Insurance Broker vs Agent: 5 Important Differences
While shopping for auto insurance, you may communicate with insurance brokers and insurance agents. At first glance, these professionals seem pretty similar. After all, either one can help you find an insurance policy that matches your needs.
As you talk to more people in the insurance industry, though, you discover differences between agents and brokers. Before you purchase your next auto insurance policy, make sure you know these five important differences between brokers and agents. Knowing them could help you save money or get a better policy.
Agents Work for Insurance Companies But Brokers Represent Buyers
The fundamental difference between agents and brokers is that agents are employed by insurance companies and brokers work independently. Agents, therefore, can only offer policies from their employers. Brokers, however, can offer you policies from a variety of insurance companies.
Many drivers prefer to use insurance brokers because they want more options to consider. Keep in mind, though, that the broker may not have access to all of the products that insurance companies offer. As employees, agents may know about policies and add-ons that brokers don’t know about.
Agents Work for Large Companies, But Brokers Usually Work for Small Agencies
Auto insurance companies often have thousands of employees. They may even have hundreds or thousands of agents working for them. Brokers, however, usually work for small agencies with no more than a few dozen employees.
If you want personalized services, then call an insurance broker. Over time, you can build a relationship that helps you find policies for health insurance, life insurance, and property insurance. When you call the agency, you get to speak to the same person every time. For some people, this personal touch means a lot.
Other consumers don’t care about building a relationship with one person in the insurance agency. They’re happy to talk with any of the insurance company’s agents.
If highly personalized service isn't that important to you, then it might not matter much whether you choose an agent or broker. You should, however, know the difference when you start exploring your auto policy options.
Some Insurance Agents Are Forced to Sell Specific Policies
Since agents work as insurance company employees, they have to follow company policies. In many companies, that means the agent can only offer you specific policies. A “captive agent” doesn’t have much freedom. Instead, they can only give you options that have been approved by their managers.
Talking to a captive agent can limit your access to auto insurance policies. Instead of looking at a huge menu that includes a lot of opportunities for customization, you get a small list that only includes policies that the insurance company wants to sell.
Unfortunately, those policies don’t always deliver the lowest prices or the highest levels of coverage.
Brokers Usually Have Experience With More Insurance Products
Since brokers work independently, they have more freedom to find insurance products that match your unique budget and coverage concerns. Some brokers may have connections to a dozen or more insurance companies.
When you talk to brokers, they will take your information, fill out forms, and talk to their connections within insurance companies. Depending on your needs and the broker’s negotiation skills, you may get more options that let you choose a policy that fits your needs better.
Of course, insurance companies can choose to reject your application. They can also choose to give your broker a limited number of policy options. In some cases, having more options doesn’t necessarily mean that you will get a better deal.
Brokers May Charge Additional Fees
When you buy insurance from an agent, you’re purchasing it directly from the insurance company. The insurance company already includes the cost of paying employees, buying equipment, and running a business. You get a concrete price that doesn’t give you any room for negotiations.
Brokers don’t get paid from insurance companies, so they have to make money in other ways. Most brokers choose between two options: charging you a higher premium for your policy or charging you a fee for their services.
Does this mean that you will pay higher rates when you choose a broker? Sometimes, but it depends on what kind of deal the broker can get for you. If the broker was able to get you a lower price on an auto insurance policy, then the additional fee doesn’t really cost you more. Instead, you end up paying about the same as you would by purchasing the policy from an agent. The difference is that the broker’s policy probably matches your needs better.
Insurance agents and brokers work in different ways, but they can both help you find the insurance policy you need. The option that works better for you depends on what you want. If you don’t mind a cookie-cutter policy from an insurance company, then an agent will probably meet your needs well. If you want more policy options, then you should probably talk to a broker.