An insurance broker and an insurance agent act as an intermediary between the people that need to purchase insurance and the insurance companies. An agent can be either a captive insurance agent or independent insurance agent (more on that later).

When it comes to an insurance agent vs broker, there are some major differences. Learn more about these insurance professionals.

Insurance brokers

Both brokers and agents are licensed by the state they are selling insurance policies in, and they have to follow the regulations enforced by the state's insurance commissioner's office.

However, the main difference between an insurance broker and an agent is that a broker represents the buyer instead of the insurance companies. Brokers act independently from insurance companies, so they can sell policies from many of them. Brokers meet with a potential client to find out what types of coverage are needed. Then they obtain quotes from multiple insurance companies and present the best ones to the client.

Also, unlike an insurance agent, an insurance broker can't bind coverage. This means coverage isn't effective until the insurance company has reviewed the application and approved the buyer. 

How does a broker get paid? An insurance broker is paid a commission based on the annual premium policy that they sell. They may also charge clients a "broker fee" for services like setting up a policy or obtaining certificates of insurance.

What are the pros and cons of working with an insurance broker? One of the key benefits of working with a broker is that they can obtain quotes from several insurance companies. The downside is that they don't have a direct relationship with these insurance companies. Therefore, brokers often aren't aware of recent changes on policies. They are also more expensive than agents due to broker fees.

Insurance agents: Captive vs independent

If you’re shopping for new insurance, you may come across the terms captive agent and independent agent

What is a captive insurance agent? A captive agent represents a single insurance company. That is, they can only sell policies through the insurance company they work for. Captive agents can usually bind coverage on a new policy meaning it's effective immediately. 

This type of agent is paid by the insurance company they work for. They may only be paid a commission on the policies they sell. Some captive agents are also paid a salary depending on which insurance company they work for.

The plus of working with a captive insurance agent is that they are very familiar with the policies they sell. The downside is that you won’t be able to compare rates from multiple providers; they can only offer clients policies that their insurance company provides.

Some major insurance companies like State Farm, Allstate and Farmers Insurance use captive agents to sell their products.

What is an independent insurance agent? An independent insurance agent partners with multiple insurance companies to sell their products. Like captive agents, independent agents can usually immediately bind coverage on any policy they sell. They are solely paid commissions, and they pay their own overhead as they're independent businesses.

One of the biggest advantages an independent insurance agent has is that they aren't locked into any one insurance company like a captive agent is. An independent agent can obtain several quotes and then present the best one to their potential client. Not only is this convenient, but it can also potentially save clients a lot of money on their insurance.

An independent agent assesses a customer's needs, then finds the carrier that offers the best blend of coverage, price and service. They make sure clients are adequately covered and advocate for them if there's a claim or issue with billing. Because they represent many insurance companies, independent agents can fulfill any insurance need a client may have such as auto, home, renters, life and business coverage.

Choosing between an insurance agent or broker

When it comes to picking an insurance agent vs broker, one isn’t necessarily better than the other. Working with a broker or agent comes down to your preference. 

The most common reasons many people choose an insurance agent is they can obtain the coverage they need quickly. Insurance agents may also provide better customer service than brokers as they have an established relationship with insurance companies.

Independent insurance agents offer people multiple advantages over captive agents as they work with multiple insurance companies instead of just one. Being able to compare quotes ensures you have the lowest rate possible. 

An independent insurance agent like Squeeze can ensure you get the insurance you need.

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