Should You Get Your Insurance From An Agent Or Broker?

The English language can be confusing. Is it “effect” or “affect?” What the heck is the difference between “infer” and “imply?” And who decided that “pneumonia” should start with a “p?” Yes, no matter how well you have mastered the English tongue, there are likely a few words that still cause you grief.

While contemplating the “k” in knife, Martha’s head exploded.

One pair of words that causes massive confusion is “agent” and “broker.” Is there a difference between an insurance agent and an insurance broker? And, if so, which one should you use?

No, the words “agent” and “broker” are not the same thing. While these jobs are both similar, there–not “their” or “they’re– are distinct differences that set them apart.

The Agent

An insurance agent works on behalf of one or more insurance companies. A captive agent works for a single insurance provider, while an independent agent works for multiple insurance providers.

Agents can only sell the products offered by the companies that they represent. Their responsibility towards the customer is administrative in nature only–ensuring that the paperwork is accurate and processed on time. They are not required to examine your unique situation and identify the best policy to serve your interests. This is why it is important to do your homework when dealing with an agent.

On the upside, all agents must charge the same price for the exact same policy. If you are purchasing policy X from a specific company, you should expect to pay the same premiums no matter which agent of that company you select. In “Understanding Insurance: The Difference Between an Agent and a Broker,” it states that “when you get a quote for a rate from any company, that is the rate that company is allowed to charge for that particular coverage by the Insurance Commissioner.”

The Broker

Brokers do not work on behalf of a specific insurance provider and, instead, work on the client’s behalf. They seek quotes from a selection of competing insurance companies and present you with the best options. They will then consult with you and help you reach your final decision.

Brokers tend to be more knowledgeable than agents, having received in-depth industry training. According to the “Difference Between Health Insurance Agents and Brokers,” they are licensed by a state’s insurance regulatory agency. They do not, however, have the ability to create a binder. This must be done by a representative of the insurance company, itself.

Choosing an Agent or a Broker

When choosing between using an agent or a broker, it is important to keep a few things in mind.

• Your Knowledge. If you need the advice of a knowledgeable professional in order to understand your insurance needs and the policies available, the broker may be a better option. They are trained to analyze your needs and determine exactly what type of coverage you will require. The “Top 5 Reasons Why Consumers Should Use an Insurance Broker,” compared buyers’ experiences with buying insurance online directly from an insurance company versus using an independent broker. They found that brokers were more “efficient at cross-checking policies, and also very good at educating their customers.”

• Your Relationship with the Insurer. If you have been dealing with the same insurance provider for years and wish to continue that relationship, the agent that represents that insurer may be able to negotiate the best price for you and make changes to your premium as necessary.

• Your Budget. If you are not loyal to a particular insurance provider and are driven by price, a broker is in a better position to do some comparison shopping and find you the most competitive prices.

• The Broker Fees. Since brokers do not work directly for the insurance company, they are paid through commissions or broker fees. These fees are, then, added to your premium. The broker is legally obligated to disclose the amount of these fees.

You may still ponder over whether or not you want “dessert” or “desert.” And, you might ask yourself if it’s “snuck” or “sneaked.” But you now have one thing clear. You know the difference between an “agent” and a “broker.” And you’re all set to shop for insurance.

What words cause you confusion?