should I use an insurance broker?

[AllBlackBimmer]

So, I just bought my first house

... and obviously I need to get homeowners insurance...

I am not overly happy with my current CAR insurance company, so I am not going to pursue them to package my insurances together.

My realator suggested to me to use a partner of theirs, that is an insurance broker and will shop for the best rates.

Is there ANY downside to using a broker? Is it going to cost me any $ either upfront, or down the road?

Pardon my ignorance, but I am just getting into all the stuff. Funny I posted here, but I even really did too much Google'ing. Figured many of my fellow BMW'ers know a thing or 2 about home ownership and insurance

[gatorfast]

No downside to using a broker. A broker is simply someone who has access to various insurance companies and can offer you various plans to chose from.

[AllBlackBimmer]

Originally Posted by gatorfast

No downside to using a broker. A broker is simply someone who has access to various insurance companies and can offer you various plans to chose from.

That is kind of what I thought... just didn't know if there were any "hidden" cost associated with them.

Thanks man!

[Maestro]

There are always hidden costs with brokers, think about it, they have to make money somehow, they are not doing it out of the kindness of their heart. They either get a finders fee from the insurance company or they get a % cost of your insurance for some period of time. So will they get you the best insurance or the best one for their pocket book.

I am not sure what state you live in but in PA Real Estates Agents and Companies are not allow to refer you to brokers or loan companies or home inspectors. The only thing they can do is provide you a complete list of who all can do these servers in you local area. If your Agent is referring you, to one particular person what are they getting out of the deal.

You will not get the best rate unless you bundle everything together. Most of the big company had all sorts of discounts for tying all your insurance together. This is the best way to go.

Even if you not happen with your current car insurance and need something fast it maybe worth just going with them for the time being they maybe able to do a deal with the house and car now. I am assuming your mortgage is requiring you to escrow the insurance payment thus they are requiring you to have insurance ahead of time so that can be done.

[BayMoWe335]

Originally Posted by Maestro

There are always hidden costs with brokers, think about it, they have to make money somehow, they are not doing it out of the kindness of their heart. They either get a finders fee from the insurance company or they get a % cost of your insurance for some period of time. So will they get you the best insurance or the best one for their pocket book.

I am not sure what state you live in but in PA Real Estates Agents and Companies are not allow to refer you to brokers or loan companies or home inspectors. The only thing they can do is provide you a complete list of who all can do these servers in you local area. If your Agent is referring you, to one particular person what are they getting out of the deal.

You will not get the best rate unless you bundle everything together. Most of the big company had all sorts of discounts for tying all your insurance together. This is the best way to go.

Even if you not happen with your current car insurance and need something fast it maybe worth just going with them for the time being they maybe able to do a deal with the house and car now. I am assuming your mortgage is requiring you to escrow the insurance payment thus they are requiring you to have insurance ahead of time so that can be done.

Neither do single insurance companies....they have to make money too and they are biased.

[AllBlackBimmer]

Originally Posted by Maestro

There are always hidden costs with brokers, think about it, they have to make money somehow, they are not doing it out of the kindness of their heart. They either get a finders fee from the insurance company or they get a % cost of your insurance for some period of time. So will they get you the best insurance or the best one for their pocket book.

I am not sure what state you live in but in PA Real Estates Agents and Companies are not allow to refer you to brokers or loan companies or home inspectors. The only thing they can do is provide you a complete list of who all can do these servers in you local area. If your Agent is referring you, to one particular person what are they getting out of the deal.

You will not get the best rate unless you bundle everything together. Most of the big company had all sorts of discounts for tying all your insurance together. This is the best way to go.

Even if you not happen with your current car insurance and need something fast it maybe worth just going with them for the time being they maybe able to do a deal with the house and car now. I am assuming your mortgage is requiring you to escrow the insurance payment thus they are requiring you to have insurance ahead of time so that can be done.

Yes, my mortgage does require me to escrow the insurance payment.

And I do live in PA... my realtor works for Prudential, who in their same office also have some other "partner" companies... such as loan brokers and insurance brokers. My realtor did state he does not recieve anything by "refering" me to these people. My realtor simply stated, that they provide these services for convience, and if I do not wish to use them, I can go anywhere else I want, I do not have to use them at all.

[Mr Tonka]

like anything else there are honest brokers and dishonest brokers. Most Ins brokers get paid a commission if you will. The ins carrier looks on them as an extended sales force. They're prices don't necessarily go up because they have to pay a broker. The benefit of the broker is that they can compare all carriers in your area. Some carriers may be wanting to get more business and have lowered their rates. But the broker will be able to look at those big package deals and compare them individually as well. We used to have a package deal for the longest time, but for the last 3 years, we've had different companies providing ins for auto, liability and property. By doing that our premiums decreased $4000 a year. Without the broker, i wouldn't know unless i have several days allocated to insurance shopping each year.

