Insurance is an integral part of every citizen’s life. It protects them when a problem occurs by softening the financial blow that comes with said problem.
So, if you’re searching for a new insurance policy to help protect yourself even further, there are two types of professionals you may interact with: an insurance agent and an insurance broker.
Both of them play a part in securing an insurance policy for yourself, your business, or your family. If you’re unsure what the difference between an insurance broker and an insurance agent is, don’t worry.
This article will discuss that in-depth, and it will detail why an insurance broker can be beneficial in matters regarding insurance.
Is There a Difference Between an Insurance Broker and an Insurance Agent?
Yes, there’s a significant difference between an insurance broker and an insurance agent. An insurance agent is someone who sells an insurer’s products for a commission. Therefore, the insurance agent represents the insurance provider, even though they help a consumer select a product.
An insurance broker, on the other hand, works with their client directly. So, they operate in the best interests of their clients. An Insurance broker doesn’t work for an insurance provider. Thus, their goal is not to sell insurance policies but to help you select the best policy, should you choose to get insurance.
Insurance brokers don’t represent insurance providers, and, thus, are unable to bind coverage (complete an insurance sale, in other words).
Difference Between an Insurance Agent and Broker
Keeping all of the above-mentioned information in mind, here are two points that will help explain the difference between an insurance agent and broker.
- Insurance agents cannot bind coverage (complete an insurance sale), while insurance brokers cannot
- Insurance agents represent insurance providers, while insurance brokers represent consumers, which are the clients they represent
- Insurance agents can receive appointments to represent one or more insurance providers, while insurance brokers can’t. Appointments are specific contracts that detail the products insurance agents are allowed to sell and the amount of commission they will receive for every sale.
While both insurance agents and brokers work in the same line of work, their interests are very distinct. Because insurance agents represent insurance providers, their goal is to sell products. So, they are not going to look out for your best interests as a consumer. Therefore, they may sell you an insurance policy with coverages that you may not need. This is because they may receive a greater commission for selling a more expensive product. An insurance broker, on the other hand, will help you find a policy that has exactly the coverages you need. They acquire quotes from various companies in order to help you find the best prices.
What Does an Insurance Agent Do?
In order to get a better understanding of the difference between agents and brokers, you must know what an insurance agent does. Insurance agents act as conduits for providing information to consumers purchasing insurance. Therefore, you, the insurance buyer, can select a policy (from a specific insurer) and its coverages based on the information your agent provides. The insurance agent has contractual agreements with insurance providers and can complete a sale for you.
There Are Two Types of Insurance Agents
Insurance agents can work with a specific insurance provider, or they can be independent. In either case, they will still represent the insurance provider. Therefore, ultimately, their interests lie in selling insurance policies that will help them make the most profit. While insurance providers do keep the consumers’ needs and financial budget in mind, the nature of their job is to sell. Thus, it’s important to note at this point that insurance agents exist in two types.
An Independent Insurance Agent
An insurance agent can be an independent insurance agent. Such an insurance agent typically represents more than one insurance provider. By working with an independent insurance agent, you may be able to get access to more quotes from different insurers. What this means is that you may have various insurance policy options to choose from. Insurance policies are a significant investment. So, it’s best to review insurance products from many companies before settling on one.
While your local insurance agents can provide extensive options for policies, they often don’t have the expertise or experience in the field. Therefore, they are unable to adequately advise insurance buyers on the benefits of certain policies or coverages. They are more likely to recommend insurance products that will help them and the insurer make more money instead of a policy that’s best suited to your situation.
A Captive Insurance Agent
The second type of insurance agent is a captive agent. Such an insurance agent typically represents only one insurance provider. As a result, they will not be able to provide you with quotes from different vendors. This means that you’ll have significantly limited options to choose an insurance policy from. Thus, you can consider hiring an insurance broker to help you in this case. While they won’t be able to bind coverage for you, they will be able to acquire quotes from multiple vendors. Once you select an insurance product, they can correspond with an insurance agent that represents the insurer. Thus, the insurance agent will then bind the coverage at the price your insurance broker discussed with you.
What Does an Insurance Broker Do?
An insurance broker is a specialist in insurance and risk management. An insurance broker helps clients determine what their existing liabilities are, and how they can manage those risks through insurance. They offer insurance buyers knowledge and advice on various insurance products. This way, their clients can make well-informed decisions when selecting insurance policies. Their clients can select policies that include the coverages they need and are available at a price they can afford.
An insurance broker does not only help individuals identify liability risks. They also help insurance buyers identify risks pertaining to their businesses or their families. This way, you, an insurance buyer, can learn about various types of insurance products from just one insurance broker. Typically, your local insurance broker will know about health insurance, home insurance, business insurance, and so much more.
The various contacts an insurance broker has enables them to provide you with quotes for all the different types of insurance you may need. They can also explain the terms and conditions for competing insurance policies. They can also explain the policies’ coverages and exclusions, and which coverages are essential for a particular type of insurance.
