Buying Life Insurance Direct vs. Using an Insurance Broker

Our guide outlines the key differences between buying life insurance from a broker vs purchasing it directly from an insurance company

Updated 10 May 2021

Summary:

When considering your options for life insurance, there are two primary ways you can purchase a policy: through an independent agent/broker or directly from the insurance company.
A broker's role is to help you understand the myriad of policy options and insurance carriers out there for you to choose from and represent your interests throughout the process.
Brokers can help you build a plan that includes products that fit your life insurance needs and help you through the application and underwriting process.
Brokers act as valuable advisors, not just when you are buying a new policy, but when things change in your life that could drive a need to review your plan like marriage, having children, and more. They will also assist the policy's beneficiaries (i.e. people/person the money is paid out to) during claim time.
Insurance companies also assist you in determining which policy may be the best fit for you and walk you through many of the same scenarios a broker would.
However, insurers can only sell you policies from their insurance company. If their insurance policies aren't appropriate or cost-effective, they're unable to suggest alternative insurers.

In this guide, we outline the pros and cons of buying life insurance from an independent broker and directly from an insurance company. We cover:

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Pros and Cons of Buying Life Insurance from an Insurance Broker

Pros

Brokers work for you as opposed to working for the insurance company, which means they will look out for your best interests, not the insurance companies.
Independent brokers are precisely that, independent. They are not beholden to any one insurance company and can get quotes from multiple insurance companies to ensure you get the best pricing available.
Brokers understand the differences in underwriting guidelines from a wide variety of carriers. This is extremely important if you have any health issues or pre-existing conditions. Different insurance companies have different guidelines, and if you have diabetes, for example, they can help you find the carrier that offers the best rates for those with diabetes.
They can help you avoid being declined for coverage. Some pre-existing conditions may prohibit you from getting coverage. However, different carriers have different underwriting guidelines. A broker can help you find an insurance company that may accept you with your specific condition even if others will not.
An broker can help educate you on the different insurance terms, policies, and coverages available to you.
To a broker, you (as a customer) are not just a number; their goal is to develop a long-lasting relationship with you. They will check in regularly to ensure your needs are being met and see if your situation has changed, which may drive the need to alter your coverage.

Cons

Independent brokers work with many different insurance companies. They may not know all of the intricate details of every policy out here, so always check to make sure the policy you purchase meets all of your needs and you understand any exclusions that may apply.
You may not need all of the coverage that the broker suggests. Keep in mind your goals concerning the coverage you think you need and your budget, and talk to your agent about how best to acquire that coverage.
Independent brokers get paid through commissions paid by the insurance companies. While there is no difference in your premium if you use a broker or not, for some brokers, the commissions they get can impact what they suggest. The simple way to avoid any issues is to have them show you quotes from multiple carriers to ensure you get the best deal and not just the policy that pays the highest commission for selling.
As reported by Consumer and Radio New Zealand in late 2020, brokers may not cover the whole market so you're not necessarily going to get advice on all the policies out there. The Consumer research concluded that New Zealanders were more satisfied when buying direct from an insurer vs using a broker or a bank.

Pros and Cons of Buying Life Insurance Directly from an Insurance Company

Pros

Buying life insurance directly from the insurance can speed up the process and is a simple way to get coverage, and in many cases, it can be done online.
Going directly to the insurance company means you can avoid the back and forth that you may have to deal with if you are using a broker who is essentially a middleman.
In most cases, the premiums you pay will not be different if you buy directly from the insurance company or use a broker. However, it pays to check and see if you can get a better deal directly through the insurance company.
You control which insurance companies you get a quote from.

Cons

If you buy direct from a life insurance company, you may not get the personalised experience you would if you work with an insurance broker. In most cases, you will be dealing with someone in a call centre who may or may not be there next week, let alone several years later.
If you need assistance with a quote, with underwriting questions, or with any other, you may need to rely on the company’s call centre and could talk to a different person every time you call.
Some life insurance companies only sell through insurance brokers, so you would not be able to buy policies from them and could miss out on any unique features they offer or more competitive pricing.
When you buy directly from a life insurance company, they will only talk to you about the products they sell, which may or may not meet your needs. If the insurer thinks you may need a different kind of policy from another insurer, they will not help you find it.
You won’t necessarily know if you are getting the most competitive price unless you contact multiple carriers and get quotes from all of them. This can be a time-consuming and tedious process, especially if you have pre-existing health conditions. For this reason, it can often be hard to compare if you are not an expert in life insurance policies.
Because insurers only sell their policies, it is possible you could end up with coverage that’s not right for you or even insufficient coverage.

5 Must-Know Facts about Buying Life Insurance from a Broker

Brokers are personal - When you work with an independent broker, they will sit down with you and analyse your current family, financial situation, and insurance needs. They will then develop a plan and suggest the right coverage to meet your needs within your budget.
Brokers may sell other policies - In many cases, brokers can also help you with other types of insurance if they think there may be a need for additional coverage.
Brokers keep in regular contact - A good insurance broker will keep in touch with you, and if your situation changes, for example, if you get married, have kids, etc., and will work with you to adjust your insurance coverage as needed.
Brokers are regulated - Life insurance brokers need to be authorised and registered under New Zealand law. They must complete training, take an exam, and complete ongoing continuing education courses to stay up to date with industry and product changes.
Brokers offer choice (but check to see what insurers they work with) - Life insurance brokers have access to many different life insurance companies products, but that does not mean they can sell all of them. Ask your broker which carriers they are appointed with and can sell. If you are interested in a specific insurance company, make sure the broker sells insurance on behalf of that insurer.

Frequently Asked Questions

It's not always clear how to proceed and it's likely you'll have questions about what to do next - our common queries below help explain what the options are.

Is it better to buy direct from the insurance company or from a life insurance broker?

The answer depends on your situation. Are you experienced with life insurance and the many different product offerings and insurance companies available if so, you may feel comfortable buying direct. Do you need someone to help walk you through the process? If so, you may want to work with a broker.

Are there some brokers who only sell life insurance products from one life insurance carrier?

There is a kind of broker called a "captive agent". They are similar to brokers but are employed by the insurance company and can only sell products from their company. They're not that common in New Zealand, but they do exist and work directly for the insurer and no one else.

How do I choose a life insurance broker?

When selecting a life insurance broker to work with, you may want to choose one that is local and can meet with you in person if that is important to you. You can read online reviews and talk to friends and family to see if they have worked with them in the past. Like with anyone who will be providing you with advice and guidance, it is crucial to work with someone you are comfortable with. If you meet with a broker and for whatever reason, you don’t click, the best thing to do is to choose someone else. This is a person who will be providing you with important financial advice, so it's very important you choose wisely.

If I call an insurance company directly to buy life insurance, will they tell me if they may not be the right fit for me?

Hopefully, if you call an insurance company and they either don’t have the right products for you or are not the right fit for some other reason, they will tell you. However, that is not always the case, and it is not necessarily because they are just trying to sell you their products. They may not be educated or informed about other products that may be available in the market to meet your specific needs. Working directly with a life insurance company, regardless of the size, does limit your options.

Related Guides

Are you looking to insure for pre-existing conditions? This guide is not for you - our pre-existing medical conditions guide has you covered.
Want to compare life insurance policy prices? Our comparison guide explains everything you need to know.
Do you smoke or vape? Our dedicated smoking, vaping and life insurance guide outlines everything you need to know.
Want to change or adjust a life insurance policy? Our when to cancel or change a life insurance policy guide outlines the must-know considerations.