When buying insurance, the insurance broker vs. agent question is an important one to answer.
The basic labels “Broker” and “Agent” seem similar, but they are different in a very important way.
This article discusses the simple, but important, differences between an insurance broker and an agent.
Insurance Broker vs. Agent – What’s The Difference?
The main difference in the insurance agent vs. a broker question is the way each is aligned (or not aligned as the case may be) with the interests of the customer.
- Agent: An insurance agent’s primary alliance is with the insurance carrier, not you, the insurance buyer.
- Broker: An insurance broker primary alliance is with you, the insurance buyer, not the insurance carrier.
Insurance agents are often referred to as “captive“… This means they may represent only one insurance company (eg. State Farm, Farmers, AllState, etc.)
If you see a State Farm, Farmers, AllState office near you, the agents who work there may offer you fewer choices, simply because they may be limited in what they can offer.
You want to find the best, most affordable choice for your insurance needs. Indeed, it is difficult to understate the importance of specialization in insurance when it comes to individual and business coverage.
In contrast, an independent insurance broker represents you and approaches multiple carriers to find the best combination of price and coverage which will benefit you, the insurance buyer.
As mentioned above, for the business insurance buyer, specialization is important… Because insurance carriers often have particular insurance coverage and expertise in protecting against risks in your industry.
Insurance Broker and Agent Definitions
An insurance broker is a licensed professional who has fulfilled state requirements, including in some cases a background check, and has passed an insurance licensing examination to do business in his or her state.
An insurance broker must take continuing education courses on an annual or biennial basis to maintain his or her license.
An insurance agent is likely also licensed and has fulfilled state requirements. The continuing education requirements with insurance agents vary from state to state.
The most important difference between an insurance broker and an insurance agent is how they prioritize their relationship with you, the insured.
Still unsure of whether an insurance agent or broker adds more value for you?
Insurance Broker Expertise
As mentioned above, one of the most important aspects of insurance buying, especially for a business, is industry expertise.
This is because every business has different types of risks and exposures.
For example, I am insurance broker with a specialty in alternative energy and cleantech.
I have seen the terrible situations that can arise when a business relies on advice from the wrong agent or broker…
For example, I have found solar contractors who are paying tens of thousands of dollars for solar contractor insurance policies that are really offering them no coverage whatsoever because of insurance exclusions that the broker, and client, missed.
How would you like it if an employee or sub-contractor was injured or killed on a job site and then find out that after paying tens of thousands of dollars per year… Your business actually has no insurance coverage for this problem?
As a result of making the wrong choice about the “insurance broker vs. agent question”, your business is on the hook for damages and legal bills that could add up to millions of dollars.
When seeking to buy insurance for your business, be sure to look for insurance industry expertise… Do your homework and confirm your broker’s understanding of your business based on his or her own professional experience.
