1984, the Insurance Contracts Act 1984, the Trade Practices Act 1974 and the State Fair Trading Acts.
  • Ensuring that the accuracy of insurance documents are checked.

A broker must also be a reliable liaison between the product provider and their client. The needs of the client will be met most effectively by being able to answer questions and provide general advice about what type of insurance may be best for their current situation.

Is It Cheaper to Buy Life Insurance Through A Broker?

You have to pay a fee to a life insurance broker meaning that finding a policy on your own could be more cost-effective.

However, it’s also worth taking into account

  • The price of your life insurance premiums: a broker may be able to help you find the cheapest deal
  • How much you will be covered for: an insurance broker can help avoid any underinsurance problems

Additionally, given the way a broker will know the ins and outs of the market, they could stop you from buying more cover than you really need or help you avoid buying a policy that you may not even be able to make a claim on in the future.

Your personal circumstances will also help to determine what type of insurance premium you will pay. When you buy a quality life insurance policy, affordability is important, but you also want to ensure that you and your family are adequately covered. A quality life cover is well worth the price if it protects your family.

Life Insurance Broker Fees and Costs

In Australia, your life insurance broker must be transparent in how they make their money.

They must also be able to disclose any broker fees and costs that are charged to you when you purchase a life insurance policy. Transparency is a key component in how the insurance industry operates, especially when it comes to fees and premiums.

If you have any questions about your premiums or any other costs associated with your life insurance policy, ask your broker right away.

Both brokers and carriers charge administrative fees and other charges to cover the cost of underwriting and processing your life insurance policy.

Do You Need a Life Insurance Broker?

The decision to work with a life insurance broker is a personal one.

For many people, having a broker to talk to and discuss policy disclosure statements and specific coverage details is extremely important. Working with a broker also allows you the option of having several choices in terms of both levels of cover and type of cover.

Additionally, if you want to save time on research and shopping around, a life insurance broker can help you by recommending the right policies.

If you are comfortable with choosing a basic life insurance policy without having any interaction with any authorised representative who can offer you financial advice or general guidance, then you would not need a life insurance broker. When you choose to not work with a life insurance broker, it will be up to you to fully understand your own financial situation so that you can still secure the right insurance needs for you.

How to Look for an Experienced Life Insurance Broker

There are several ways to find an experienced life insurance broker. Talk to your friends and family to find out who they recommend. Talking to someone who actually works with the broker is the best way to get to know them and how they handle their business.

A knowledgeable broker will save you money and also provide you with the level of cover you need to keep your family financially secure. The personal advice they offer will be invaluable.

At My Money Sorted, we work with some of Australia’s leading Life Insurance Brokers.

If you want to work with a Life Insurance Broker, get in touch with our team who can connect you with the right Specialist for your needs.

What Questions Should You Ask Your Life Insurance Broker?

There are many questions that you can ask your life insurance broker. They include:

  • Do you have policies that cover pre-existing conditions?
  • Will I need to undergo a medical exam?
  • How much of my premium is used for the cash value of my policy?
  • How much life insurance will I need to protect my family?
  • Which insurance companies are best for my needs?

Life Insurance Brokers vs Going Direct

An Australian life insurance broker must be licensed in order to sell any type of policy. Choosing to use a life insurance broker will provide you with a personal touch. You will have someone to talk to when you need financial guidance or have questions about your policy. They will work with you to ensure you have the right type of coverage for your individual circumstances.

A life insurance broker can save you time, effort and energy. Additionally, they can ensure you have the right policy for you at the cheapest cost.

You also have the option of buying direct life insurance from an Australian carrier. Buying direct cuts out the middleman and allows you to choose from a few specific policies that are in line with what your needs are. You will order your life insurance directly from the carrier and pay your premiums to them. This means you won’t have to pay any additional fees besides your premiums.

The choice to use a life insurance broker must be made by you. You are dealing with your financial future, and any choice to be made requires special consideration.

Once you know what you need in terms of coverage, it will be much easier for you to make an informed decision.

Still not sure where to start, or want help securing the right insurance faster? 

That’s okay!

Many people may be unaware of this…but just like you, 41% of Aussies intend to get financial advice rather than going it alone, according to an Australian Securities and Investments Commission (ASIC) report.

You can reach out to My Money Sorted to guide you for free before you seek professional advice from an insurance expert!

When you book a call with My Money Sorted, you’ll:

✓ get a better understanding of your money matters

✓ have an idea of your money goals

✓ be matched with the right insurance expert who can help simplify your search for an insurance policy that fits your needs

My Money Sorted is your stress-free pathway to getting ahead with your money. Here’s what your journey will look like:

Step 1: Start off with a quick money matters session with My Money Sorted

Step 2: Get matched with a Insurance Expert that’s right for your money situation

Step 3: Take the first step towards getting the protection you need with a clear and sound roadmap prepared by an Insurance Expert

It’s that easy!

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I want to see all my options with the help of a Finance Expert

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