Saturday, December 18, 2010

The 2 Dirty Words in Insurance ...

Well it's time to talk about those dreaded dirty little words of the insurance industry. That when mention, it could end a deal before it even begins “The Broker Fee”. What is a Broker Fee? A Broker Fee is a non regulated fee that only your insurance broker can charge for writing your insurance policy. The reason for a broker fee is simply a service charge. Think of it this way, when you go get your car looked at for a tune up they have an inspection fee, just to see what’s wrong with your car. When you change your oil they charge a service fee, Plumbers have estimate fees, there is start up charge for cable Etc. Broker Fees are just that! A fee you pay for a service rendered.

So why is the broker fee so bad in insurance? Well it all depends on how much it is. The Broker Fee is a little tricky because it really is up to your insurance agent how much to charge you. A lot of brokers these days try to hide this fee because they know that it is NOT very appealing when your insurance is only $350.00 a year for a basic liability plan and your Brokers Fee is $300.00. That by the way has to be paid up front. Does that seem a little unreal to you? Well believe it because hundreds of people really do pay up wards of $300.00 to $500.00 in broker fees. From a sales point of view there is an acceptable reason to charge a fee. Some insurance brokers are taking advantage of the fact that they can charge what ever they like. Here are some tips to make sure you are getting a fair price for what you’re buying.

First look at what kind of insurance policy are you buying? If it's the basic liability required by law an acceptable fee would be around $50.00 to $65.00. When you need more coverage such as full coverage uninsured motorist then you can expect to pay $70.00 to $85.00. Commercial Insurance, depending on what kind of business you have the fees are a bit more. Between $100.00 and $250.00. These are not standard fees that every insurance company uses. How ever they would be more acceptable for the services that an insurance broker will be doing for the life of the policy. Second if you have a bad driving record you can expect to be charged more. A bad driving record means you are a high risk to insure and more likely to cost the company a lot of money in claims. Last if you are a good driver ask to be put with a preferred carrier such as Mercury, Safeco, or Travelers. Preferred companies DON’T charge broker fees.

Now the next time your going to buy insurance and you seem to be paying a bit too much to start the policy ask your agent what the broker fee is, you can also ask to see the Broker Agreement. Every insurance broker should have a broker agreement that you sign. It should list any and all fees that the broker charges for services. Please try to remember as well that your broker will be servicing you for the life of the policy and a fee is acceptable. Just make sure it is one that you are comfortable with and reflects the kind of policy you will be purchasing.

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