Insurance Broker vs. Insurance Agent
What’s the difference between an insurance agent and an insurance broker?
That’s a question we are asked every day at our agency by individuals and businesses shopping for more affordable insurance. Is using an Insurance Broker going to save me any time and money shopping for lower rates?
The short answer is yes.
There are differences you should understand.
They both have the same licensing requirements by the State(s) in which they transact business, but the big difference is who they work for.
An insurance agent is an insurance company’s representative and the agent’s primary alliance is with the insurance carrier (company), not the insurance buyer.
An insurance broker represents the insured (you), and has no contractual requirements with insurance carrier to sell only their products. Insurance brokers are free to assist customers find the best insurance products for the most affordable rate.
Working with An Insurance Agent
The Insurance Broker
Insurance brokers have options not available to agents and companies to choose from. Names like: Safeco, Travelers, Progressive, Allied, Mercury, The Hartford, Fireman’s Fund, Chubb and more. There are literally thousands of insurance carriers, but who has the time or the energy to compare rates with even 3 or 4 companies?
This is where an insurance broker would have a significant advantage with the technology available today insurance brokers can shop several carriers at the same time. A good example would be the mortgage industry…in the past you would visit a local bank for home loan and the rate they provided was more than likely what you’d take. Today, there are mortgage brokers who, like insurance brokers, work with multiple banks to find a loan that meets your financial needs and your ability to pay for the mortgage.
Chances are you’ve seen the ads on T.V. offering competitive rates for new or refinancing your mortgage. You no longer must leave the comfort of your home to receive the latest mortgage rates. The same thing applies to the insurance industry, and many brokers such as Insurance Brokers Group work with customer from coast to coast finding the best policy at the right premium.
Being an insurance broker means more than just great rates, they can also provide first class service by communicating all your options and explaining your coverage’s. Taking the time to review and make suggestions based on your need, not what an agent want to sell you.
Have you reviewed your coverage’s with your agent or broker lately?
You’d be surprised how many people are driving around with the state minimum liability coverage’s and potentially putting their financial future at risk. A perfect example might be increasing your property damage coverage (e.g. if you damage someone’s property or vehicle) from $50,000 to $100,000 might cost an extra ten dollars a year. Make sure to review with your insurance professional your coverage’s, listen to suggestions and recommendation, get prices for any increased coverage’s, and make an informed decision before you have an accident.
What is the difference between an agent and a broker?
Another question which basically a variation of our initial question of insurance broker vs. insurance agent. Again, one is independent to work with any insurance company they qualify to represent and the other (agent) is exclusive to one insurance company. See short funny video below.
How do insurance brokers make their money?
Another common question people have about insurance broker vs. insurance agent is how does the insurance broker make their money or how do they get paid? As you might guess insurance agents typically are paid by the company they are agents for with either a salary and/or commission plus bonuses for keeping up with sales quotas.
Insurance brokers are paid by the insurance carrier chosen by the customer for their insurance needs. brokers receive commission only since they are not employees of any insurance company.
Insurance brokers in many cases are also competing for the same business with the insurance carriers they represent, such as Progressive, The Hartford, Nationwide, Travelers. But, unless you’d like to contact each and every company that a broker already represents (at the same premiums) you might be wasting a lot of time and energy.
Is there a difference between and independent insurance agent?
An independent insurance agent is basically the same thing as an insurance broker. People are still more familiar with the term insurance agent, so I believe it’s more of a comfort thing. If you are independent (not a captive agent for any one company) then you are aka a “broker.”
The choice is moving back to the consumer when shopping for affordable insurance if an Insurance broker vs. insurance agent would be a better option is still up to you to decide what you feel comfortable with using.