Fees and commission, what are they?

There are a lot of things to consider when taking out protection insurance. One of those things being whether you’re happy to pay an adviser for their services, or if you would like this to be taken care of in the background. 

Within the protection insurance industry, most advisers get paid in the form of a commission. Which means that you don’t have to directly pay for the use of their services, and you’re also not out of pocket if you decide to hold off on getting protection insurance.

This shouldn’t have any impact on your insurance journey or experience. The process of taking out insurance will still be the same and the terms that you’re offered also wouldn’t change.

For a commission based adviser, insurers pay the commission to the adviser if your policy is taken out and your monthly payments are kept up to date. You can think of this as a way of the insurer thanking the adviser for helping to arrange your policy, and paying for their services on your behalf.

On the other hand, there are some advisers who will charge you a fee for their services, and potentially a fee for certain services you might want or need after your policy has started.

So which is better?

There’s no right or wrong way to go about this, it’s personal preference. Though there are things to consider and there are pros and cons of both approaches. 

Fees

A positive of paying a fee to an adviser is that the insurer might remove the amount that would usually be paid to a commission based adviser, so your premium could be less. This amount might not be huge, but it all adds up in the long run.

A negative of paying a fee is that the fee is paid regardless of if the policy goes ahead or not. It could be that the prices are higher than you expected, the terms don’t quite match what you wanted or there’s just been a change in circumstances, the adviser has still done the research and sourced the cover and the fee is usually non-refundable. Another con is that this could get very expensive in the long run. Some people might be able to start a policy within a few hours, whereas some people might have to wait for a medical report from a GP. It has been known for these to take a couple of months, and the fee to cover this kind of time frame won’t be cheap!

Commission

When it comes to commission, advisers can’t make up this price, so you should feel confident that you’re not being over-charged for anything. As an example, if you started a policy through us at Cura for £10, this policy would have also been £10 if you went straight to the insurer. The cost of your premium doesn’t increase just because you’ve used the services of a commission-based protection insurance adviser. 

It has been known for some advisers or brokers to have arrangements in place with an insurer for the premium of a policy to be higher so that they can receive a higher commission. There have been calls in the industry for this to be stopped and definitely isn’t something that Cura does.

Deciding which way you would like your adviser to be paid is up to you, it is ultimately whatever feels best for you. The adviser you choose should be transparent about the route that they offer, it is part of our regulatory requirements to be open about this from initial conversations, and it’s certainly ok to ask questions before making any decisions for your insurance journey.

If you want to know more, managing director Kathryn hosted an episode of the Practical Protection Podcast on commission vs fees. You can listen below:

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