An Insurance Broker Negotiates with Insurance Agents on Your Behalf
An insurance broker can negotiate with insurance agents or insurers on your behalf. In some cases, they can reduce the insurance premiums by referring to your insurance history. In addition to that, your insurance broker may identify discount options that you may be eligible for. Insurance brokers typically have access to multiple insurance policies, some of which are inaccessible without their referral. As a result, you’ll have more policy options to choose from, which, in turn, can help you find a suitable policy that’s available at an affordable rate.
An Insurance Broker Provides You with Knowledge on Insurance
An insurance broker provides you with knowledge on different types of insurance. Their education and experience allow them to effectively identify insurance policies that will help protect you against specific risks that you face. For example, if you’re purchasing condo insurance, they’ll inform you about claims that are covered in a basic policy. In this case, the policy will cover theft, damage to the interior, accidental slip and fall coverage, and more. What this policy won’t cover is an intentional injury to guests, and wear and tear to the interior of the condo. You can use this information to purchase additional coverages in your policy then.
An Insurance Broker Analyzes Policies to Help You Select the Best Option
A local insurance broker’s job is not limited to finding insurance policies that have the lowest rates. Their job is to provide you with the absolute best policy you can get in a specific price bracket. They analyze the information you provide them and the details of various policies. After that, they shortlist insurance policies that are tailor-made for you. This way, you can get the most benefits from the money you pay. Also, because insurance brokers have significant experience in the field, they know which insurance providers provide high-quality services. Therefore, they’ll find you a list of policies from top tier insurers. This way, you won’t have to deal with poor service after you make your purchase. You must remember that the cheapest policy is most likely not the best policy.
An Insurance Broker Simplifies Choosing a Policy
Many insurance buyers struggle to select an insurance policy when they have multiple options in front of them. Thus, an insurance broker helps simplify the selection process. They accomplish this by reducing the options to a short list of the best policies for your case.
Why Hire an Insurance Broker?
If you’re purchasing an insurance product, you’re going to have to interact with an insurance agent. They will tell you about the policy options you have and the prices for each of those options. However, unless you know a lot about insurance, it’s not wise to rely on their advice and guidance only.
An essential difference between an insurance agent and broker is their experience and educational levels. More often than not, insurance agents don’t have much experience in insurance. The US Bureau of Labor Statistics outlines that insurance agents don’t need more than a high school diploma to work in this profession. They also don’t require any experience in insurance either. So, this indicates that they aren’t experts, and may not provide you with 100% accurate information. As a result, their guarantees may fall flat when you actually file a claim.
Insurance brokers, on the other hand, must complete courses on insurance and pass the license exam in their respective states. They cannot practice their trade without an insurance broker license. Each state has its own requirements for the license exam, so insurance brokers must prepare for that as well.
Now, while you don’t have to hire an insurance broker when purchasing a policy, there are numerous benefits to doing so. They are experts in the field who know exactly how to get you the best policy and save you money in the process. If you’re considering buying an insurance policy, here are some ways your local insurance broker can help you with the process.
An Insurance Broker Has Insider Information
One of the most significant advantages of hiring an insurance broker is that they possess insider information on the market and various insurance providers. This means that you’ll have access to information that you wouldn’t be able to find elsewhere. Your insurance broker can inform you about:
- Which insurance providers don’t typically increase their premiums each year
- Insurance providers that typically deny more claims than others
- Insurers that provide stellar customer service
An Insurance Broker Can Help You Save Money
An insurance broker an actually help you save money, even though you’ll be paying them a fee. This is because they can help you secure policies at the best prices. They can also determine if you’re eligible for any discounts.
An insurance broker will also study your case individually. Thus, they can determine which coverages you should and shouldn’t include in your insurance policy. By removing useless coverages, you can reduce your premiums. Unless you’re well-informed on insurance, it’s risky to remove coverages from your policy. That said, make sure you hire a trustworthy broker for your insurance needs. Hiring a professional who is not transparent about their fees can end up costing you more money than you originally estimated.
Last Few Words
The insurance industry is growing, and the number of insurance agents in employment is expected to grow by 10% from 2018 to 2028. Now, while this is good in terms of growth for the industry, consumers have to be more careful not to trust any and every insurance agent. Doing your own research can significantly put your mind at ease when picking a policy. You can also consider hiring a local insurance broker if you want professional assistance.
Digital Marketing Director
Pawson Insurance | Legal Disclaimer |
Informational statements regarding insurance coverage are for general description purposes only. These statements do not amend, modify or supplement any insurance policy. Consult the actual policy or your agent for details regarding terms, conditions, coverage, exclusions, products, services and programs which may be available to you. Your eligibility for particular products and services is subject to the final determination of underwriting qualifications and acceptance by the insurance underwriting company providing such products or services. Statements on this website as to policies and coverages provide general information only. This information is not an offer to sell insurance.