Choosing an Auto Insurance Agent or Broker - Understanding the Difference

Before you decide whether to use an insurance broker or an insurance agent to help you find the right insurance products, it is important to understand the difference between the two and the pros and cons of each. In simple terms, an insurance agent, also referred to as an “insurance sales agent,” sells insurance to individuals, families, and businesses for one or more specific insurance companies. An insurance agent is an intermediary between the insurance provider and the policyholder.

While insurance agents do help customers find the right insurance products, their main goal is to sell insurance policies for the company they represent. They are only responsible for processing premiums, forms, and paperwork. They are not responsible for making sure customer’s have the appropriate coverage.  Insurance agents are either captive or independent. A captive agent works with one company only. He is a “captive” of that company and will sell policies for that insurer only. An independent insurance agent works as an agent for several different insurers.

An insurance broker represents the potential policyholder only. He works for the buyer by working with any number different insurance companies to find a match. A broker must carry a broker’s license to do business in any given state. This means that an insurance broker has more experience and education that an insurance agent. This is one advantage of using an insurance broker.

Another advantage of using an insurance broker has to do with customer service. Unlike insurance agents whose job is to get and keep customers for the benefit of the insurance company, an insurance brokers goal is to make the customer happy, not necessarily the insurance company. For their business clients, insurance brokers analyze the business in order find the appropriate amount of coverage for their business. For individuals and families, an insurance broker will assess your needs and seek out several insurance companies/policies that might be a fit. He will then help you compare policies.

Once you purchase an insurance policy through an insurance broker, your insurance broker will be the contact person if you have any issues with your policy or if you are involved in an accident. He will help you through the claims process, from start to finish, and resolve any issues you might have. An insurance broker can also help customers find life, health, home, and travel insurance.

The only downside to using an insurance broker is cost. Because the call of duty is higher for an insurance broker than it is for an insurance agent, they will charge an administrative fee. In addition, premium payments on auto insurance is usually higher when purchased through an insurance broker.

Using an insurance agent can certainly help you obtain the right policy with a specific insurance company. An agent can also help you shop and compare the prices of several specific insurance companies. If you have an issue with your insurance policy, an agent can answer your questions, but if you have an accident, you will have to work with the claims department—usually directly. One of the benefits of using an insurance agent over an insurance broker, however, is price. You do not have to pay administrative fees to an insurance agent to process premiums, forms, and paperwork. In addition, auto insurance premiums are usually lower when you purchase your policy through an insurance agent.

To find an insurance agent or licensed broker in your area, contact your state insurance department. Please visit the official website for The National Association of Insurance Commissioners (NAIC) to locate your state insurance department website.