What your realtor is getting out of recommending this broker is your relationship with them and the possibility of listing your home in the event that you sell it. By servicing your needs or recommending a quality individual to service your needs, he's hoping to make himself your go to guy when buying or selling property.

I will always use a broker, for all my insurance. My home insurance has better coverage and lower premiums that just about everyone i know. That's the other benefit of a broker, they can explain exactly what coverages you have and where your risks are.

We told our broker to make sure we have good enough insurance so that if we get a call in the middle of the night telling us the business building is on fire that we can hang up the phone and go back to bed. Irony being as cruel as it can be, in 2003 our building burned to the ground. Our broker made sure we were covered to the hilt. We got a check for the building in 3 days. (it was a total loss) We got additional checks for lost revenues, lost rent, (we had a tenant in the building) contents, and an additional $134k we wouldn't have know about if it weren't for our broker. All of that made us whole again and we still payed less than average premiums for our area.

[RambleJ]

There is a benefit to using a broker, as they can shop multiple carriers at once. Like anything the key is finding a decent honest broker. There are a lot of brokers out there that give others a bad name. I am a little biased as I manage a team of insurance brokers ( only focusing on Medicare products ), and luckily there is a set standard commission for the health plans to offer as well as the residuals that can be made if you put a person on the right plan and they stay on it. Brokers that go for the quick money are not in the industry for long since they do not have any rapport and do not have any residuals to keep them going.

I have also managed sales agents for the insurance carriers directly, so I have seen both sides of the world and like the fact that brokers are not pigeon holed to one plan.

[Maestro]

Damn Mr Tonka, all my insurance together including life does not add up to not much more than $4K/yr and I have pretty good coverage on all my cars, house and my wife and I and I have Teen driver too. My personal insurance is with one company and everything else is with a different company. What the hell were you insuring to see a $4k decrease.

I never dealt with a broker for personal stuff and I assume you have since I believe you own a business and as such you need to use a broker since some insurances are only accessible via a broker.

Over the years I like to deal with a insurance agent since many time they have a vested interest in getting you the best deals since their business grows by referral. Form time to time I shop my insurance around to keep my agent honest and I have yet to have anyone match what I have. I also know I am a low risk so no really room for any one company undercut.

[RambleJ]

Originally Posted by Maestro

Over the years I like to deal with a insurance agent since many time they have a vested interest in getting you the best deals since their business grows by referral. Form time to time I shop my insurance around to keep my agent honest and I have yet to have anyone match what I have. I also know I am a low risk so no really room for any one company undercut.

This is where I have to disagree. Most insurance agents that work for a company receive a salary plus compensation per sale and a small residual along with some company fed leads. When you deal with a broker, referrals are key to survival, because there is no salary, you make your own salary by selling and self generated leads. So if you are a sh*tty broker, your business will suffer to the point it will fail. If you do well for you clients, you gain rapport, generate referrals and get a name for yourself in the community. I see it the complete opposite that you do and I am in the insurance industry and have worked for insurance companies directly and also managed brokers as well. You will see your shady sales people on both sides of the fence, which is why it's best to go by referral.

[MidwestGolfBum]

Originally Posted by Mr Tonka

like anything else there are honest brokers and dishonest brokers. Most Ins brokers get paid a commission if you will. The ins carrier looks on them as an extended sales force. They're prices don't necessarily go up because they have to pay a broker. The benefit of the broker is that they can compare all carriers in your area. Some carriers may be wanting to get more business and have lowered their rates. But the broker will be able to look at those big package deals and compare them individually as well. We used to have a package deal for the longest time, but for the last 3 years, we've had different companies providing ins for auto, liability and property. By doing that our premiums decreased $4000 a year. Without the broker, i wouldn't know unless i have several days allocated to insurance shopping each year.

What your realtor is getting out of recommending this broker is your relationship with them and the possibility of listing your home in the event that you sell it. By servicing your needs or recommending a quality individual to service your needs, he's hoping to make himself your go to guy when buying or selling property.

I will always use a broker, for all my insurance. My home insurance has better coverage and lower premiums that just about everyone i know. That's the other benefit of a broker, they can explain exactly what coverages you have and where your risks are.

We told our broker to make sure we have good enough insurance so that if we get a call in the middle of the night telling us the business building is on fire that we can hang up the phone and go back to bed. Irony being as cruel as it can be, in 2003 our building burned to the ground. Our broker made sure we were covered to the hilt. We got a check for the building in 3 days. (it was a total loss) We got additional checks for lost revenues, lost rent, (we had a tenant in the building) contents, and an additional $134k we wouldn't have know about if it weren't for our broker. All of that made us whole again and we still payed less than average premiums for our area.

