The world has thousands of musical styles, but most of us only acknowledge two: There's the kind we like and everything else. The insurance industry is radically different from the music industry, but a similar simplification can be applied. In the world of insurance, there is life insurance and everything else. "Everything else," in this case, is called general insurance.
The life insurance business has enough policies, plans and options to confuse anyone poring through them, but life insurance itself is a pretty simple concept. If the policy is in force when you die, the insurer gives a specified amount of money to your chosen beneficiary. Helping clients understand what their needs are, suggesting and tweaking appropriate policies to meet those needs and instilling good financial-planning habits are all part of a life insurance agent's work. This requires a considerable degree of expertise, and life insurance agents must qualify for state licensure before they can do business.
General insurance is a catchall phrase to describe almost any insurance other than life coverage. It includes property-oriented coverage such as auto, homeowner and boat policies, as well as health and group benefits plans. The malpractice insurance carried by health professionals and the errors and omissions insurance that plays the same role for other professionals are both forms of general insurance. So was the million-dollar policy once written to insure movie star Betty Grable's beautiful legs. General insurance agents and brokers are also licensed by the state and might need multiple licenses or certifications depending on the lines of insurance they sell.
In theory, if you're insuring a person, you want a life insurance broker, and if you're insuring a thing, you want a general broker. In practice, the lines are not that clear. Brokers of both types sell disability, health and group benefit plans when the opportunity arises. Large insurance brokerages typically employ agents and brokers of both kinds so they can provide full-spectrum coverage to their clients and reduce the risk of losing them to a competitor. In smaller offices, an individual broker might earn multiple licenses to be able to sell more than one kind of insurance.
For the individual consumer, acquiring all your insurance through a single broker has advantages and disadvantages. One definite benefit is simplicity. Coordinating all your coverage through one broker makes it quick and easy to manage claims and renewals. When appropriate, combining multiple policies with one insurer can result in discounts. A good broker can also help you fit the coverage you need into your overall financial plan. However, brokers sometimes renew policies without price-shopping them, so you'll need to regularly check your premiums against competitive offerings. Many insurers will price match or offer discounts to keep your business, and this can result in significant savings over time.
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