One of the most effective ways to secure your future financially is to get insurance. That way, when you encounter unexpected circumstances, you can still continue where you left off. However, finding the right insurance can be tricky, especially if it’s your first time, so it’s recommended to hire an insurance adviser. 

An insurance adviser plays a vital role in helping you find the best insurance policy whether it’s for your business or yourself. Some people think that hiring an insurance adviser is more expensive than figuring things out on their own. But unfortunately, it might be the other way around. 

In this article, we’ll discuss the ways in which an insurance adviser gets compensated to help you understand how you can save when you hire them. 

Role of an Insurance Adviser

People have different situations and preferences when it comes to insurance. This is one of the reasons why insurance advisers recommend personalized insurance products per client. In addition, they can help identify the potential risks that should be taken into account when choosing insurance coverage.

At first, the insurance adviser usually asks their client about the insurance their planning to get. Additionally, they’ll need the complete information and the budget for the said insurance. From there, they can recommend the types of insurance and specific add-ons that can help boost the policy. 

Types of Compensation

Insurance advisers have various ways to get compensated. It can be from commission, fees, or both. 

a. Commissions

The most common way to compensate insurance advisers is through commission. When you purchase insurance premiums they recommend, they can get a percentage from the amount you’ve paid for, either annually or monthly. 

However, there’s nothing to worry about their recommendations. Most of the time, insurance advisers won’t recommend things you don’t need. Besides, whatever policy you end up getting, there might still be a commission from it. 

In life insurance, an insurance adviser can get more than 60% of the amount of the insurance premium in the first year. However, the percentage they get for the succeeding years tends to be smaller. 

b. Fees

Hiring an insurance adviser sometimes comes with fees. If the insurance adviser isn’t tied up with any insurance company, they might not get any commission. If that’s the case, the fees can be a bit higher. However, the total bill for the insurance premiums might also become smaller.

Usually, an insurance adviser that’s relying upon fees can charge an hourly rate or a flat rate. So before hiring them, it’s best to get to know the basis of their rates. 

Unlike commissions, fees are paid directly to the insurance adviser. So instead of relying on your monthly or annual insurance payment, you can pay them upfront. 

c. Combination

The most popular type of compensation an insurance adviser usually has is the combination of commissions and fees. When you hire an insurance adviser, they can charge you with their base rate. In addition, when you avail of the insurance products they recommend, they can get commissions from it. 

However, the service they provide goes beyond just recommending and asking for fees. Since individuals have different situations, they analyze your needs and inform you about the best products an insurance provider offers. 

And as you move forward, they can help you alter the products you avail if there are changes in your circumstances. 

Transparency and Disclosure

One of the most difficult things an insurance adviser does is to gain the trust of their clients. Since they provide services that involve investments and safety, people can’t immediately trust them with their money. 

However, if an insurance adviser has enough experience and positive feedback from their past and current clients, it should be enough to start a discussion. Once the client has been informed of the services, it’s essential to know whether the insurance adviser gets a commission from insurance products or requires standard fees. 

Potential Conflicts of Interest

Although most insurance advisers prioritize the needs and preferences of their clients, there are instances when you may encounter someone who might force you to avail of certain products. When you sense that it’s happening, maybe it’s time to find another insurance adviser. Someone who knows the best for you, and doesn’t rely much on commissions. 

Final thoughts

Understanding the compensation structure of an insurance adviser is vital in building trust. As mentioned, availing of insurance isn’t just an investment, but a way to secure your future. So if you hire someone that’s hard to trust, it might jeopardize your intention of getting the security you deserve. 

We hope this article helps you to get to know the various ways in which insurance advisers get compensated and the importance of knowing it before you hire them. If you want to discuss more about the rates and compensations of insurance advisers and insurance companies, don’t hesitate to leave a comment below!

ABOUT THE AUTHOR

Aliana Baraquio writes for Partenaire Solutions, an Authorised Representative of Insurance Advisernet, one of Australasia’s largest General Insurance Brokers. She also spends some of her time looking for the opportunity to start her own business.