Are you ready for a fight? We love a good fight. Today we’re going to have a fight: we are going to compare an insurance agent versus an insurance broker.
What’s the difference? What makes one better than the other? And then at the end, we’re going to tell you our opinion.
Table of Contents
Insurance Agents
Insurance agents work for a captive company. What a captive company means is that you are bound to do business with that one single company. These are companies like Allstate and State Farm and Farmers.
So if you are an Allstate agent you can only be an agent for Allstate. If you’re a State Farm agent, you can only be an agent for State Farm. That’s what we mean by captive.
So agents work for captive insurance companies. One disadvantage of working for a captive company is you don’t have as many options.
Many times it’s a cookie cutter option because you only have one company and most of the time one policy.
It’s one size fits all. And if you don’t fit that size, well, tough luck. They don’t have a policy for you.
However one advantage of this is that they only have one policy or one company that they have to learn and understand. When you’re dealing with either an insurance agent or an insurance broker you really want somebody that understands deeply, understands the policy that they are selling to you.
It’s a lot easier for an agent to understand the policy because there’s only one.
Another advantage of an insurance agent is they have the backing of their huge insurance company. We know State Farm is a very large company. So even if your agent is not a good agent, you can call State Farm 24/7. Call their 800 number and they are always there to help you.
So it’s kind of the best of both worlds. You get your agent and you get the insurance company that you can call whenever you need to.
Insurance Agents Work For Their Company, Not You
Insurance agents for the most part, they may own their book of business or their client list, but at the end of the day they are an employee of that insurance company. So they work for the insurance company rather than working for their clients.
Another disadvantage is if you’re an agent and you work for the captive company, if those rates go up, well, they don’t have many options to offer to their clients because again, it’s one single company and one policy.
If rates go up, it is what it is. If they don’t have the policy or the rates you need, well, you just have to go down the road because they have no other options.
So those are the advantages and disadvantages of an insurance agent.
Now, let’s talk about insurance brokers.
Insurance Brokers
Insurance brokers do not work for any one particular insurance company.
They’re brokers, this means they have many options with many different companies. They essentially have whatever options they want. They can go out and contract with different insurance companies that they want to and then offer those policies to their clients.
Every scenario is different. Every person is different in terms of what they value and what they need in terms of coverage and a broker has more options to be able to make this happen.
One disadvantage, which is very different from an insurance agent is, insurance brokers represent a number of different companies, sometimes dozens and dozens of different companies, which leads to them representing dozens and dozens and dozens of insurance policies.
It’s very hard for any one particular person to be an expert in 15 different policy forms. Therefore, if you’re using a broker, you really need to make sure that the broker knows and understands the policy that they’re selling you.
A lot of brokers simply go contract with all the companies they can and they’re just selling policies left and right with no true understanding of what the policy is actually covering and if it’s the right policy for their client.
Insurance Brokers Work For You. Not The Insurance Company
Insurance brokers are not held captive by a captive insurance company. What this means is the insurance broker essentially is working for you, the client, and they are not working for the insurance company themselves.
One important distinction is insurance brokers, for the most part, are not able to write business or write policies for these captive companies. So insurance brokers don’t have access to your Allstate and State Farm and Farmers.
If you want one of those companies, you’re gonna have to go directly to an Allstate, State Farm or Farmers agent.
So overall, a broker has access to more companies and more policies and more pricing. So when the insurance policy you have goes up, you can simply call your insurance broker and request that they find you another company with better rates.
If an insurance policy suddenly does not meet your needs anymore, your coverage needs, you can call your broker and ask them to find something that better fits your coverage needs.
So, overall, brokers have more options.
Which Is Better?
So which is better – an agent or a broker? We’ll will let you decide.
But we did tell you that we’d give you our opinion.
We may be a bit biased (we are a brokerage, after all), However, we still think if you look at all the pros and cons of each, it is fairly obvious that working with an insurance broker is going to provide you with more options, better pricing, better coverage and an overall better experience.
We always talk about not all policies are created equal. Everybody has different needs when it comes to insurance. By working with a broker you can make sure that all of those needs are met because there are many more options available.