This is exactly why I use a broker. I have all around cheaper rates because they can see more companies than just one. I also don't have to spend my life shopping around for things, I call up my insurance broker, tell him what I would like to do, and he sends me an email about a day later with the options that I have. He makes my life more simple and because of that, I have more time to do the things I want to do. I also refer people to him for exactly that reason.

He takes care of my business insurance, autos, homes, rental properties, etc. and very few of them go through the same company. As Tonka mentioned, even without those discounts I pay less than I previously did when I was going through just a single company however many years ago.

[Maestro]

Originally Posted by AllBlackBimmer

Yes, my mortgage does require me to escrow the insurance payment.

And I do live in PA... my realtor works for Prudential, who in their same office also have some other "partner" companies... such as loan brokers and insurance brokers. My realtor did state he does not recieve anything by "refering" me to these people. My realtor simply stated, that they provide these services for convience, and if I do not wish to use them, I can go anywhere else I want, I do not have to use them at all.

My current understanding is they are not allow to specifically direct you to any one company. When I bought my recent house which was a 10 yrs ago, and most recently when some friend bought a place the agent said they could not specifically refer any companies, however, they could provide a list of companies which do various things and we were free to pick form the list or find our own services.

Again, when a person is making money on a commission bases and especially real estate people start referring you to something the hair stand up on my neck. I tell people this all the time, the agent no matter how many times they tell you they work for you, it not true they only work for themselves. They do not get paid unless the deal closes they do not care if you over pay or are buying crap they just want it to close and if that means making sure you get insurance or what every else to ensure it closes that is all they worry about.

When I sold my property and the buyer got a home inspection, I made it very clear I would only fix or agreed to address building code or safety issues nothing else. When the inspection came back with all sort of "maintenance concerns" I just ignored it, and my agent began freaking out since he was concern the buyer would walk away. I told him I was not going to spend money on minor things which all home owner have to deal with. I found out after closing my Agent went to the house since it was empty and fix a number of the thing on the list. What an idiot he was, but it was his nickle not mine.

[Mr Tonka]

Originally Posted by Maestro

Damn Mr Tonka, all my insurance together including life does not add up to not much more than $4K/yr and I have pretty good coverage on all my cars, house and my wife and I and I have Teen driver too. My personal insurance is with one company and everything else is with a different company. What the hell were you insuring to see a $4k decrease.

I never dealt with a broker for personal stuff and I assume you have since I believe you own a business and as such you need to use a broker since some insurances are only accessible via a broker.

Over the years I like to deal with a insurance agent since many time they have a vested interest in getting you the best deals since their business grows by referral. Form time to time I shop my insurance around to keep my agent honest and I have yet to have anyone match what I have. I also know I am a low risk so no really room for any one company undercut.

At that time it was for a business with revenues around $15mil per year. We had several vehicles and a lot of equipment. Had a 30,000 sf building with a warehouse that typically had anywhere from $100k to $500k worth of flooring materials inside it.

The total ins pay out after the fire was in the neighborhood of $1.1mil and we were paying about $30k a year in insurance for: auto, liability and property.

The same broker handles my personal stuff; residence, rental homes, health, life, long term, disability, liability and umbrella. His firm handles all types of insurance so if he can't do it, someone else in his office can. They do our payroll and are the business' HR department as well as facilitate any or our needs for payment/performance bonds that our projects may require. Although those costs are included in the $30k figure.

Our home insurance went from $2700 / year to $1200 a year when we switched from State Farm to my ins broker. Likely not typical, but once that happened, he was my guy from that point on.

[bing240sx]

i skimmed some of the responses and will offer my own feedback here.

if your book of business (home and car) is very simple to cover then you may be better off going with a direct writer. typically they are supposed to be 'cheaper'.

cheaper is not necessarily better, as any BMW owner should appreciate.

however a good insurance broker will be vital for a more complicated book of insurable assets. if you have multiple cars, a business, boats or other insurable toys, etc. etc. then you DEFINITELY need to have a good broker who understands you and your needs. someone you can call on periodically for questions and someone who understands your policy and can advocate for you in a complex claim scenario with your insurer.

the entire insurance broker industry is under attack by direct writers and their only defense is to provide better service than direct writers or agent driven insurers can.

premiums are determined differently by different companies at different times. not only do claims history and risk come in to play but also the PIF (policy in force) in your area. Some insurers may want to draw down their PIF by offering slightly higher rates while others will offer better rates to gain share in an area. your broker may know who is who at any given time.

on the flip side, brokers are incensed to keep claims down and are bonused on the performance of their overall book of business.

*edit:

another point to mention is that some automotive insurers are not ideal for a BMW if you are in-warranty and intend on having your car sent back to BMW for certified collision repairs. I'm not sure how Progressive, Geico etc. deal with that since we dont have them up here in Canada. It would suck if your insurer were one where they insist on writing the appraisal and then force you to top up the repair costs at a premium service collision centre like most BMW certifieds are.