Home Insurance Broker
What Is a Home Insurance Broker?A home insurance broker also called a homeowners insurance broker, is an individual or company that acts as an intermediary between homebuyers or homeowners and insurance companies. Unlike a captive insurance agent, brokers deal with multiple homeowners insurance companies. In this way, they are similar to independent insurance agents, who arrange for life, home, automobile, and other types of insurance policies. KEY LESSONS
A home insurance broker acts as an intermediary between an insurance shopper and various insurance companies. A home insurance broker can be useful if you have an unusual or hard-to-insure property or if you don’t have time to shop on your own. Home insurance brokers are typically paid by the insurance company that they connect you with.
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?A home-buyer or homeowner might want to use an insurance broker if they’re looking for the best possible price on a policy or if there is something unusual about the property that they want to insure. For example, some insurance companies won’t write policies for certain types of homes or those in certain areas, such as hurricanes or tornado territory. A home insurance broker should know each company’s rules, which can save the client time that otherwise would be wasted in applying to the wrong companies.
What a Home Insurance Broker Will Want to KnowA 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 typical homeowner’s insurance policy consists of four main parts, according to the Insurance Information Institute, an industry-sponsored group.1 1. Coverage for the structure of the home. This coverage should pay to repair or replace your home if it is damaged by any of the perils (such as a fire) listed in the policy. If your home is at risk from other, unlisted perils (such as flooding or earthquakes), you’ll need separate coverage for those. Your broker may be able to arrange for that insurance as well. If you have a mortgage, your lender is likely to require that you purchase a specified amount of coverage.2 2. Coverage for your personal belongings This part of the policy covers your furniture, clothing, and other ordinary possessions. The dollar value of the coverage is usually based on the coverage that you have on the structure; for example, it might equal 50% to 70% of your structure’s coverage. If you have particularly valuable items, such as jewelry or artwork, you may want to buy a special policy endorsement, rider, or floater to make certain you have enough coverage on them, just in case. 3. Liability coverage This part covers you if, for example, someone is injured on your property and sues you. It can also provide coverage if you’re sued for bodily injury or property damage away from your home. Homeowners’ policies generally come with at least $100,000 in liability coverage. If you want more liability coverage than your policy will provide, ask the broker about purchasing a separate umbrella policy. If you have a home office or run a business out of your home, you’ll also want to mention that to the insurance broker. Failure to do so could lead to a cancellation of your policy, according to the National Association of Insurance Commissioners. 4. Additional living expenses. If your home is made unlivable by a covered mishap, this coverage can help you pay your hotel and restaurant bills until life returns to normal. Levels of Coverage Note as well that you may have a choice of different levels of coverage:
- Actual value coverage will pay to repair or replace your home and possessions, but only after accounting for their depreciation over time.
- Replacement cost coverage will pay to repair or replace them without deducting depreciation.
- Guaranteed 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.
- Extended replacement cost coverage will pay up to a certain percentage (such as 20% or 25%) over the coverage limits.1