Insurance Agents and Brokers: What makes them Different?

The terms ’insurance agent’ and ’insurance broker’ are often used interchangeably. To most people, they mean the same – people who sell insurance to customers.  It is generally true of course; however, there are a few important differences you need to be aware of. That information will help you decide on who to contact for your insurance needs. There are a few commonalities between the two:

• Agents and brokers both require a license from the regulatory agency of the state in which they sell insurance.

• Both receive their compensation from the companies whose insurance policies they sell.

• They both need to acquire necessarily a few from many accreditations; a customer has the right to know which ones the agent needs to acquire, and which others the broker needs to. The customer has the right to be familiar with what those accreditations entail.

           

Insurance agents

An insurance agent is a representative of an insurance company: he works on behalf of that company to sell their insurance policies to customers. Agents are bound by contracts with the companies they work for. The contracts define what they can sell, say or do; they specify clearly the compensation an agent receives for policies sold.

There are two types of agents: a ‘captive agent’, who works for only one company, and an ’independent agent’, who works with multiple companies.  It may appear that independent agents are better off, but this is not always the case. Captive agents often have access to policies and terms reserved only for them. Independent agents, of course, have a wide range of policies they can offer from different insurance companies.

Insurance brokers

Insurance brokers do not represent insurance companies; they represent insurance buyers. They are not contractually bound to any insurance company, and so they are completely independent. They do receive compensation from insurance companies for the policies they sell, but their success and business growth come from the services they provide the buyers.

Which one is right for you?

Insurance is a highly competitive business. You do find many variations between all types of policies with reference to the terms, conditions and exclusions, and deductibles and premium amounts. A policy that costs more may not provide the type of coverage your specific circumstances demand. A policy that costs less than others may have the coverage you need, but the limits may be too low.

It is difficult for you decide whether higher deductibles and lower premiums are right for you, or the contrary is more suitable for your needs. An accurate comparison of policies, their benefits and their reliability requires a great deal of expertise and experience in matters of insurance.

Insurance brokers are in a better position to offer you a wider range of policy choices, and guide you to the options that suit your needs the most. Remember that insurance agents work for the benefit of insurance companies, and insurance brokers work for the benefit of insurance customers. The success of the brokers, both professionally and financially depends on the quality of their services to customers and customer satisfaction.