As part of your long term insurance plan, you will want to be sure to develop a good relationship with a professional insurance agent or broker. Both offer consumers a gateway to insurance companies and both charge fees for doing so. The following describes the differences between these two professions.
Insurance Agents
The more common insurance professional you will find is an insurance agent. These professionals serve as a liaison between an insurance customer and an insurance company. In most cases, they will have to be licensed, and they often an insurance company will pre-qualify an insurance agent before they can do business. An agent has a duty to ensure that all filed forms are accurate, that all premiums are accurate and paid as required, and that all paperwork is timely and correct. They are not required to conduct a comprehensive assessment of your business to determine if you have the correct insurance coverage. When you conduct insurance business with an agent, the onus is on you to ensure that you have the appropriate insurance coverage.
There are two types of insurance agents. An agent that works exclusively for one insurance company, and who is often an employee of that company, is called a “captive” agent, also known as a “direct writer” of insurance products. This type of agent cannot sell insurance products from any other companies.
An agent that deals with several different companies is called an independent agent. These agents are usually either self-employed or they are structured as an independent corporation. They have the ability to write insurance with several different insurance companies.
There are advantages and disadvantages to both types of agents. Captive agents may be more familiar with the products they sell and can often find creative ways to help save on premiums. They can also bundle insurance products together for further discounts. Additional savings may also be realized due to lower commissions that a captive agent may receive.
Independent agents have a wider range of options available to them, which may help them find a suitable product for you both in terms of coverage and in terms of cost. They may also be able to provide coverage for specialty items that a captive agent could not.
Insurance Brokers
An insurance broker has all of the advantages of an insurance agent, but has the added ability to access even more insurance products. A broker’s license is often more difficult to obtain which means that a broker generally has had more education and experience than an agent.
One important consideration when comparing an agent to a broker is that brokers have a higher duty to their clients. They are expected to carefully analyze a customer’s insurance needs, and they have a duty to advise properly on which products and limits are required. This added component of professional service means that there are other costs involved however. Brokers will typically charge an administrative fee, or will have higher commissions than an agent.